Understanding Music Royalties and How They Work for Independent Artists
The term music royalties is a very common phrase in regards to the business side of the music industry. Most people have heard of the phrase “music royalties.” Whether you are pursuing a career in the music industry as a independent artist or mainstream artist understand exactly what music royalties are and how they work is extremely important. It’s literally how you get paid for your music selling as an artist. Before I can dive into the world of how music royalties work and how you acquire them I first have to explain what music royalties are. Music royalties are payments made by one party to another based on an agreement between both parties. In other words, music royalties are payments an artist receive based on how many units his or her song sales. Sounds quite simple doesn’t it. The explanation of what music royalties are is exactly very simple. However, it’s the actual process of obtaining those royalties and how those royalties are divided that makes it difficult. But no matter how difficult understanding how music royalties work may be it’s definitely something you need to know as an artist.
Figuring out how you are paid your music royalties as an artist
Like most industries, in the music industry several topics and elements go hand and hand. If you read my previous posts explaining music publishing and copyright you will be familiar with me stating there are 2 different elements to each piece of music an artist create. You have the song which is also called the composition. Then you have the sound recording which is also called the master. Knowing the difference between these 2 elements are very important when it comes to publishing and copyrighting. However, it’s also important when understanding music royalties. This is due to the fact that the song and and sound recording both generate their own separate royalty streams. So if one party has ownership of the song only then that party receives a specific type of music royalty. If another party has ownership of the sound recording, that party receives the music royalties generated for the sound recording. Due to the fact that the song and sound recording are 2 different entities on 1 body of work it’s important to know how they relate to music royalties. If you haven’t read my previous posts and you are wondering who has ownership of what this is how it typically goes.
Song aka Composition = Usually owned by songwriter and music publisher
Sound Recording aka Master = Usually owned by artist who sings or raps song and record label
However, what if you’re like so many inspiring artists in this day and time and want to remain strictly independent. It’s very important to understand who owns what and who receives royalties for what portion of the music. If you’re an independent artist with no label then you own the sound recording (master) to your song all by yourself. If you’re an independent artist and have no music publisher you are automatically your own music publisher. Since you are your own music publisher you own all the rights to your song (composition) by yourself. This means you own 100% of your music regarding the song and the sound recording. That’s the beautiful thing about being an indie artist. However, now that you are strictly independent with no help that also means you have to do everything by yourself. This includes registering your songs so their sales can be calculated and then obtaining all your royalties by yourself. The good thing is you keep all the gross royalty income yourself. The bad thing is the process of tracing, calculating and registering will take longer. However, it’s possible and can be accomplished. Don’t get discouraged. The key to collecting all your music royalties as an independent artist is to know all the type of royalties there are and the companies you go through to get them.
Performing rights organizations (PRO’s) and public performance royalties
If you’re an indie artist with ownership of your song and sound recording there are several different streams you’ll be receiving royalties from as your units sell. In order to track the sell of your units and use of your music you have to register your music with different companies. Unfortunately there isn’t 1 major company you can register with that will cover all the different type of music royalties you may be entitled to. This means you have to register with several different companies to cover all the different type of royalties you are entitled to. The first company/ organization it’s imperative for you to register yourself with as an independent artist is a PRO. I’ve also mentioned PRO’s in my previous post as well and explained what they do and how they work. PRO’s are performance rights organizations that represent songwriters and music publishers. They allow you to register with them as a songwriter, music publisher or both. These organizations then track your songs and see how your songs are being used. If your songs are being used you are owed music royalties. However, it’s only certain type of royalties performing rights organizations track and distribute for you. These royalties are called performance. Meaning every time your song is performed or broadcasted as long as it’s copy written and registered with your PRO, your PRO tracks it and at the end of the quarter gives you your royalty for the broadcast or performance of your song. These two performing rights organizations are called ASCAP and BMI. Both of these organizations represent major and independent artists, songwriters and music publishers. They both have similarities and some slight differences. Which ever performing rights organization you decide to go with it 100% up to you. My advice would be to visit the site of each one to draw your conclusion on which PRO you go with. Keep in mind registering with a PRO only grants you royalties to one type of music stream. There are other organization you have to register with and pay to have them track and distribute your royalties for you.
