Secure the Bag: How to Collect Your Music Royalties

As a music attorney, I often see a lot of confusion when it comes to artists and producers collecting their music royalties. Estimates indicate that anywhere from 20–50 percent of music payments do not make it to their rightful owners. This is likely because many artists and producers do not fully understand the practical steps of collecting all of their music royalties. Don’t be one of them. 

My goal here is to concisely break down (i) the different types of music royalties, (ii) which entities are responsible for paying these royalties, and (iii) how you can collect them as efficiently as possible. Go forth and secure the bag.

(For the TL;DR crowd, scroll to the summary at the bottom.)

Copyright & Royalties Overview

Before diving in, let’s briefly go over the two types of music copyright and the two overall pools of music royalties to which they are linked. Each piece of recorded music has two sets of copyrights: one for the musical composition (i.e., the lyrics and melody), and one for the actual sound recording. The compositional copyright is typically held by the songwriters and publishers. The sound recording copyright is typically held by the performing artists and/or their labels. 

Royalties generated on the composition side are known as publishing royalties (when you hear people refer vaguely to “publishing” this is what they mean), and these royalties are paid to the songwriters and publishers. Royalties generated by the sound recording are known as sound recording royalties and are paid to performing artists and/or their labels. Now, let’s dive in…

Sound Recording Royalties

1) Interactive Streaming: These royalties come from digital service providers (DSPs) that let you choose the song you want to hear. Think Spotify, Tidal, Apple Music, Anghami, etc. (NOT Pandora or Sirius XM — more on this below). You can collect such royalties through your distributor (e.g., DistroKid, TuneCore, UnitedMasters, CD Baby, etc.). DSPs typically pay royalties to artists based on a pro rata distribution model, whereby artists receive a percentage of the total revenue pool based on their share of total streams for that month.

2) Digital Performance Royalties: These royalties come from non-interactive streaming, such as webcasting and satellite radio (NOT terrestrial radio). The biggest players here are Pandora, iHeartRadio, and Sirius XM. They are classified as “non-interactive” because you have no choice over what they choose to play. 

US copyright law requires labels to license their sound recordings at a rate set by the government (shoutout to Section 114 of the Copyright Act). However, license fees are not paid directly to labels. They instead are collected by a nonprofit organization called SoundExchange, which collects the fees, deducts its costs, and distributes the balance to artists. In 2023, SoundExchange distributed just over $1 billion to its members. If you have not done so already, be sure to sign up for SoundExchange to collect your digital performance royalties. Don’t forget to opt into SoundExchange’s international royalty collection services, as they now work with partners in over 50 countries to collect royalties for artists when their music is played overseas.

Note: If you are independent and registering a sound recording on SoundExchange, be sure to check the boxes reflecting that you are both the sound recording owner and the featured artist. This will net you 95% of the royalties available. The other 5% is set aside for session musicians.

3) Digital Downloads: Also known as digital phonorecord deliveries (DPD), digital downloads allow a buyer to download music for later use. Technically, there are two types of digital downloads: permanent downloads (think iTunes store downloads) and tethered downloads (aka conditional downloads — think offline listening on Spotify). Here, we’re only talking about the former. You can collect these royalties through your distributor.

4) Master Use Licenses: If someone wants to use your sound recording in a movie, TV show, commercial, or video game, they will need a master use license. This license typically comes from the artist (if independent), or the label (if the artist is signed). The master use license goes hand in hand with a sync license, which we will get to below in the Sync Licenses section. For now, just know that the artist/label receives a flat fee in exchange for a master use license, and the amount of such fee is usually (but not always) equal to the sync license fee paid to the composition owners.

5) Neighbouring Rights Royalties: Many countries outside the US pay royalties to the artist/label every time a sound recording is played on the radio, regardless of whether it’s terrestrial or digital radio. These are called “neighbouring rights.” As mentioned above under Digital Performance Royalties, artists/labels in the US are paid royalties from non-interactive streaming, such as webcasting and satellite radio. However, they are not paid if their sound recording is played on terrestrial radio. Meanwhile, songwriters/publishers in the US get paid public performance royalties (see below) when songs are played on terrestrial radio. 

For those of you in the US, SoundExchange collects performance royalties internationally through agreements in over 50 regions covering 85% of the globe. For those outside the US, register with a local collection society in the territory where your music is being publicly performed and broadcasted the most. Here are the ones for the UK, Canada, and Australia, respectively: PPL, Re:Sound, and PPCA.

