What Are Royalties In Music

How Artists Get Paid

In many cases, royalty payments happen once a month, but exactly when and how much artists get paid depends on their agreements with their record label or distributor. Once we pay rightsholders according to their streamshare, the labels and distributors pay artists according to their individual agreements. Spotify has no knowledge of the agreements that artists sign with their labels, so we cant answer why a rightsholders payment comes to a particular amount in a particular month.

Royalties And Copyrights On The Internet

The internet has its own dynamics regarding what are royalties in music. There is no fixed percentage for music played online. Take Spotify, for instance. To figure out the royalties, they have to think about many different factors. Like the country where the listener is or the number of premium users listening.

To make things easier, there are some online calculators for streaming. That can give you a good notion of what to expect.

Besides, US law has the Digital Millennium Copyright Act . That act criminalizes the creation and dissemination of any technological resource intended to deceive the control on protected works.

Institutions work to restrain modifications and unauthorized distribution, as well as to prevent copies and illegal downloads. Using what they call Digital Restriction Management .

This subject is the source of a lot of controversy as well. Because the DRMs end up limiting use formats for content that is legally purchased. And that jeopardizes the crative industry. Even so, DRM is an important tool against music piracy.

Fashion Merchandising And Other Direct Sells

Selling non-music products like perfumes, paraphernalia and clothing lines is an easy money-making strategy that artists have been taking advantage of for decades but in the digital era, musicians can also get creative with their methods, expanding well beyond traditional merch tents at concerts and posters on a website.

Artists are also starting to ask for money from audiences directly via crowdfunding or creating custom channels of communication with their fans outside of social media platforms like Instagram and Twitter. The Voice star Angie Johnson raised roughly $36,000 on Kickstarter to record an upcoming album, for instance. More groups are releasing dedicated apps or subscription packages for their music or selling bespoke products like artist-curated festivals, email subscriptions and limited music releases. Pitbull has his own cruise.

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Based On Net Receipts

Methods of calculating royalties changed during the 1980s, due to the rise of retail chain booksellers, which demanded increasing discounts from publishers. As a result, rather than paying royalties based on a percentage of a book’s cover price, publishers preferred to pay royalties based on their net receipts. According to The Writers’ and Artists’ Yearbook of 1984, under the new arrangement, ‘appropriate adjustments are of course made to the royalty figure and the arrangement is of no disadvantage to the author.”

Despite this assurance, in 1991, Frederick Nolan, author and former publishing executive, explained that “net receipts” royalties are often more in the interest of publishers than authors:

In 2003 two American authors Ken Englade and Patricia Simpson sued HarperCollins successfully for selling their work to its foreign affiliates at improperly high discounts

This forced a “class action” readjustment for thousands of authors contracted by HarperCollins between November 1993 and June 1999.

Who Can Receive Royalty Payments

Since there are two different copyrights in any piece of recorded music one for the sound recording and for the music and lyrics , there can technically be multiple different copyright owners. However, there are many cases where one rightsholder will own both copyrights.

A general word the music industry likes to use to describe these individuals and organizations is rightsholder. Youll hear this word being used a lot throughout your career.

Keep in mind that this table only shows the general rule of copyright ownership. Its possible for an individual like an independent artist, or organization to own both copyrights.

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Why I Made This Guide

Ever since Ive begun my research, I have followed the steps and am now successfully earning music royalties from multiple sources including Spotify, YouTube, Film Music, and Live Performances! Now its your turn, I created this guide so that you can be knowledgable of not only how to collect your royalties, but also understand what percentages are fair so that you get paid what you are worth.

What Are Royalties In Music

Music royalties are payments that go to rights holders. Such as songwriters or composers for the right to use their intellectual property.

We can define royalties in music as the fees paid to rights holders for each use of their music.

For example, royalties will be generated when a song is streamed on Spotify. Spotify has to pay rights holders for various different types of royalties.

To understand what royalties are in the music industry as well as their relevance, just think about film score composers. In the music business, royalties are one of their main sources of earnings.

Royalties make up a significant slice of the music industry, as a kind of passive income. Learning how to earn money from the usage of your copyrighted music can significantly increase your earnings.

Sometimes you can get fees instead of/on top of royalties, however. You can read more about that in our article about Music Licensing Fees.

To earn everything possible from your music, you need to know how to collect music royalties and what all the different types are. Thats where this article comes in!

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Does Bmi Pay Performance Royalties On Remixes

On official remixes, meaning the new work has been commissioned by, or otherwise approved by, the creators/rights owners of the original work, yes, BMI does pay performance royalties. An official remix usually involves a DJ/producer, and, to the extent that there is a sufficient amount of new creative elements in the remix, it will typically be considered a derivative work. The label, artist, publishers, writers, and individual involved in creating the remix will agree on what the royalty splits will be for the remix, which requires a new BMI registration to reflect the agreed royalty splits.

On an unofficial remix, meaning the remix was done without the consent of the creators/rights owners of the original work and the creator of the remix, no, BMI does not pay performance royalties to the individual involved in creating the remix, because it is an unauthorized derivative work. Unofficial remixes should not be registered with BMI as a new work.

How Much Royalties Do You Get For A Song

How the record is utilized for the royalties to occur mainly decides how much royalties you can get on a record. Theres no particular royalty amount for a song because it can get monetized in various ways.

For example, a sync license might exist, which will pay some royalties, while another public performance license might pay more than streaming royalties, etc.

Whatever the case is, the amount of royalties that one can get for a song mainly depends on how it is being monetized.

Considering only the album sales, the math can be done like this: . The royalties one will get will mainly be in accordance with the copyright agreement in place.

It is also important to note that in a case where multiple parties own a copyright to a song, all the royalties will get split as per the agreed-upon percentages that each copyright holder is entitled to get.

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Understanding The Music Royalties Breakdown Matrix

If your products are played in public, youre entitled to performance royalties. Refer to boxes 1 and 4 above.

If your products are copied for private use, youre entitled to mechanical royalties. Refer boxes 2 and 3 above.

If you want to make money from your SOUND RECORDINGS, focus on the YELLOW boxes above.

If you want to make money from your COMPOSITIONS, focus on the BLUE boxes above.

Make sense?

Lets take it step by step.

Who Distributes Music Royalties

If you want to collect royalties then you need to sign up with a collection society. For songwriters, this will be PRS for Music. This is a UK organisation that collects revenue that you are owed for uses of your songs and is the best way to collect your royalties. PRS for Music collects and distributes royalties on behalf of the songwriter/composer. This is perfect if you write your own music!

PRS for Music includes two separate collecting societies, PRS and MCPS that operate together. Musical works that are performed or play get their royalties collected and distributed by PRS. MCPS collects and distributes royalties for musical works that have been reproduced or copied.

The Phonographic Performance Ltd society is another way in which you can collect royalties. This company collects royalties on behalf of performers and record labels.

PPL does a very similar job as the PRS. However, they specifically license the use of recorded music to be played in public, radio, TV or the internet. You will have to register each of your tracks on the website for free in order to collect royalties.

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A Recording Royalties From Download Sales And Streams

These are perhaps the most basic and simple to understand of all music royalties. Whenever you buy a song on iTunes or Amazon, a music royalty is generated. Those are very straightforward, and its almost like when things were truly easy to grasp, back when stores were the primary way people bought music. The same thing happens whenever people stream a song on Apple Music, Spotify, or any of the dozens of other sites, though the royalty is much lower.

This money is typically collected by the company distributing the music, which is then usually paid to the label, and a part of that is paid to the artist. These days, many up-and-coming musicians work directly with the distributor, cutting out the label entirely.

The Importance Of Royalties In Music

There is a lot if information that must be understood, to know what are royalties in music. All the different kinds, the laws to protect it and who gets what and when.

But one thing is important to keep in mind. The payment of royalties is fundamental for the arts to survive all around the world. A big productive chain is involved from songwriters and musicians to record companies and distributors. So many people in that chain depend on it.

So it doesnt matter what type of royalties and what are its percentages. The important thing is that it goes to the people who should get it. For the good of music and those who live from it.

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Approaches To Royalty Rate

The rate of royalty applied in a given case is determined by various factors, the most notable of which are:

• Territorial extent of rights

To correctly gauge royalty rates, the following criteria must be taken into consideration:

• The transaction is at “arms-length”
• There is a willing buyer and a willing seller
• The transaction is not under compulsion

How Music Royalties Are Divided

So we know musicians get paid royalties, but exactly who gets royalties from a song?

Every song thats been recorded has two separate rights attached to it: the composition rights and the master recording rights.

The songwriter owns the composition rights, and therefore the songwriting royalties .

Whoever records that song owns the master recording rights to that specific recording of the song, and therefore the master recording royalties .

So every time a royalty is generated, both the songwriter and recording artist are owed a portion of that money.

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% Of The Gross Revenue Of The Company Minus The Cost Of Public Performance

This means the following factors are at play:

• In which country fans are streaming an artists music

• Spotifys number of paid users as a percent of total users the more premium users, the higher per stream royalty rate

• Relative premium pricing and currency value in different countries

So that pretty much gets us to a number we will never know. Especially since there are more free users signing up for Spotify every dayessentially the royalty rate is dropping as we speak.

