Music Royalties: The Ultimate Guide
Everything you need to know about how music royalties work, who earns them, and how much they can be worth
According to “So You Wanna Be a Rock ‘n’ Roll Star,” by The Byrds, you just need an electric guitar and time to learn how to play in order to strum your way to financial success. The song references concerts, groupies, and fame, but doesn’t touch on the reality of music royalties, which are the complex means by which songwriters, musicians, and other associated parties profit from the creation and performance of music.
A strong understanding of music royalties is in every recording artist’s best interests. Knowing what you’re due lets you make informed choices about contracts, agreements, and partnerships. Your music is art, but it’s also a business, and the more you know, the stronger your business will be. Let’s dig in.
What are music royalties?
Music royalties are money paid to music professionals for their involvement in the process of bringing music to people’s ears. Different categories of royalties cover the many aspects of music creation, reproduction, and distribution, as well as where or how a piece of music is being heard. The value of royalties varies depending on factors like the kind of royalty it is, who the recipient is, and the specifics of an individual contract.
Music royalties are paid to the parties that own the rights associated with a piece of music. While musical rights can be straightforward — for example, if the songwriter composes both the lyrics and the music then performs it themselves — they’re usually more complicated than that. All musical rights refer to one of two aspects of a piece of music:
The Composition: This is the harmony, melody, and lyrics of a piece of music that has been recorded to a tangible medium. When Lin-Manuel Miranda was on his way to a party and made a voice memo on his phone of what would become “My Shot,” he became the owner of those rights.
The Master: This is a particular expression of a composition; in other words, a version of a song. To continue with the Hamilton example, a recording of the original Broadway cast would have a master, but a recording of the UK cast would have its own master.
There are many individual music rights within each of those categories, of course. For the complete breakdown of musical rights, read What Are Music Royalties?
How do music royalties work?
The process of earning, collecting, and distributing music royalties involves two distinct groups of interested parties: those who create the song, and those who handle the collection and distribution of royalties for it. The individuals in those groups might overlap or change over time depending on contractual agreements or other factors. The most straightforward process for music royalties is:
A songwriter writes a song.
An artist records the song. (This may or may not include the songwriter.)
The artist who recorded the song and/or their representatives connect with intermediaries who manage royalty collection and distribution.
The song is played and/or committed to physical copies and/or streaming.
The intermediaries collect royalty payments and distribute them to the rights holders.
Once the song is written and recorded, groups track how often and in what context the song is performed. They then collect the royalty payments and distribute them to the rights holders. Due to the immense volume of music being played every day, different associations oversee specific categories of royalties. Performance Rights Organizations (PROs), for example, collect public performance royalties, but not other kinds of royalty.
How Do Music Royalties Work? goes into deeper detail about the particulars of royalty collection and distribution.
What are sound recording royalties?
Time to start tackling specific kinds of royalties. Sound recording royalties are the payments made for the ability to use a specific recorded version of a piece of music. While a single type of artistic right — master/sound recording rights — generates sound recording royalties, they actually can refer to several different kinds of royalties. Physical or digital recordings generate reproduction royalties, streaming music leads to mechanical and performance royalties, and music that’s used in a multimedia production such as a video game results in either performance or synchronization royalties, depending on the circumstances.
The amount sound recording royalties are worth depends on how the music is being used and who made it in the first place. Rates are negotiable, and a musician with the stature of Yo-Yo Ma will have more leverage than someone just starting out. Determining sound royalties becomes even more complex when non-featured artists and musicians are factored into the payments.
Learn the particulars of this kind of royalty by reading What Are Sound Recording Royalties.
What are mechanical royalties?
Of the many types of music royalties, mechanical royalties are perhaps the most straightforward. With a history dating back to the piano rolls of the early 1900s, the process of paying out mechanical royalties hasn’t changed all that much. Mechanical royalties are generated whenever a piece of music is made available to the public via physical media or a streaming service. Mechanical royalties in the US are unique in they are the only musical royalty whose rate is not determined by the free market. Instead, The US Copyright Office’s Copyright Royalty Board (CRB) reviews the rates every five years and adjusts if appropriate.
The biggest change to mechanical royalties in 100 years was the addition of digital streams, which are as much a vehicle for music as CDs and tapes once were. One nuance digital has that physical mediums don’t is whether or not the listener has taken action to hear the song. The royalties artists receive for someone pushing play on Spotify are different from those when the same song is played on Sirus XM satellite radio.
For more about how mechanical royalties work, read What Are Mechanical Royalties?
What are synchronization royalties?
Synchronization royalties refer to payments made in exchange for the use of a piece of music in a multimedia production, such as a movie, TV show, commercial, or video game. Sync royalties are paid as a one-time, upfront fee known as a sync license fee. The inclusion of popular music in movie soundtracks is a common generator of sync royalties.
Sync royalties have caused some controversy on streaming channels like Twitch and YouTube as content creators have had their videos de-listed due to their use of music they hadn’t licensed. If, for example, a streamer is playing a video game and the game’s soundtrack can be heard, everyone involved with the creation of that music is within their rights to demand compensation for it.
Discover how an ad for Jaguar became a turning point for sync royalties in What Are Synchronization Royalties?
How much do artists get in royalties?
There’s no clean answer to the question of how much music royalties are actually worth. It’s a complex question influenced by many factors including who the artist is and how the music is being used. A megastar like Ariana Grande can demand a higher cut of royalties than an up-and-coming band, for example. Rates vary between streaming services, too, so the same song will earn different amounts of royalty payments on Apple Music versus Spotify. A song used in an independent rom-com won’t be worth as much as one used in the next Marvel blockbuster. With so many permutations of rights-holders and song use, a great deal of calculation goes into figuring music royalties.
Another factor in the amount artists get is how many different rights to a piece of music they own. If the songwriter is also the performer, for example, they’re entitled to cuts of royalties stemming from both the composition and the master rights. They may negotiate — or even sell — some or all of their rights in exchange for more money up front.
Read How Much Do Artists Make In Royalties for a deeper dive into the dollars and cents.
Am I owed music royalties?
Learning the vagaries of music royalties is interesting and will forever change the way you see the world, but what matters most is whether you have any coming your way. If you own the rights to a piece of music, you should be earning royalties each time it is played, performed, or used. So much music is played in so many different ways that even when the system is working well, royalties can lay unclaimed.
Our blog post Am I Owed Music Royalties? provides the information you need to determine whether you’ve earned royalties, but you might need a partner’s help to claim any you’ve yet to receive. At Trqk, we have first-hand experience navigating the challenges the royalty process presents. We use data science and business intelligence to provide a holistic view of your royalties and catch payments other organizations may have missed. Our mission is to help keep the music creator economy transparent and fair because we’re musicians and music execs ourselves. Get in touch to learn more about what Trqk can do!