The RULES of the GAME.
You can not play the GAME if you don’t know the RULES.
Physical/Analog Songwriter Royalties & Revenue
#1. Mechanical Royalties
If you’re serious about getting your music out there, you’re probably selling physical products like CDs, LPs or cassettes (someone must still listen to cassettes…right?). Every time a unit is sold or manufactured, you earn a mechanical royalty, generated from the reproduction of your song. Record companies or other entities manufacturing products with your song—like The Gap, W Hotel, Putumayo—pay this royalty. If the reproduction is in the U.S., the royalty rate is $0.091 per reproduction for songs under five minutes. A formula rate kicks in set by the U.S. Government for songs over five minutes. Outside of the U.S., the royalty rate is typically 8%-10% of the list price.
#2. ’Analog’ Public Performance Royalties
Every time there’s a “Public Performance” of your composition, you make money. Public Performances happen all the time—you play a set at the local pub, your song gets radio play, you hear your track as background music in a restaurant or hair salon—and each time, the songwriter earns money. So who pays up? AM/FM radio, network TV, bars, restaurants, airplanes, offices, movie theaters…you get the point. Both in the U.S. and outside the U.S., the royalty rate is determined by a one-to-one negotiation between the Performing Rights Organization (PRO) and the entity where the performance occurred.
#3. Synchronization License Royalties (from the “Distribution” Copyright)
If a film or TV studio, production company or someone else wants to use your composition in a TV show, movie or commercial (hooray!), they need to pay for the synchronization license. The license fee (both in and outside of the U.S.) is a one-to-one negotiation usually based on several things like the length of the use, how it’s being used (background or up front), the format and the popularity of the production. Because of all these factors, the fee can range from a few hundred dollars to hundreds of thousands of dollars.
#4. Mechanical Synchronization Royalties
Let’s stay on the topic of Sync for a moment, as there’s also a mechanical royalty generated from the “Reproduction” copyright. All that publishing lingo means that there’s a per unit royalty payment owed to the songwriter based on the number of units manufactured that include the song (like a greeting card, toy, video game, etc.). Depending on the type of unit manufactured, entities like Hallmark, toy companies, or video game companies generate and pay this royalty, and the value worldwide is usually based on initial manufactured units.
#5. Print Royalties
As the name suggests, this royalty, generated from the Public Display copyright, has to do with printed materials—lyrics, sheet music, tablature, etc. When music publishers like Hal Leonard or Alfred Music Publishing create sheet music, or a company prints t-shirts with lyrics on them, they are required to pay a print royalty. There’s no government rate for this royalty—it’s a one-to-one negotiation. If we’re talking sheet music, the royalty is usually 15% of retail price, and/or a one-time fee for pressing is negotiated.
Digital Songwriter Royalties & Revenue
#6. Digital Download Mechanical Royalties
If you write a song and distribute it to download music services like iTunes, Amazon, or Google, you’re owed a royalty for every unit of your music that’s downloaded. This royalty type comes from the “Reproduction” and “Distribution” copyrights, and the royalty payment mirrors physical reproductions: $0.091 per reproduction in the U.S., and generally 8% – 10% of the list price outside the U.S.
#7. Streaming Mechanical Royalties
Streaming is the name of the game these days, and if you distributed your music to digital stores, it’s likely that you chose a few interactive streaming services like Spotify, Rhapsody or Rdio. In case you’re not familiar with the term, “interactive” means that the user can choose songs, stop, go backwards, create playlists, etc. As was the case with digital downloads, a songwriter is owed a royalty (from the “Reproduction” copyright) for every stream of his or her song on an interactive streaming service. In the U.S. there’s a government-mandated rate of around $0.005 per stream (expected to grow!), and outside of the U.S. the royalty is typically 8% – 10% of the list price.
#8. Digital Non-Interactive “Streaming” Public Performance Royalties
We talked “interactive,” and now we’re talking “non-interactive.” A non-interactive streaming service is one through which you can’t pick songs, create playlists, or otherwise “interact” with the music, kind of like AM/FM radio. A non-interactive stream is a “Public Performance” and therefore generates a songwriter royalty, paid by the streaming service, like Pandora, Slacker, iHeartRadio, Sirius XM Satellite Radio, cable companies, and thousands of other entities. Worldwide, the royalty rate is determined by a one-to-one negotiation between the PRO and the other entity (generally based on a % of the entity’s Gross Revenue).
#9. Interactive “Streaming” Public Performance Royalties
When someone streams your song on an interactive streaming service like YouTube, Spotify or Radio, it also counts as a “Public Performance,” which means you’re owed additional songwriter royalties. There’s no set government rate in or outside the U.S.—it’s determined individually by the PRO and the other entity, once again usually based on a % of the entity’s gross revenue. A few formulas and calculations from the PRO later, and you’ve got a royalty.
#10. Digital Synchronization License
Sync also applies to the digital world. We all know it’s common for people to create YouTube (or Vimeo) videos that use someone else’s music in the background. In slightly more technical terms, what’s happening here is that the song is being synchronized with a moving image, and when this happens, a per use license payment is required.
As far as the royalty rate goes, there is no government rate, just a one-to-one negotiation that sets the per use royalty rate. It’s typically a percentage of Net Revenue as generated by advertising dollars.
#11. Digital Print
Google any song and you’ll immediately find dozens of sites with the song lyrics, sheet music, or tablature available for your use. The use of the music on these sites is yet another form of public display, and the lyric sites, musician sites, and even sites with avatars wearing virtual t-shirts with song lyrics (yup, those count) all generate and pay this songwriter royalty. Once again there’s no government rate set worldwide, and the rate is typically a fee for a specific period of time, and/or a percentage of the site’s gross revenue from paid subscriptions or advertising.
#12. Mechanical Royalty for a Ringtone/Ringback Tone
Ever purchase a ringtone? Or distribute your own to the iTunes store on your phone? Whenever a ringtone or ringback tone is purchased for a mobile device, a royalty is owed (it’s generated from the “Reproduction” and “Distribution” copyrights). Music services and telecoms like AT&T, Verizon, T-Mobile, Cricket, Vodafone and more are required to pay mechanical royalties to the tune of $0.24 per ringtone (in the U.S.) and a percentage of gross revenue (outside the U.S.).
#13. Public Performance Royalty for a Ringtone/Ringback Tone
In addition to the royalty generated in the purchase of a ringtone/ringback tone, a songwriter royalty is owed from the public performance that occurs when someone plays the tone outside of the U.S. Once again, the telecoms and music service need to pay up, and the rate is determined by a one-to-one negotiation.
Exhausted from reading this but ready to get the money you’re owed from the use of your compositions? That’s the right attitude! When you make a publishing deal, the publishing administrator will license and collect for you worldwide all of the royalties that should be coming to you, the songwriter, and nobody else. It’s a good idea to get in the know now, because as the music industry landscape keeps evolving, there’s no doubt you’ll soon have more royalties to collect.