Understanding The Four Main Types Of Music Royalties And How They Work
How do you get paid for your music in today's music industry? The short answer: through music royalties. But how do they work? What are mechanical royalties and performance royalties? And, how much will your record label take?
Whether you are a new artist or music producer or have already built quite an audience you better make sure that you understand how the music business works, so that you can plan ahead of yourself to be successful in the music industry.
After all, the better you get at handling your resources, even if they haven’t yet hit your bank account, the more efficiently you’d be able to utilize them to continue growing your fan base and thus make even more from royalties (and faster) in the future. So, in this blog post, we’ll go over how royalties work and the four main types of music royalties. And of course, if you have any questions, feel free to drop them in the comments!
Signing A Publishing Deal
Before we get into talking about music royalties and the music business in general, there's something you must understand. If you're a recording artist, a songwriter, or a music producer, you must beware that even though you'll make money from different types of music royalties, what will determine exactly how much you make is your publishing deal.
Whether you're an independent artist or get signed by a record label, in a way or the other, you'll be dealing with publishing deals. This is just how the music business works these days. A record label will be upfront about it and you'd have to sign a contract with them.
On the other hand, however, you'll have distribution companies such as Distrokid, that will have their terms and conditions and, in a way, these will turn out to be the terms of your publishing deal as they would be the ones distributing your music and collecting your music royalties.
What are royalties and how do they work for musicians?
Music royalties are a percentage of revenue generated by streaming music services like Spotify, Apple Music, and Google Play. In today's music industry, they're paid to artists on a per-stream basis (there may be some exceptions). Unfortunately for musicians, the rate at which they receive these royalties has been steadily decreasing over the years. Some artists have even had to take legal action against music streaming platforms that don't pay out fairly or quickly enough!
As an artist, you need to understand how music royalties work so you can make sure all your hard work doesn’t go unrewarded! The first thing you need to know is where exactly your money comes from: It's generated when someone listens to one of your songs on a streaming platform, your song is used in public media or you perform live. It's then divided up between different parties like songwriters, recording artists, and producers.
In a nutshell, when it comes to the music business, the more plays your music gets the better! But remember to make sure you're getting paid what you deserve by reading all of the information on streaming services before deciding to move forward with them (you might find something that says otherwise). This also applies to your record label and distribution company.
You'll also need some help managing your finances if this is new territory for you. Consider hiring an accountant or financial advisor who can give their expert opinion on how much money makes sense to be spending at any given time. After all, no one wants to go bankrupt just because they were following their passion!
What are the different types of music royalties that artists can receive?
Royalty Type #1: Mechanical Royalties
Since the beginning of recorded music, musicians have been paid mechanical royalties when their songs are played on radio and TV. Now they can be played in a variety of ways: online streaming services, satellite radio stations, cable TV channels, etc.
So what exactly is a "Mechanical Royalty"? Mechanical royalties are generated from the composition copyright of a song and are owed to the songwriter or composer when an artist releases a song to the public either through a public performance or sound recording.
This includes any time one song or recording has been reproduced from vinyl records to cassette tapes to CDs to music streaming platforms. It doesn't matter if it's going through an amplifier speaker system either! If your song is playing somewhere you're earning money off every reproduction without having done anything else at all even though it requires some work by others to make sure they get compensated for using your tune.
You don't need permission from anyone but you do need to register with a "Mechanical Rights Society" for you to get paid! How much do musicians earn from mechanical royalties? That's hard to say because there are so many different factors including how popular your song is, the length of time it has been out, and whether or not it was played on the radio. The average payment right now comes up short. But, if you can make a hit single that makes a lot of money you may not even need to tour at all if that’s what you want.
Royalty Type #2: Public Performance Royalties
These music royalties are earned whenever a musician's original music is played in public. In the US, this can include being played on TV or radio shows, at bars and restaurants with live music, performances by cover bands (e.g., weddings), movies & movie soundtracks, businesses playing recorded music for commercial purposes such as retail stores and shopping centers, etc.
Public performance royalties can be one of the most confusing things to understand in the music industry because there are several different types of licensing organizations that musicians must pay to legally play their songs for the public on TV or radio broadcasts and at live performances. These groups include ASCAP (American Society of Composers, Authors & Publishers), BMI (Broadcast Music Inc.), SESAC & GMR (Global Music Rights).
In addition, each country also has its collection societies such as SOCAN in Canada and APRA/AMCOS in Australia! This is one reason why it's so important to know who owns your music publishing rights before signing any contracts with record labels or other companies. If an artist doesn't have the publishing rights to their songs, then they must pay public performance royalties (or any other money earned from using someone else's music) directly to the publisher.
Royalty Type #3 Synchronization Royalties (SYNC)
This type of music royalties is generated when your material is paired with visual media. Sync licenses give you the right to use music in TV, video games, commercials, ads, streaming, music videos, and other things.
But, these licenses don’t give you the right to use existing material with new audiovisual projects. You’d need a master license before you can do that. A master license is an agreement between the owner of the recording (i.e. the record label) and whoever is seeking permission to use his or her material.
Any use of protected music in an audiovisual project requires a master sync license. It doesn’t matter if you’re using the entire song or just a fragment. For example, you need both a master and sync agreement before syncing up the latest NF track with your free squat video on YouTube.
Royalty Type #4: Print Music Royalties
These are earned when PRINT MUSIC is purchased online, in physical store locations, or through other sales. Musicians earn music royalties each time their music is purchased either physically (CDs) or digitally (MP-PRINTS). Print music royalties are typically paid out by record labels with an affiliate program that pays the artist for every sale made of their music.
Digital distribution provides a great opportunity to increase revenue if marketed properly and additional social media efforts can help generate more traffic on websites where digital files are sold. It’s important to note that not all licensing deals pay royalty advances which means artists may have to wait until they sell enough copies of their songs before earning any money from them at all!
The Bottom Line
You must understand the music business! If you don't know the different types of music royalties and how they are generated, you'd be at the mercy of anyone in the music industry, which isn't good at all! Make sure you understand the terms and conditions of various music publishers and that you make your decisions based on what benefits your music career the most.
Remember that any music composition, original music, sound recordings, digital downloads, physical or digital reproduction, or use of a recorded song of yours, generates either a performance royalty, mechanical royalty, or any of the other types of music royalties because the material is your intellectual property!
You don't have to be an expert in the music business, in sound recording, or in copyright law to be able to move forward with your music career. But do make sure that your record label and publishing company genuinely care for your financial success, not just how famous you can get. Beware because people in some record labels are known for using your dream of becoming a famous music artist to distract you from your well-earned music royalties.
Thanks for reading up here! As always, if you have any questions regarding how to become a music producer, collect performance royalties, mechanical royalties, sound recording, or even sheet music, feel free to drop them in the comments! Also, if this post has been helpful please share it with friends!