Royalties represent the amount of money paid to an artist, when someone or some company wants to publicly use that artist's work. The word royalty usually makes us think of something related a king. And, in a way, that is true. It is some sort of "payment to the king" - the legal owner of a certain product. So what are royalties in music? It's the amount of money an artist receives whenever and however it's music is used by anyone other than the music right's holder. For example, to open a franchise of any brand, you must pay royalties to the owner of that brand. That payment gives you the right to use and sell their products. Generally, royalties have to do with rights to use natural resources, patents, franchises, brands or products. So, if we really want to know how royalties work in music industry, first we need to look at some copyright laws.
US LAWS AND CATEGORIES OF ROYALTIES IN MUSIC
In the US, there are different categories of royalties. The main ones are: Songwriter Royalties: This is the royalty paid to the artist who wrote the song. It is related to the sheet music, before the recording. Only the songwriter (or songwriters) is paid. But sometimes a songwriter has a contract with a publishing company. In this case, the publisher gets a share of the royalties. Mechanical Royalties: Refered to the phonogram. The recorded version of the song. It can have many different formats: CD, DVD, MIDI, games and films. Even ringtones have to pay royalties. It is important to say that, in the case of a phonogram, another agent joins in: the record companies. They are the ones responsible for paying royalties to songwriters and publishers. Performance Royalties: This is related to the performance of the song. That can be at parties, TV shows, on the radio, in bars, religious events and many other activities. In this case, only songwriter and publishing company get paid. Synchronization Royalties: Granted through sync licensing. To synchronize is to perfectly adjust sound and image in a video. So sync royalties are paid when a song is used in soundtracks for TV ads, film, theatre. Digital Royalties: The most recent and challenging type. Digital royalties came to existence because of the large use of music on the internet. It is related to digital playing of songs in social media, streaming platforms and online distribution. It's closely related to mechanical royalties.THE COPYRIGHT ACT
To understand what are royalties in music, we must know a little bit abour laws. The Copyright Act, from 1976, is the North American law that regulates everything concerning copyrights. Despite going through updates and amendments, it is the most important document on the sunject. The United States are also part of the Universal Copyright Convention (UCC) and of the Berne Convention. Both events discuss the protection of works of art worldwide.THE MAIN COPYRIGHT ORGANIZATIONS
THE PROS
The first thing you need to know about copyrights, is that if you want to use someone else's song, publicly and commercially, you will need a license. You can get that license from one of the Performing Rights Organizations (PROs). The most important PROs in the country are: Those institutions work as copyright protection associations. They are in charge of inspecting where the song is played. And then sharing the royalties between the songwriters and the publishers. The PROs also negotiate licenses with people and companies that want to use a song. Including radio stations and TV channels. Each PRO's has their own method to do it. North American law is different in some aspects, even though it follows international standards. For example, in case of performance royalties, only songwriters and the publisher get paid. Even if the performance is of a phonogram, the record company does not receive anything. That happens because behind it, there is an understanding that, the act of playing a record will boost record sales. And that benefits the record company. When we talk about the internet, the situation changes. In this case, record companies and interpreters have right to royalties. The artist must be a member of a Performing Rights Organization to receive the appropriate royalties. If the artist only wants to protect the copyrights, it is possible to register the song on US copyright Office. But, that does not make the artist entitled to get any money.ROYALTIES IN MUSIC - WHAT IS FAIR USE?
When we think about what are royalties in music, we come accross the term "fair use". That is when there is a possibility of using a song for free. But that use must be limited and must have a positive contribution to society. Fair use still generates a lot of controversy. And it is based on 4 key points:- Purpose of use - Teachers, researchers, critics and scientists have preference.
- The nature of the work intended to be used.
- Percentage of the work used.
- Its effects on the industry, on society and on the appreciation of the work.