What are royalties…How to get them
What is a royalty?
A royalty is a percentage of gross or net profit or a fixed amount per sale to which a creator of a work is entitled which is agreed upon in a contract between the creator and the manufacturer, publisher, agent and/or distributor. Inventors, authors, movie makers, scriptwriters, music composers, musicians and other creators contract with manufacturers, publishers, movie production companies, producers, and distributors to be paid royalties in exchange for a license to manufacture and/or sell the product.
What royalties am I entitled to?
copyright registration entitles a musical composer to performance royalites whenever the musician’s composition is performed publicly, i.e., over radio, television, or in restaurants, bars or other public places. In the United States, performance royalties are collected and administered by ASCAP, BMI and SESAC. Mechanical royalties are paid by the record company (or label) to the publisher for the reproduction of musical compositions which appear on compact discs (CD), cassette tapes, vinyl phonorecords, digital audio tapes (DAT), and other manufactured formats.
Are there different types of royalties
There are four (4) different types of royalties, each derived from a separate and distinct copyright. The four potential sources of royalty revenue in the music recording and publishing industry are:
(1) Mechanical royalties: paid from record companies for record sold based on the exclusive to reproduce and distribute copyrighted works.
(2) Public performance royalties: paid by music users for songs in the operation of their businesses and broadcasts based on the exclusive right to perform publicly copyrighted works.
(3) Synchronization fees: paid by music users for synchronizing music with their visual images based on the exclusive right to reproduce and distribute copyrighted works and to prepare derivative works of copyrighted material.
(4) Print music income: paid by music printers for sheet music and folios based on the exclusive right to distribute copies of copyrighted material.
How do collect my Royalties?
Performance Royalties
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.
(1)Performance Rights Organizations or PROs (in the US that’s BMI, ASCAP, and SESAC) collect songwriting performance royalties from music users and then pay songwriters and rights holders (publishers).
(2)Like BMI and ASCAP, SoundExchange collects recording performance royalties for recording artists and labels whenever a music is performed publicly — but only for digital performances.
(3)That’s because copyright regulation as it stands means terrestrial broadcasters (AM/FM radio) pay performance royalties to songwriters, but not the recording artists.
(4)Digital performances (for example, Pandora) pay a recording digital performance royalty to SoundExchange and a songwriting digital performance royalty to the PROs.
(5)But on the flip-side, BMI and ASCAP are governed by consent decrees, which means an arm of the US Judicial Branch (called a “rate-court”) can set the rates (per radio play, per stream, etc.). BMI and ASCAP collect for songwriting performance royalties. In exchange for the right to collect on behalf of songwriters across America, they are limited in their ability to negotiate by this rate court.
(6)SoundExchange isn’t governed by a consent decree, which means they can negotiate on the free market. This is where things get complicated. Recording artists get paid nothing when their music is played on AM/FM radio (because there’s no performance right for recordings on terrestrial radio), but they are typically paid at least 5 times more than songwriters when music is performed digitally, like on Pandora. That’s because of SoundExchange’s negotiation power, and BMI/ASCAP’s limitations. AM/FM broadcasters do pay songwriters, but it’s at a royalty rate ultimately set by the courts.
Mechanical Royalties
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.
(1)Current copyright regulation wasn’t created at a time when services like Spotify or Beats existed, (which are kind of a hybrid of ‘performance’ and a ‘sale’) so they pay both performance royalties and mechanical royalties to songwriters and artists.
(2)Spotify pays about 10% of its revenue to songwriters (split between mechanical and performance royalties) and about 60% to the artists. Services like Spotify don’t have to negotiate with songwriters because the government sets the rates — through the consent decree for PROs and a compulsory license for mechanical licenses.
(3)Mechanical royalties for songwriting are usually paid by labels or artists to a third party, (traditionally for the major publisher it’s been HFA (the Harry Fox Agency), who pay the publishers.