Different types of music royalties and how they play a part in you getting paid
Assuming you are an independent artist and you don’t have a major corporation backing you that can collect royalties on a song or record for you this next topic is detrimental for you to know. There are several different types of music royalties, some being more popular than others. However, being aware of all of them is important. Below is the list of all the most popular types of music royalties, how they work and if they fall under the song or sound recording category.
- Performance Royalties – are royalties earned when your song is broadcast or performed publicly. This includes if your song is played on the radio, internet radio, online streaming, performed at clubs, played by retailers or broadcast on TV. These royalties are tracked and collected by performing rights organizations. They are paid to song rights holder which are usually the songwriter and music publisher. But keep in mind if you are a strictly an independent artist and not signed with a music publisher than you are your own music publisher. Therefore all of the royalties generated that belong to the song rights holder would go solely to you (as long as you’re the artist who wrote the song yourself).
- YouTube Recording Royalties – these are royalties paid every time your your video or recording is viewed on YouTube. These royalties are paid to the master rights holder. These royalties usually go to the record label and the artist who actually records the song. However, if you are an independent artist and have no record label you receive the master rights royalties. How you actually receive these royalties isn’t from YouTube itself. You collect your YouTube royalties by registering with a distribution company. A few of these companies are adRev, Audiam and InDMusic. These companies charge you to become a member and some take a certain percentage of your royalty income. However, it’s your best bet as an indie artist.
- TV Royalties – music royalties received when your music is used in a movie, movie trailer or commercial. In order to collect these type of royalties you would have to register with SAG-AFTRA.
- Print Royalties – these are royalties earned when a song composition is transferred onto sheet music paper and sold to the general population. These print royalties go to the songwriter and music publisher.
- Composition Performance Royalties – are royalties paid when your song gets played on the radio FM, AM or digital radio, streaming services, live shows, restaurants and stores. These royalties are similar to performance royalties and are also paid to you by your PRO.
- Mechanical Royalties – perhaps the most important type of music royalty there is, these are royalties earned when a song unit is sold on a mechanically reproduced physical medium. This means every time a physical cd, tape or vinyl is sold you are entitled to a mechanical royalty. Mechanical royalties are also earned when your song is sold for digital download (Amazon, iTunes, etc.). These type of royalties are collected and distributed by the only mechanical royalty agency in America called Harry Fox Agency (HFA). Normally HFA would pay your record label your portion of mechanical royalties, as well as your music publisher their portion of mechanical royalties. Then your record label would pay you as the artist your mechanical royalties share and also send your music publisher his or her mechanicals. However, if you’re an independent artist and have no record label or music publisher (because you are your own music publisher) you need an alternative to collect your mechanicals. Unfortunately Harry Fox Agency doesn’t allow independent artist to collect their own royalties on their own. This is where admin publishing companies come into play. There are several companies that allow independent artists to collect his or her mechanical royalties without having to go through a record label or HFA. CD Baby, TuneCore and SongTrust are just a few of the companies that allow you to collect your mechanical royalties. In order to have these companies collect mechanicals for you you have to register as a member with them. They all have fees and some restrictions. Some charge upfront fees as well as a percentage of the mechanical royalties you generate. Deciding which company to go with is a personal choice up to you. The best thing you should do is check out the site of each admin company and weigh out your options.
This grand summary of understanding music royalties and how they work especially if you are an independent artist is only the beginning. The business side of music is extensive, tedious and there’s always something to learn. The music industry is always revolving and changing. However, this is the start to knowing all about music royalties and how they work. If you are an independent artist reading this post would be very beneficial to you.
To learn more about the business side of music purchase brand new book Mogul here