If you got to this article it's probably because you have been wondering what are royalties in music. Understanding this concept is a very important issue for artists because it ensures they will get all their mechanical royalties. In the industry, there are a couple of different ways a musician can profit. It all depends upon the media where your song was played. It also makes a difference how you choose to publish and distribute your work. To learn more about royalty’s policies and regulations, keep reading below.
What are mechanical royalties?
Whenever we talk about mechanical royalties, we’re talking about a very specific type of payment from music sales. They come into play when a physical or digital copy of that record is manufactured. So, whenever a CD, vinyl, cassette tape or even a download is made, there’s profit generated. The money from those sales is shared between songwriter, composer, performer and publisher. Later on, we will get into the details of how they split that money. For the time being, what you need to know is that mechanical royalties exist in all forms of media distribution records. And that also includes the digital world. It’s set up that way because the “mechanical” part of it includes all sorts of media in which music is distributed. Performing Rights Organizations (PROs) are the ones collecting and paying the money from royalties. Their work is centered on issuing licenses for performances. On the other hand, Mechanical Rights Organizations (MRO) work with mechanical royalties. It’s very important to make sure your discography is registered with one of each of those organizations. It’s also paramount that you and your publisher – if you have one – register with the same company. Today, the top PROs in the market are SECA, BMI and ASCAP. For MROs, the biggest names are Harry Fox Agency, Songtrust and PRS for Music.How the payments work
Some people may be tricked by the term “mechanical” into thinking this type of royalties is only valid for physical copies. This isn’t true at all! Due to the internet becoming such a huge part of how we now listen to music, the rules have change. So, if your listeners decide to buy your songs through download, you also get paid mechanical royalties. The same goes for plays done on Digital Service Providers (DSPs or simply streaming services). All forms of media now qualify for mechanical royalties and this is a great thing. Talking specifically about DSPs, their revenue generates both mechanical and performance royalties. Because of how legislation works in the U.S., only the second type is collected by PROs. For a long time, it was nearly impossible for independent artists to cash out the money form their mechanical royalties. It all changed with the creation of The Mechanical Licensing Collective, an organization that aims to make sure indie artists get all they’re owed. When it comes to splitting the money between the people that worked on a track, there’s a specific dynamic. For all effects, we should focus here mainly on the revenue generated by streaming services. It’s well known they now are the main media for music consumption. As we have mentioned before, each play a song gets on DSPs generates both performance and mechanical rights. This money goes straight to the publisher – independent artists are their own publishers, for all purposes. In order to make sure you will get songwriter royalties, it helps to be registered with an MRO. Similar to PROs, they are the ones in charge of collecting royalties of songs licensed for mechanical use.Licensing fees and payments
Now that you know how are royalties split on a song, we can move to licensing fees and payment dynamics.
First of all, know that mechanical rights are owed anytime a copy of that record is made. That would mean that artists get a cut of the profit each time a CD is pressed, for instance, and not when that product is actually sold. This is where MROs come into action.
As a rule, songwriters are the ones that get to collect the payments here. But that doesn’t mean they keep all of the money to themselves. More often than not, it comes to what was previously agreed between composers, producers and the performing artist.