How Music Royalties Work

Let’s run through the important, but complicated, process of music royalties.

Royalties are the money that is paid to recording artists, songwriters, and/or publishers for following the use of their artistic work. While the definition is simple, issuing royalties to artists can be a complicated and involved matter. In general, artists can receive royalties for their music through mechanical reproductions (CDs, vinyls, etc.), public performances (radio, broadcast, etc.), and synchronizations (films, commercials, etc.). Royalties are divided between different people involved in the creation of a song, including the songwriter, the publisher, and the recording artists.

Who Gets Music Royalties and Distributes Music Royalties

 

Each of the entities listed below have a direct role in either issuing and/or receiving royalties from the use of music.

  1. The Songwriter

Responsible for writing both the lyrics and music for a song. This can be one person or many people. They receive royalties from several different entities, including the publisher, record label, sync licensing agency, PROs, and print companies, depending on how their song is used.

  1. The Publisher

Responsible for exploiting an artist’s music for profit by issuing rights to record labels, tv/movie producers, and more. They generally acquire the copyright from the songwriter in exchange for royalty privileges. The publisher receives royalties from record labels, sync licensing agencies, PROs, and print companies.

  1. The Record Label

Responsible for recording an artist’s work and producing both tangible and digital copies of the recording. They have the master rights to a recorded track, but not the publishing rights. If the label owns the recordings, they receive rights from the publisher to record them and sell them for profit. If they don’t own the recordings, i.e. for a compilation or something similar, the label receives rights from the mechanical licensing agency to record a song a sell it for a profit.

  1. The Performing Artist

The person or people who actually perform the songwriter’s original work. Unless they also are the songwriter (which is common), they do not have publishing rights. They receive royalties for use of the master recording, in mechanical reproduction of the recording (CDs, vinyls, etc.), as well as from sync licensing agencies.

  1. Performing Rights Organization (PRO)

PROs acquire public performance royalties on behalf of the songwriter and the music publisher. Public performances include any public space where a song is played — including radio, commercial spaces, etc. Once the copyrighted material is registered with the PRO, they will issue royalties to both the publisher and the songwriter.

  1. Mechanical Rights Agency

This agency manages mechanical licensing rights for the music publisher and issues those rights to anyone who’d like to produce copies of the music. They issue royalties to the songwriter, publisher, and performer.

  1. Sync Licensing Agency

Acquires rights from the music publisher and record label to issue licenses for syncing a song alongside any sort of visual media, including films, commercials, etc. They issue royalties for sync licenses to the music publisher, songwriter, and whoever owns the rights to the master recording.

The Big Picture

A songwriter issues the copyright for their song to a music publisher, who then either releases the recording independently, issues rights directly to a record label, or issues rights to a mechanical rights agency, who then issues those rights to a record label to record and produce the music with a performer. Depending on how the music is used — in public performances, CD sales, in films, sheet music, etc. — the people who were involved in the production are issued royalties. Royalty splits are negotiated between each entity, depending on their level in the process and how many people were involved. Simple, right?

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