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All you ever wanted to know about the different kinds of royalties and how they'e collected.
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The music industry relies on royalties generated by the licensing of copyrighted songs and recordings as a primary form of payment for musicians. Intellectual property law and licensing systems have gone through significant adjustments over recent years as a result of the rise of digital music, but much of the industry's historic legal framework remains.
To start thinking about music in legal terms, it's important to realize that there are two types of musicians: songwriters and performing artists. These hold two distinct copyrights: songwriters hold the rights to the lyrics and melody of a piece of music, while performing artists hold the rights to a particular recording of a song, which is called a master recording. Songwriters may only seek copyright for a full song, and cannot divide lyrics and melody into separate rights.
Both songwriters and recording artists typically assign their rights to a third party for management, instead of attempting to track a song’s use and seek payment independently. Song copyrights are typically assigned to music publishers, while master recording copyrights are typically assigned to a record label.
The fees music users pay when music is performed publicly. The use of music over the radio, in a restaurant or bar, or over a service like Spotify or Pandora is considered a public performance.
Mechanical royalties paid to songwriters and artists when music is licensed (think CD or vinyl) but also when music is streamed (streaming mechanicals) “on-demand” (like Spotify). Songwriting mechanical royalties are set by government through what’s called a compulsory license, which right now is set to about 9.1 cents per copy.
(Source: American Songwriter)
LEARN MORE: Mechanical Royalties Guide 2019
Expand the images below to learn more about the flow of royalties from various sources:
(Source: Future of Music Coalition)
With a master recording copyright, a record label seeks to collect royalties from the use of a specific recording of a song. Master royalties are paid to a label when the label’s recording is used in an advertisement, film, television program, streaming service or other medium. Master royalties are typically paid in addition to synchronization or public performance royalties, as royalties paid to the publisher only grant the rights to the use of a song, not a specific recording of a song.
Terrestrial radio stations do not typically pay master royalties, as radio play has traditionally been viewed as free advertisement for a recording. However, radio play may or may not have a positive impact on sales, and congress is considering legislating that the royalty be paid. At present, recording artists only earn master royalties from radio when their recordings are played in a non-interactive digital arena where the listener is a subscriber (i.e. satellite radio).
Now that you have a firm grasp of how music copyrights work, you should create a free account to view all of the music royalty assets we have up for auction on the site. You can create your free account in less than two minutes by clicking the button below.
