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Step by Step Guide to Understanding Mechanical Royalties

By ASKM Publishing

Learn all about mechanical royalties and how they work for indie artists

 

mechanical royalties indie artists

Learn all about mechanical royalties, how they work with contracts as well as with indie artists

Whether you are a mainstream, independent or inspiring artists you would want to get paid for your work. Most artists who pursue music do it for the art and because it’s his or her passion. That’s great. That’s how it should be. However, the reality is everything is a business. No matter what level you’re on in the business you should get paid for your creations and your time. In the world of music getting paid for your work is called music royalties (or sometimes just referred to as royalties). As an artist or entertainer I’m sure you’ve heard of the term music royalties before. Some understand royalties very clear. Some have a general idea of them. This is common due to their complex nature. Another thing that makes music royalties complicated are the various kinds. The kind I’m going to specifically teach you about are mechanical royalties. The reason I want to focus on mainly mechanical royalties is due to the fact that they are arguably the most important type of music royalties around.

 

What are music royalties and mechanical royalties?

Music royalties are payments an artist receive based on how many units his or her song sales. Every time your song sales you receive payment for it. Due to the fact that there are multiple ways a song can be purchased and heard by the general public, there are various different types of music royalties. For example there are TV, performance, print , mechanical royalties and more. Each royalty represents a different avenue or route your song can be purchased or heard by to the public. If your song is affiliated with a TV related project, you receive TV royalties. If your song lyrics are printed in a book, you receive print royalties and so on. Mechanical royalties are royalties earned per unit when a song is sold or purchased on a mechanically reproduced physical medium. This means every time a cd, tape or vinyl of yours is sold you are owned mechanical royalties. Due to the internet and streaming phenomenon streaming and digital downloads also fall under the mechanical royalties category. Meaning if your music is downloaded through software such as iTunes or streamed on platforms such as Spotify, those are mechanical royalties owed to you.

vinyl mechanical royalties

A vinyl is 1 of the physical mediums that generate mechanical royalties when sold. At one point was very popular in the music industry.

 

What makes mechanical royalties so special?

Mechanical royalties are so special and important because they account for the most common way an artist’s music can be purchased. As an artist when you create music and release it you want people to like it and you want it to sell. If you song sells through any of the most popular mediums I mentioned earlier you are owned mechanical royalties. Although we live in the day and age where cd’s and tapes aren’t sold as much anymore, we still have downloads and streams. Those downloads and streams generate mechanical royalties. If you have a hit record or breakout song that does well you will want to know everything you can about mechanical royalties to receive are your just pay. Some will argue mechanical royalties are the “original music royalty.” This isn’t to say other music royalties aren’t important. However, mechanical royalties relate to music sales, which are extremely important for every artist and party involved with the music.

 

How do mechanical royalties work?

Now that you know what mechanical royalties are and why they’re so important you have to know how they work. As I’ve explain in the past when you create music there are 2 separate entities for each piece of music you create. You have the composition aka song which covers the melody and lyrics. Then you have the sound recording aka master that covers the official voice/ sound recording of the song by which ever singer or rapper is going to record the song for commercial release. Both of these elements of the music have their own separate owners and generate their own royalties. If you are an artist that does everything themselves then you would be the owner of both the song and sound recording. When dealing with mechanical royalties the great this is they cover the song and sound recording. Meaning all parties involved with the music are paid once the music sells. This includes:

The Artist = whoever the song is written for, the person who records the song, can also be the songwriter if artist writes his or her own music

-usually have rights to the song master (sound recording)

 

The Publisher = music publisher or publishing company the song is registered under. Songwriter can be his or her own publisher as long as they’re not signed to any publishing deal

-usually have rights to the song (composition)

 

The Songwriter = writer who wrote the song lyrics, melody and/ or produced the music. This can be the artist if artist writes his or her own songs

-usually have rights to the song (composition)

 

The Record Label = the company artist is signed with and records song under. If this is an independent  artist then no label exists.

