Music Royalties: An Overview
A Song of Two Copyrights
Any song that you listen to has two different copyrights associated with it, the Musical Composition Copyright and the Sound Recording Copyright.
- The Musical Composition Copyright covers things like the words and melody of a song. These are typically created by the songwriter or composer.
- The Sound Recording Copyright covers the actual audio recording of a song. The creator is typically the performer that records the song and/or the record producer who processes the sounds and fixes them in the final recording.
There can be multiple Recording Copyrights in existence for a song, but there is generally only one Composition Copyright.
SOMRE Royalty Stream Classifications
SOMRE classifies royalties into 3 different streams for each copyright:
- Performance Royalties
- Reproduction Royalties (a.k.a. Mechanical Royalties)
- Sync Licensing
This gives us a grand total of 6 different types of royalties that we will be talking about. Three streams for each of the two copyrights.
For each of the above mentioned royalty streams, it is important to know where that royalty is coming from (i.e. via what medium is a song being consumed).
Performance Royalty Sources
When we think of performance royalties, we can think of the song being played or performed for an audience’s consumption. Sources include:
- Satellite Radio
- Internet Radio
- Public Use (e.g. in a shop, cafe, etc.)
- Terrestrial Radio (e.g. AM & FM) — Music composition only. Which doesn’t really make sense, but the logic is something to do with it being a public broadcast.
- Live Performance — Music composition only. Which makes sense because when you are listening to live music, you are not listening to a recording.
Reproduction Royalty Sources
Reproduction royalties can be thought of as coming from the song being sold. It has been reproduced as an album or a downloadable file that a consumer can then purchase. Sources include:
- Interactive Streaming
- Downloads
- CD / Vinyl Sales
Sync Royalty Sources
Sync is short for synchronization. Sync royalties come from licensing a song to be used in sync with a visual medium such as a movie. Sources include:
- Movie
- TV Show
- Video Game
Royalty Payors
Now that we have covered the sources of the royalties, it is important to take a look at some of the potential companies that might be paying those royalties. Take a look at the below breakdown containing some well known companies like Apple or Spotify to see which royalty stream their payments would go towards.
Royalty Collectors
Most of the time, copyright owners have various companies that will collect royalties on their behalf. The reason for this is that these companies specialize in collecting the royalties and have the resources required to reach out to everyone that owes royalty payments. It is well worth it to have these companies collect the royalties, as the copyright holders end up receiving a higher return even after you subtract the collector fees.
On the Music Composition side of things, royalty collection is pretty straight forward:
- Performance Royalties are collected by a Performance Right Organization (PRO) such as BMI, ASCAP, or SESAC.
- Reproduction Royalties are collected by Harry Fox Agency.
- Sync Licensing Royalties will come from a contract, so a few major sync licensing agencies have been listed below.
All of the above are typically collected by a publisher and then paid out to the copyright holder. Some of the collectors even require that the payments go to a publisher and won’t pay the royalties directly to an individual. You will see big name publishers listed below as well as some “admin publishing companies”, which are ideal for independent artists.
As for the Sound Recording side:
- Performance Royalties are collected by SoundExchange. They pay 50% to the copyright holder, 45% to the performing artist, and 5% to a fund that goes to non-featured artists such as background singers and musicians.
- Reproduction Royalties are collected by distribution companies and aggregators. As the sound recording copyright is often times owned by a record label, many of the large record labels have in-house distribution departments that collect these royalties. However, there are plenty of options nowadays for independent artists that do not have a record label.
- Sync Licensing Royalties will come from a contract, so a few major sync licensing agencies have been listed below.
When a song is added to SOMRE, the royalty payments come directly from the above listed companies and more. SOMRE then distributes those payments out to anyone that holds ownership of the particular royalty.
Tip of the Iceberg
Hopefully now you have a better understanding of the wide (tangled) world of music royalties. There are other streams of royalties which we did not cover and which are not in scope for SOMRE; however, the above should cover most ways that you consume music. We would love to hear and answer your questions, so please contact us!
Originally published at https://www.som.re.
