Let’s get this out of the way. All information posed here is for educational purposes only. If royalties are in any way relevant to what you’re doing, you should already have an attorney (or a professional acting on your best interests)!
Getting paid for doing what you love – making music – that’s the dream of every starry-eyed kid with posters of their heroes plastered all over their bedroom walls. It seems an impossible feat, maybe now more-so than ever…
The music business used to be a veritable minefield of artist exploitation; hidden clauses, shady managers, unfair contracts, conflicts of interest, you name it. It’s no secret that the music industry has gone through massive changes in the past two decades, ever since Lars Ulrich decided to litigate against some dorm room wunderkinds who found a way to bring a worldwide multi-billion dollar industry to its knees.
The internet, for better or worse, has revolutionized how music is made, played, distributed, and sold. There is sage advice available via a few choice keywords that just years ago would have only been accessible through an intermediary (and definitely NOT for free) like a manager, attorney, or producer. Streaming services like Spotify, Pandora, and Youtube have made instant audio gratification attainable for new artists and legacy artists alike (with a few famous names turning themselves into martyrs…).
One of the biggest ways that the industry has shifted is how royalties are handled. It’s also a hot button issue with everyone up the music ladder, from record label heads to the artists themselves. Put simply, there are two main royalty streams for artists, performing (sometimes called publishing) and mechanical. Though times have changed, these two categories are still vital to your income as a musician. Let’s break it down!
Performance royalties means essentially being paid for any “live performance” of registered material. The term “live performance” can mean when the recording is played on terrestrial radio (that’s earth), satellite radio (that’s space), or streamed via internet radio (that’s Spotify, and Pandora, and…you get it). It also applies to music licensed for film and video games.
Mechanical royalties come from record sales, and are based on the number of recordings sold. The term originated from when copies of recordings had to be physically reproduced (vinyl, cassette, 8 track). Whoever owns the master recording (a record label, the artist) is technically to be paid for every reproduction. This includes digital copies sold and streams as well.
That bears repeating.
This includes digital copies sold and streams as well. This is where many take issue with streaming services, even those that are subscription-based. Another fun fact about mechanical royalties? Performing rights organizations (ASCAP, BMI) aren’t responsible for collecting mechanicals, only performance royalties. Some good news is that Under U.S. law, download retailers include the mechanical royalty as part of the net payment, though it’s a significantly lower rate than it would be for physical sales. This no doubt due to the fact that digital sales outnumber physical sales.
Next week we’ll dive more into royalties, and look at some digital distribution options.
About the Author: Brandon Stoner has been in and around the music business for over a decade. He is the owner of Audio Ecstasy Productions and LoudLife Media, as well as the lead vocalist and guitarist in the band Thieves & Lovers. He resides in sunny Los Angeles, Califonia with his dog Max.