When you step up your production skills and begin self-releasing competitive music, you’ll eventually realize there are a lot of different royalty types for your music. Worse, you’ll probably also realize that you’ve been entirely missing out on some of these revenue streams. And when you start researching the subject, you’re confronted with a lot complex articles that make it all seem like a convoluted legal landscape.
The royalty and revenue aspects of the music industry are complex because there are a lot of hands in the pie, and a lot of different sources to collect revenue from. Adding to this complexity is figuring exactly who should be paid for any one song or EP/LP: writers, publishers, labels, producers, collaborators, and so on.
It’s a lot to wade through, but it’s necessary in this empowering time when you don’t need a label any more. A lot of artists are finding great success completely managing all aspects of their own career, or at most joining a “collective” that functions like a small, loose indie label that doesn’t try to take ownership of your music.
One quick note before I continue: everything I say below is based on how things are done in North America. The specific organizations and laws are different in other regions of the world. However, these North American organizations typically have agreements in place that allow them to collect revenue from at least some other regions as well.
Why you’re probably missing out on some potential royalties
The most basic TL;DR is that self-publishing your own songs through a distributor like DistroKid, CDBaby, TuneCore, and so on will pay you only some of the possible royalties for your music. There are a few other steps you should take to ensure you’re receiving all of the possible royalties. There are three basic types of royalties:
- Mechanical royalties are collected and paid by your distributor (DistroKid, CDBaby, etc.). These all revolve around physical or digital recordings of your music that are sold through a store. For example, MP3s purchased from Amazon or AACs purchased from iTunes, or CDs and vinyl LPs/EPs/singles purchased from stores.
- Performance royalties are collected and paid from a variety of organizations. These all revolve around a performance of your song to the public. This could take the form of streaming plays through Spotify, Apple Music, Pandora, satellite radio, broadcast radio, DJ shows at clubs and festivals, and so on. Who actually collects and pays these performance royalties is the most confusing aspect of the music industry right now, so I’ll explain in more detail below.
- Sync licensing fees are collected and paid by a “licensing company”. These all revolve around songs that are coupled with (synchronized with) film or other media. So when your song is used in a movie, TV show, video game, or commercial (or trailer), that’s a sync license. And note that these are one-time fee payments; not recurring royalty payments.
Sync licensing and mechanicals are the easy part
You might or might not be in the sync licensing game, but if you’re looking for that revenue stream, you make it happen by contracting with a licensing company to shop your music around to the various professionals that scout music for sync use.
Mechanical royalties are also very easy to deal with, and most of us already have that handled well. If you are using any of the typical distributors, they are handling all the collection and payouts of mechanical royalties to you. Some distributors (like DistroKid) will also take care of paying out any mechanical splits you might have arranged with collaborators.
Performance royalties are the confusing part
So that leaves us with the thorny issue of performance royalties. This is the hard one. I imagine that many of us drag our feet on this one, because it can seem so freaking complicated. I recently got motivated to deal with this because of an upcoming collab with Spiderhound, who is really on top of the licensing game. With his help and a little extra research on my end, I can hopefully help you navigate this one a little easier.
The first thing to understand is that performance royalties are broken into two main types: interactive and non-interactive. When you listen to “terrestrial” broadcast radio or satellite radio, those are non-interactive royalties. Why? Because you are a passive listener. You have no choice in the songs you hear. In a similar way, when you listen to “digital radio” like Pandora, or Spotify radio, or Beats 1 on Apple Music, these also generate non-interactive royalties. And due to the vagaries of the legal and copyright system, these non-interactive performance royalties are collected and paid from only one organization in North America: SoundExchange.
By contrast, interactive performance royalties are those where you get to actively choose which songs to listen to! For example, all live performances at clubs and festivals and concert hall and stadiums generate interactive performance royalties. So does browsing and playing from playlists on Spotify or Apple Music and so on. Again, due to the vagaries of the legal and copyright system, these interactive performance royalties are collected and paid by three different organizations in North America: ASCAP, BMI, and SESAC.
The tricky part with these three (interactive) Peformance Rights Organizations (PROs) is that you can belong to only one of them! (If you register with more than one, you are potentially committing fraud because you’re potentially getting double or triple revenue.) So you have to choose one and only one. (But you can leave one at any time and join a different one instead.)
Putting it all together
With me so far? This means that to collect all possible royalties from your songs, you would need to:
- Publish your song through a distributor (for the mechanical royalties).
- Register that same song with SoundExchange (for the non-interactive performance royalties).
- Register that same song with the PRO that you belong to (for the interactive performance royalties), and
- Register that same song with your licensing company so they can shop it around for potential sync licensing.
So far so good, right? That’s not too confusing. Except there is one more small wrinkle. And again, the wrinkle is in the performance royalties. Basically, the three PROs have two types of license they administer: a writer license and a publisher license. To keep it simple, I won’t describe the differences here. Just know that nearly all of us music producers who self-release should register BOTH types of account with our chosen PRO, and we are entitled to BOTH types of royalties for every song.
And SoundExchange also has two types of license they administer: an artist license and a label license. Again, just know that nearly all of us music producers who self-release should register BOTH types of accounts with SoundExchange, and we are entitled to BOTH types of royalties for every song.
But what if you are signed to a label?
The last thing to remember is that the rules are slightly different if you are signed with a traditional label, because the label releases and publishes your music on your behalf. The mechanical royalties are split between you and your label, and the label typically receives the publisher royalty from your chosen PRO and the label royalty from SoundExchange. Can you see why increasingly, artists choose to go it alone and keep ALL the potential royalties for themselves? A label should be able to greatly boost your reach and promote the hell out of you to earn that share of the pie.
I hope you have found this to be helpful information! I’ll end with the obligatory disclaimer that this is only a broad informational summary and should not be taken as legal advice in any way. You still need to do your own research and even obtain some legal advice if you really want to be careful. My intent with this article is only to help you understand the “big picture” so you can ask the right questions. Go forth and prosper!