We explain how and why they exist, and whoever the heck Harry Fox is.
Mechanical royalties are paid to artists whenever they’re music is reproduced. This can apply to CDs, vinyls, cassettes, digital downloads, and streaming services. After signing with a mechanical rights agency (the Harry Fox Agency is who pays mechanical royalties in the U.S.), copyright holders will receive royalties upon the sale of their music. Generally the mechanical rights are obtained by a record label or streaming service, and the royalties are paid by the mechanical rights agency to the music publisher, who then splits the royalties with the songwriter based on their agreement.
What are Mechanical Royalties?
Just like many other aspects of the music industry, who pays mechanical royalties is fairly easy to grasp on the surface, but a bit more difficult to explain in-depth. In general, they apply to the money that is paid to copyright holders when their music is reproduced in a physical or digital format. This can apply to CDs, cassettes, vinyls, digital downloads, streaming services, etc. While modern methods may have moved beyond “mechanical” (the original term came from player-piano rolls) the name has stuck.
Who Pays Mechanical Royalties?
Mechanical royalties are paid by mechanical rights agencies. In the U.S., the Harry Fox Agency is the primary mechanical rights agency, but there are many more around the world. This is the first step in the process, in the same way that an artist signs with a performance rights organization to gather and distribute performance royalties.
Who Receives Mechanical Royalties?
Mechanical royalties are given to the copyright holders (most commonly the music publisher and the songwriter). An entity must get a mechanical license to reproduce a copyrighted song in any format — digital or physical. This is most commonly record labels and streaming services. Once they obtain a mechanical license and reproduce the material, the licensing agency collects royalties based on the units sold (or songs streamed if digitally).
Music publishers and songwriters do have the option to collect royalties directly from the record label in the U.S. without sacrificing a percentage to the mechanical rights agency. Oftentimes a record label will make an agreement with the copyright holders when they sign a contract on who collects mechanical royalties.
How to Collect Mechanical Royalties Outside the U.S.
If you’d like to collect mechanical royalties for copyrighted work being reproduced outside the U.S., you’ll most likely need to sign with a mechanical rights agency in the respective country. This can be an involved and time-consuming process, especially since many countries require the use of an agency to collect and distribute royalties.
How Much are Artists Paid for Mechanical Licenses?
Another difficult question to answer. On average, songs earn around 9.1 cents each time it is reproduced in physical format or downloaded digitally following a purchase. Compulsory mechanical licenses (for covers of songs) generally earn 8.5 cents per reproduction. As for digital streaming services, artists generally receive .0008 cents every time one of their songs is played.