Music royalties: 5 lessons learned

musicbusiness

May 4

As some of you know, two months ago I started a sabbatical to focus on writing and managing my son’s band WROSE. This post is focused on what I’ve learned about the (complicated) state of things in connection with income from music. Before I go any further, the disclaimer: I am no attorney, much less a music attorney.

I have been reading the 10th edition of All You Need to Know About the Music Business, by Donald S. Passman. I was making great progress until I reached Part III on Songwriting and Music Publishing. I cannot blame Mr. Passman: his book is truly exceptional and he makes an otherwise dull topic very approachable through humor and metaphors. The thing is… the way this industry works is extremely complicated, and it has changed a lot in recent years due to the advent of streaming music, now the way most music is being consumed, and, therefore, paid for.

Here are 5 key things I learned:

1) As explained by SongTrust, every song has two halves: the composition and the master recording.

The composition refers to the underlying melody, lyrics, and music. By contrast, the master recording refers to the specific recording of that piece of music. (There can be many recordings out there for a single composition.)

2) Each half generates its own type of royalties:

Compositions generate performance royalties, mechanical royalties, sync royalties, and print royalties (there’s others, but I am skipping them here given they are more obscure):
- Performance royalties are generated whenever the song is broadcasted or performed in public (in radio, TV, venues, elevators, etc.) Included in this category are also broadcasts over non-interactive streaming services (think XM Radio or Pandora with ads).
- Mechanical royalties apply in connection with the reproduction of song in physical or digital form: CD, vinyl, MP3, and interactive streaming services, such as Soundcloud, Spotify, or Apple Music.
- Sync royalties apply when a song is synchronized with the action on a TV show, a TV or streamed commercial, a movie, a streamed video, a video game, etc.
- Print royalties apply in connection with sheet music.
Master Recordings generate digital performance royalties and master recording revenues.
- Digital performance royalties are a US-only thing. They are royalties that non-interactive streaming services must pay to performing artists each time they stream one of their songs.
- Master recording revenues are earned from streaming, download or sales in a physical format. These royalties sometimes end up in the pocket of record labels (since they own the rights to the sound recordings). Since Independent artists pay for their productions, are entitled to these royalties.

3) There’s a LOT of players in charge of collecting the different types of royalties. I highly recommend the super-detailed post The sync songwriter & the Mechanical Licensing Collective (MLC), PROs, SoundExchange, Harry Fox Agency & more, by Sherry-Lynn Lee. Some of the names you will find in here: ASCAP, BMI, Harry Fox Agency, MLC, SongTrust, and SoundExchange.

4) When you write a song (when it’s “finished”) and it exists in some form, digital or physical (it can be in a music sheet, in a recorded demo, etc.), you automatically own the copyright for the composition. Having said this, it is a GOOD idea to register your songs with the Copyright Office, since “it gives you certain legal remedies you don’t otherwise have.,” as stated by Passman.

However, to collect royalties on the piece of music you take 4 steps that are detailed beautifully in this Songtrust's Music Royalty Checklist.

5) In 2018, the US Congress passed the Music Modernization Act in an attempt to bring elements of this process into the 21st century. In spite of the passing of this law, the process remains fairly complicated. So entities like SongTrust, that take on most of the complexity for a one-time fee per songwriter + 15% royalty commission, are a welcome help.

In addition to the book by Passman and the blog post by Sherry-Lynn, two more resources I have found very valuable in this journey are: