How do Royalties Work for Music? | Beatoven

You must have heard the words “music royalties” very often through various mediums like television, music shows, newspapers or some online platforms, especially if you are a music follower, lover or a budding music artist yourself. If you are someone who likes to create music but are new to the whole “money making” though music process, you should be aware about how music royalties work before putting your art out there or signing any contract. Here in this article we will go through the basics of music royalties, their types and how they are extremely important to an artist; all to help you understand in detail about how royalties work for music.  

 

What are royalties in music?

Music royalties are payments received by the right holders of the music which includes the songwriters, artists, music composers, publishers and any other person who may own the copyrights of that particular music or song, in exchange of the licensed use of their song or music. There are various types of royalties generated from different types of licensed usage of a particular music. These royalties are generally paid by large institutions like television channels, radio channels and various online streaming platforms that use the music in their shows. The royalties are mostly collected by intermediary bodies on behalf of the copyright holders and very rarely do the institutions pay directly to the rightful owners of the song.

 

The royalties in music are the bread and butter of the music artists as they are what the music industry relies on for the primary source of payment. This is why when signing a contract, it is very important for the artists and musicians to understand the role of royalties in the agreement between the one who creates the music and the one who is going to distribute it. New artists and  musicians especially need to be aware of how these royalties will impact their rights on the art they created and what role it might play in their payments. Not only artists but content creators also need to understand how music royalties work before recreating copyrighted music on an online platform. 

 

There are some songs available as royalty free music but you need to understand that it doesn’t possibly mean that it is copyright free music. Even if there are no royalties collected from that music, it might still have some copyright which you must be aware of before using it for any commercial purpose.

 

What do you mean by royalty?

A royalty in every sense is an amount of money an artist receives in exchange for the sale or use of his art by large organisations who take part in the distribution of the art and gain lots of benefits through it. Whenever an artist creates a piece of art, in this case a piece of music or a song, the creator becomes the rightful owner of the song. In case the creator decides to sign an agreement with a distributor who will take the creator’s work to a greater audience for various promotional purposes, the distributor is liable to pay a certain amount of royalty to the creator on every sale of his music in the form of CDs, downloads, public performances or online streams. This royalty percentage is pre decided and mentioned in the contract between the creator and the distributor. 

 

When understanding what royalty means, you should also know that there are some songs or music which is royalty free. This no royalty music is usually free to download and use but may still have some copyright.

 

What are the types of Royalties?

There are different types of music royalties each having distinct copyrights and a single royalty can be generated in a variety of ways. To help you understand this better, we will go through the five major sources of royalties in the music industry, which are listed below.

• Streaming Royalties

Nowadays when streaming platforms are at their peak as many people rely on them as a primary source of entertainment, streaming royalties have become more important to understand for all musicians and recording artists. To allow these streaming platforms to use their music, large labels and even individual artists work with distributors to put their song on the streaming platforms and earn royalties in return.

 

The digital streaming platforms negotiate the global payout rates with the music owners for their content. A basic revenue amount is decided and agreed upon by both parties. This revenue or royalty to be paid to the content creator depends upon the number of streams or the number of times the content is shared through the digital streaming platform.

2. Mechanical Royalties

Mechanical royalties are payments generated towards the rightful owner of the song whenever the song is recreated or distributed through any platform including all musical formats like CDs, cassettes, digital downloads and streaming platforms. So for example, everytime a online content creator creates some content using a piece of music, a mechanical royalty is due to the copyright holders of that music. Similarly when large record labels produce and sell CDs of a song or when streaming platforms put a particular song up for their audience and the audience chooses to play or share the song through that streaming platform, they owe a mechanical royalty to the rightful owner of the song. 

3. Performance Royalties

Performance royalties are generated every time a copyrighted song is played, performed, streamed or recorded in public. This applies to restaurants, bars, coffee shops, malls, live concerts or any other public platform where the song might be played. For example, when your local bar or cafe plays a song, it is also considered as a public performance which makes the bar or cafe liable to pay performance royalties to the rightful owners of the song. These performance royalties can be paid in two parts including the songwriter royalties and the publisher royalties.

4. Synchronisation or Sync Royalties

 Synchronisation royalties or sync royalties are the royalties which are due when the audio of a copyrighted song is sync to a visual medium. This goes to all audio-visual platforms including television, advertisements, movies, video games and even youtube. So for example, when an advertisement uses a copyrighted song recorded by a music artist, the synchronisation royalties are to be paid to the recording artist. 

5. Print music royalties

Print music royalties are due every time a piece of copyrighted music is converted into a print form, for example sheet music. These are the types of royalties which are more common to classical music composers or film composers and not so much to individual recording artists. Print royalties are paid to the copyright holders of the music based on the number of print copies made. 

 

How do royalties work?

The way royalties work in music depends upon various factors including the type of royalty, the country, the platform on which the music is sold and many other factors. However, to have a basic understanding about how royalties work and are paid out, here is a generalised way in which most royalties go:

• The first step is always the creation of the art that is music. Artists work day and night to create a piece of music which is near and dear to their heart and this hard work along with their talent makes them the first rightful owner of the music they created. 
• Almost all artists have managers and representatives that work towards promoting the artists’ work on various platforms. These representatives along with the artists contact intermediaries for distributing the work that the artists have created. This is when a contract is made between the creator and the distributor in which the royalty share is decided.
• The next step is where the audience comes into play. Once the music is distributed and out for the audience to buy, stream and share on various platforms, it is up to the audience to make the music a hit by playing, sharing and streaming the music which generates various types of royalties on the way.
• These royalties are then collected by the intermediaries and distributed to copyright owners. This step can be a little complicated and the distribution depends on the type of royalty and the music consumption.
• The last step is when the recording artists and songwriters get paid their share of the revenue which is generated after splitting the amount with publishers and distributors as decided at the time of contract signing. 

 

All in all, music royalties play a very important role in the music industry and anyone who wants to make a career in music or wants to use music for commercial purposes needs to have a proper knowledge about these royalties and how they work for everyone who is a part of creating, selling, distributing and consuming the music.