A lot of artists come to us with basic questions such as what are royalties in music. There’s no shame in asking for what you don’t know and we are here to help you out. If you want to learn more about copyrights, royalties and what performing rights organizations (PROs) do, you’ve came to the right place.
Simply put, royalties represent the percentage of net or gross revenues paid to musicians for their work. The amount depends on the deal made with your label and publisher. For independent artists, it often happens that they are their own publishers because they own the masters (sound recording) of their music.
Copyrights and royalties
Each and every artist should have a really clear understanding of what are copyrights and why they’re so important. In the age of music streaming, it’s all about metadata and filling out the fields with the appropriate accreditation. The correct division of credits on a track is what ensures that everyone will get their fair share of the profits.
If copyrights are all about the right of intellectual property, royalties are about the proper payment of that work’s revenue. The royalty money doesn’t come only from plays on streaming services. There are four main types in the industry: mechanical royalties, performance royalties, sync royalties and print royalties.
The first one is paid every time that body of work is distributed through a physical or digital media such as a CDs, vinyl, cassette tapes, downloads and streams. For public performances, the artist has got to pay part of the profit to whoever owns the copyright to that music.
The third type is synchronization royalties or just “sync”. This is the case for music played on TV shows, ads, video games and every other outlet where the song is “synched” with visual media. The last kind of royalties happens to be the least common of the pack. Print royalties are paid whenever a song is transcribed to a music sheet and distributed with commercial intent. In all four cases, songwriter royalties have to be paid to each accredited composer and producer on the track.
What are Performing Rights Organizations?
In the music industry, performing rights organizations are the ones that work to collect licensing fees for artists all around the world. If you register your song with them, they’ll do the work of garnering all types of royalties from it. The top PROs in the market right now are ASCAP, BMI and SESAC.
Those organizations are not the same as publishers. It’s very important to register your songs with a PRO but you don’t have be affiliated with a publisher to do so. Actually, for independent artists, they’re often their own publisher. But there’s one thing you should be aware of is that if you do have a publisher, make sure to register with the same PRO as them. Registering the same music with different performing rights organizations could lead to an error that leaves your work unregistered and unpaid.
Although it is important to become an associate to a PRO, they’re not responsible for issuing every type of license. In the United States, performing rights organizations only collect performance royalties from streaming services. As early back as 2020, it was basically impossible for indie artists to collect their mechanical royalties from DSPs. Through the Music Modernization Act, they can now do that. The act created The Mechanical Licensing Collective so musicians could register and collect their streaming mechanical royalties by themselves.
Managing licensing rights
Whatever is your choice, you should know the importance of performing rights organizations. They are the ones doing the work of issuing licensing rights to make sure you get your royalties correctly according to the law.
The first Congressional act to clarify the rules for royalty’s collection was the Copyright Act of 1976. It clearly stated that the right of copy is automatically created as the songwriting is done. Even though the process is somewhat spontaneous, artists can still register their work with the U.S. Copyright Office and are encouraged to do so.
Through the years the laws have tried to make it easier for artists to get their check, but it still takes some time to process the payments. ASCAP will take up to six months and a half after the end of each quarter to distribute royalty’s money. BMI takes a slightly shorter time of five months and a half. SESAC is the quicker option here, vowing to pay royalties after only 90 days. All three of them have a minimum payment of $1 for direct deposits.
Get your money
It’s very important to know how copyrights work and what is the role of performing rights organizations in this process. Unfortunately, in the music industry a lot of royalties are still left unpaid for a myriad of reasons. The amount of lost money can go up to 2.5 billion, according to some estimations.
Knowledge is power here and a conscious artist is much more likely to receive all their profit. Go ahead and associate you and your band to a PRO to make sure you get every penny you’re owed into your pocket.