Music Business

Understanding Songwriting Royalties

As a songwriter making a living is extra hard! With the decline of album sales and downloads, streaming revenue and live music have become the primary streams of income for artists, alongside Merchandise and Brand partnerships. If you are not a performing artist yourself, but instead writing songs for other artists, then your only source of income are songwriting royalties. So understanding the royalty streams of income is crucial, as you will want to collect every dime you can get!

There are two main kinds of royalties, that are relevant for songwriters. Those are Performance Royalties and Mechanical Royalties. Let´s take a closer look at those and find out how to collect these royalties as an independent songwriter .

Performance Royalties

Performance royalties are collected through Performing Rights Organizations (PROs), such as BMI, Sesac and ASCAP in the US. In Australia APRA Amcos takes care of those, in Ireland it is IMRO, in Germany GEMA. So every country has their PRO or even more than one you can chose to become a member of.

PROs pay performance royalties to the writers and the publishers of songs! A songwriter who does not have a publishing deal or any arrangement with a publisher of that kind, is automatically the publisher of their own songs (self-published). So both the writer´s and the publisher´s share go to the songwriter. The writer´s and the publisher´s share split in halves. So 50% of your song´s revenue goes to the writer, and 50 % to the publisher.

But what exactely are performance royalties and how much money do they bring you?

Performance royalties are paid by music users in commercial settings. Businesses that use music pay fees that cover for the songs they use publicly. For example if a song comes up on TV, on the radio, on stage (live performances), but also referring to music played in bars, supermarkets, retail stores, gyms and the likes, even airlines pay for in flight music, and last not least also internet radio, social media platforms and streaming services.

The fees for the usage of songs  are negotiated every year between the PROs and the music users. So there is no standard rate that applies! The rates also depend on the time of day that a TV or radio station airs a song, and the number of plays etc.

Mechanical Royalties

Mechanical royalties in their original sense refer to record sales, so they refer to the master sound recording. If a record label represents a signed artist that sang one of your songs and the record gets sold as CD or vinyl or downloaded in a digital store, the label will have to pay mechanical royalties to the publisher and the songwriter for each copy sold. Since that would be a whole lot of admin work, there are mechanical rights collection agencies like Harry Fox Agency (in the US) or MCPSI in Ireland, AMCOS in Australia or GEMA in Germany, that collect these fees and distribute them to the publisher! The publisher then forwards the songwriter´s share to the songwriter.

There are different categories of mechanical rights due to the various media, that people use to consume music. The following three categories apply:

A mechanical royalty per definition refers to the reproduction and sale of your master recording (e.g. on CDs, vinyls, tapes, DVDs…).For each copy sold, the songwriter is granted a royalty of 0,091 Dollars in the United states. Outside the US, rates usually vary between 8 and 10 percent of the sales price.

A digital download mechanical royalty refers to downloads of songs through digital stores such as Amazon Music or Apple Music.  Like the classic mechanical royalty fee, songwriters and publishers are reimbursed with 0,091 Dollars per download.

And then there´s streaming mechanical royalties. These apply to interactive streaming services, which basically means, that users are able to repeat song plays, press pause or forward and create playlists without any restrictions. The rate that is mandated by law is 10,5 percent of the gross revenue minus public performance costs.

To learn more about royalties and the legal side of music, I highly recommend this book:

Disclaimer: this is not legal advice, but merely a compilation of information found through public sources.

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