Spotify used to give an estimation of their royalty rate on their FAQ page, but have since taken that page down. Fortunately for you guys, I have it saved in this guide for you. But who knows if these numbers are still accurateSpotify surely isnt saying anything:

“Recently, variables have led to an average per stream payout to rights holders of between $0.006 and $0.0084. This combines activity across our tiers of service. The effective average per stream payout generated by our Premium subscribers is considerably higher.”

Take this with a grain of salt, I know I will. Here is a cool Spotify royalty calculator you can bookmark if you are having a hard time remembering these decimals. This calculator assumes the Spotify royalty rate is $0.0045 per stream which might be closer to reality. Also, heres a link to some tissues so you can wipe your tears after discovering how little you will be making from Spotify streams.

How Much Are The Beatles Royalties Worth

The Beatles royalties, including both songwriting and performance royalties, are worth an estimated 1.5 billion dollars.

But this question is surprisingly difficult to answer.

First off, Ill repeat: there are different kinds of royalties. Weve talked about songwriting royalties, concert, and merchandising royalties Its a complicated system.

The fact that the Beatles catalog is held by Sony and Paul McCartney under fairly secretive deals makes it hard to get exact statistics on how much money is made on an annual basis.

I did my research, though, and the answer I found is this: The Beatles still earn a LOT of money in royalties.

Here are some interesting numbers I found:

• In 2016, when Sony bought out the Jackson Estates 50% interest in the Beatles catalog, they paid $750 million. That means that just 5 years ago, the catalog was worth a total of $1.5 billion.
• In 2019, Apple Records Limited reported that the Beatles earned an impressive £50,244,899 in royalties from numerous licensing agreements. This money was distributed between Paul, Ringo, Yoko Ono, and Olivia Harrison.
• In 2012 producers of the hit show Mad Men paid $250,000 to use the song Tomorrow Never Knows a licensing agreement that required the approval of Paul, Ringo, Yoko Ono, and Olivia Harrison.
• The video game The Beatles: Rock Band earned at least 40 million dollars in royalties as of 2009.

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How Do You Collect Royalties For Your Music

There are different memberships available at PRS depending on whether youre a writer or a publisher. For writers, its worth joining if you have created an original song or piece of music being broadcast or performed in any format.

Anyone who owns the rights to recorded music in the UK can join PPL. They will receive their royalties when music is broadcast or is being played in public. Its also worth noting that artists who have performed on recorded music can join PPL as a performer member but not all performer contributions will be eligible for royalties.

Generally, all audible contributions such as playing an instrument or singing will be eligible.

Rate Determination And Illustrative Royalties

There are three general approaches to assess the applicable royalty rate in the licensing of intellectual property. They are

For a fair evaluation of the royalty rate, the relationship of the parties to the contract should:

â be at “arms-length”

â be viewed as acting free and without compulsion

Cost approach

The Cost Approach considers the several elements of cost that may have been entered to create the intellectual property and to seek a royalty rate that will recapture the expense of its development and obtain a return that is commensurate with its expected life. Costs considered could include R& D expenditures, pilot-plant and test-marketing costs, technology upgrading expenses, patent application expenditure and the like.

The method has limited utility since the technology is not priced competitively on “what the market can bear” principles or in the context of the price of similar technologies. More importantly, by lacking optimization , it may earn benefits below its potential.

However, the method may be appropriate when a technology is licensed out during its R& D phase as happens with venture capital investments or it is licensed out during one of the stages of clinical trials of a pharmaceutical.

Comparable market approach

37.3%

23.6%

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Collect Music Royalties Cheat Sheet

Step 1- Join a Performance Rights Organization

like ASCAP or BMI

.to collect the performance royalties related to your songwriting.

Step 2- Register with an admin publishing company or mechanical royalty collections society

like Songtrust or MCPS

to collect the mechanical royalties related to your songwriting.

Step 3- Sign up with a digital music distributor

like Distrokid or CD Baby

to collect the mechanical royalties related to your sound recordings.

Step 4- Register with SoundExchange or a Neighbouring Rights Organization

like PPL or Re:Sound

to collect the performance royalties related to your sound recordings.

Step 5- Check for unclaimed royalties in the AFM & SAG-AFTRA Fund

to collect royalties related to your performance as a background singer or musician on sound recordings.

Step 6- Signup for the Creative & Productive Library

to download and print an extended Music Royalties Cheat Sheet and receive more helpful music royalty information.