-usually have rights to the song master (sound recording)

mechanical royalties songs

Chart showing the difference between a composition and sound recording

 

All of the different roles mentioned above may or may  not apply to your music. If you’re strictly an indie artist then the record label role wouldn’t apply to you. If you’re a songwriter but don’t have a music publishing deal because you are your own publisher, than the publisher role doesn’t apply to you. However, all 4 roles that are typically involved with a song or sound recording are explained and what part of the music they usually have rights to are also mentioned. How this information  relates to mechanical royalties is the fact that mechanical royalties cover both elements of your music. If you have music that’s sold on a mechanically reproduced medium that covers the composition and master, meaning all 4 major parties (recording artist, music publisher, the songwriter, record label) mentioned get a cut.

 

Harry Fox Agency and collection mechanical royalties

Like all other avenues of music royalties you have to go through another entity to receive mechanical royalties. In the United States the one and only mechanical royalty collection company is called Harry Fox Agency aka HFA. Harry Fox Agency tracks the sells or your music and once it’s time to distribute royalties they give a certain portion to the record label. This portion covers the record label cut and the artist (one who records song) cut. The record label then pays the recording artist. The amount the recording artist is paid will be discuss in the next section. Harry Fox Agency also gives a portion to the music publisher. This portion covers the music publisher’s share and the songwriter share. The music publisher then pays the songwriter. The buzzing question for all independent artists I’m sure is “how do I receive my royalties with no label?” This is where it gets difficult. HFA doesn’t allow artists who aren’t signed to a label to collect mechanical royalties from them. The alternative to this would be to register an account with an admin collection agency. You sign up with them, become a member, they track your music and distribute your mechanical royalties. Some of these admin companies include:

If you’re a songwriter who is also strictly independent meaning you’re not signed with a publisher HFA also won’t distribute your mechanical royalties. You too would have to sign up with any of the admin collection agencies mentioned above. Another thing to keep in mind is even if you are under a music publishing contract as a songwriter, your music publisher have to be affiliated with Harry Fox Agency (HFA). This means you publisher have to have at least 1 song released by a 3rd party label that’s under his or her publishing company.

 

Mechanical Royalties and Song Splits

          Another important aspect to mechanical royalties is exactly how much does an artist gets paid for them. You know when mechanicals are generate, to who and how to obtain them. However, how much does an artist actually receive when dealing with mechanicals? In order to understand this an artist must know the mechanical royalty rate. Your mechanical royalties are calculated by the mechanical royalty rate and how many units you have sold. The current royalty rate in the U.S. is 9.1 cents per unit sold. This means every time a mechanical unit of your song is sold you receive 9.1 cents (nine cents and one tenth of a penny). This is the standard mechanical royalty rate, but it’s not always that simple. If you wrote the song with someone else you two now have to split that royalty rate of 9.1 cents. If you’re a songwriter with a music publisher they are entitled to half of the total sum you generate from your mechanical royalties. If you are an artist signed to a label the label doesn’t even have to pay you the standard rate of 9.1 cents per unit. With the popular clause called “controlled composition”, the label is allowed to negotiate a lower mechanical rate. Not to mention there are other clauses that can effect your mechanical royalty rate if you’re signed to a contract. This is one of the many reasons why becoming an independent artist is so common nowadays. Most artist don’t want to sign a standard recording contract, a songwriter contract, or any type of music publishing deals. As an indie artist you have a better chance of gaining all your mechanicals However, as an indie artist you can’t receive your mechanical from Harry Fox Agency (HFA). Remember if you are strictly an independent artist in order to obtain  mechanicals you have to go through an admin collection company. All of these companies have a fee for you to generate mechanical from them. Most of the time that fee is deducted from whatever mechanical royalties you generated.

music streams mechanical royalties

Chart of mechanical royalties in regards to music streams

Some may argue that an artist never truly gets his or her rightful mechanicals owed. This is a valid argument and many would agree. With all the loop holes, contract clauses and fees involved with mechanical royalties very rarely does the artist get 9.1 cents per unit sold. The best way in my opinion to handle this is to keep track all of your split sheets, make sure your music is copy written in your name, limit the  number of people you write a song with, push yourself as an independent artist and keep track of every calculation affiliated with the sales of your songs.

 

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