Understanding Music Royalties

Learn these terms to know to understand music royalties

Understanding music royalties can be challenging, but once you have a few basics down, everything else falls into place. As you begin to learn about royalties so you can get paid, commit five music industry terms to mind. They'll help you get the lay of the land.

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Mechanical Royalty

A mechanical royalty is paid on a physical (or digital) copy of a recorded song. The term "mechanical royalty" comes from the days when records were made "mechanically," which may help you remember the definition. A mechanical royalty is paid by record labels to songwriters for the albums they press featuring the songwriters' material. Mechanicals sometimes are paid on all of the albums a label presses, and sometimes they are paid on all of the albums that are pressed and distributed. In that case, a label doesn't have to pay on what it doesn't sell.

The rate at which mechanicals are paid is negotiable and varies from country to country, but there is usually a minimum rate that has to be met.

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Performance Rights Royalty

Unlike a mechanical royalty, a performance rights royalty is paid to a songwriter on a live performance of a song. A live performance of a song can be a concert or a public playing of a recorded song, like a radio play.

These royalties are collected by performance rights societies, such as the American Society of Composers, Authors, and Publishers (ASCAP) or Broadcast Music Inc. (BMI), which monitor media for live performances of songs. These groups issue licenses that allow businesses to host live performances of all of the songs they represent, and then they distribute the licensing fees among their songwriters depending on how frequently their songs were used.

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Blanket License

A blanket license gives the rights to use a large amount of music for a set period and is applied in cases when individual song licenses would be difficult to manage. Blanket licenses are used by performance rights societies to give license applicants access to the entire catalogs of their members. For instance, if you are a songwriter who has registered your songs with BMI, radio stations, television stations, clubs, restaurants, and other venues who are awarded a blanket license from BMI then have a right to host public performances of all of the songs registered with BMI, including all of your work. BMI tracks how those license holders use the music through a mix of monitoring and reporting by the license holder, and then uses those license fees to pay you your performance rights royalty for the public performances of your songs.

Blanket licenses vary in price greatly, depending on how often the applicant uses the music and how large of an audience they reach.

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Publishing Deal

The easiest way to think of a publishing deal is to consider it a record deal for songwriters. When a songwriter signs a publishing deal, the publishers handle the administration of the music. They seek licensing opportunities for their songwriters, issue licenses for their songwriters' works, and in some cases, they even get involved in the creative process with their songwriters. In exchange, publishers collect a portion of the royalties and other income generated by the songs they represent.

In the case of performance rights royalties especially, publishers usually have memberships in the performing rights groups that their songwriters belong to, and they allow those groups to handle that royalty collection.

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Tour Mechandising

In the early days of your music career, your tour merchandising may be as simple as your friend selling your shirts at the back of your show. As your career grows, however, tour merchandising companies may take over the work. They license your name and likeness and then pay you a royalty on the items they sell. The specifics of these deals can vary greatly, but something in the 30% royalty range is pretty common in the United States. The bigger your shows get, the larger the royalty you can negotiate since the companies can sell more products. Typically, to receive your royalty, you may be required to play to a minimum number of people at all of your shows. Your manager will help you negotiate your tour merchandising royalty.