Publishing Royalties

1) Public Performance Royalties: Public performance royalties are generated when your music is performed publicly. This includes playing music over the radio, performing at live concerts or on television, streaming on DSPs, or playing songs at bars, clubs, or restaurants. Performing rights organizations (PROs) handle the collection and distribution of these royalties. In the US, the major PROs are ASCAP, BMI, and SESAC (the latter is by invitation only). To collect your public performance royalties, you’ll want to sign up with one PRO. In the US, you can only affiliate with just one PRO at a time. 

ASCAP currently offers free registration as both a songwriter and a publishing entity. This just means that you will need to make up a name for and register a vanity publishing company to ensure you are collecting both the writer’s share and publisher’s share of public performance royalties. Unlike BMI, ASCAP utilizes a 100% scale for calculating splits: 50% writer’s share and 50% publisher’s share.

BMI previously offered free registration as a songwriter but now charges $75. On the plus side, you do not need to register a vanity publishing company with BMI in order to collect both the writer’s share and publisher’s share of royalties. Keep in mind that BMI calculates splits on a 200% scale: 100% writer’s share and 100% publisher’s share.

Be sure to register your songs with your PRO. If you use a publishing administrator (like Songtrust or Sentric), you should be entering songs in your publishing admin account, not with your PRO. The publishing admin will forward these registrations to your PRO and other royalty collection societies and will have them registered on your behalf.

2) Mechanical Royalties: Mechanical royalties (aka mechanicals) refer to royalties paid to songwriters and publishers for the physical and digital reproduction and distribution of records. Mechanicals are generated from vinyl records, CDs, cassettes, streams*, and downloads. With respect to downloads and physical copies, mechanicals are paid by record labels, and the statutory mechanical royalty rate is set by the Copyright Royalty Board (CRB). The current rate is 12.40 cents if the song runs five minutes or less, and 2.39 cents per minute for songs over five minutes. 

Unlike physical product and downloads, mechanicals from streaming are paid by the DSPs and collected by the Mechanical Licensing Collective (MLC) in the US. Registration with the MLC is free. Keep in mind though that the MLC does not collect your mechanicals generated outside of the US. If you are in a different country, sign up with your country’s mechanical rights organization to collect. 

Note that if you have a publishing administrator, then they will handle collecting both your domestic AND international mechanicals (and public performance royalties) in exchange for a 15–20% cut of what they collect. The international part is important — publishing admins operate in 200+ countries and have pre-existing relationships in these markets. 

However, if you do not want to use a publishing admin, you can sign up for the MLC, Harry Fox Agency, and Music Reports to collect your domestic mechanicals. International mechanicals are trickier. You may sign up with a foreign collection society, such as the Mechanical-Copyright Protection Society (MCPS) in the UK, but be sure to carefully review the terms to ensure there are no conflicts with respect to any current relationships you may have with a mechanical rights organization. Also, keep in mind that you still may not be able to capture the same amount of global mechanicals as a publishing admin.

*In case you’re keeping count, a single stream generates three types of royalties: a sound recording royalty, a public performance royalty, and a mechanical royalty. As discussed, the first is paid to performing artists and/or their labels, and the latter two are paid to songwriters and publishers.

3) Sync Licenses: As mentioned above under Master Use Licenses, sync licenses are the other half of the pie when it comes to licensing for purposes of movies, TV shows, commercials, or video games. While a master use license covers a sound recording, a sync license covers the composition. So, the flat fee here is paid to the composition owners: songwriters/publishers. 

The fees paid for the master use license and the sync license are typically the same, but this is not always the case. That’s why you should request that your fee is most favored nations (MFN), which means the fee paid to you for the sync license is no less than what is being paid for the master use license (and you can request the same on the master use side). 

Summary

• Sound Recording Royalties: paid to performing artists/labels.

  • Interactive Streaming: collect from your distributor.

  • Digital Performance: collect from SoundExchange.

  • Digital Downloads: collect from your distributor.

  • Master Use Licenses: collect fee from licensee.

  • Neighbouring Rights Royalties: collect from SoundExchange or your local collection society.

• Publishing Royalties: paid to songwriters/publishers.

  • Public Performance Royalties: collect from PRO/publishing administrator.

  • Mechanical Royalties: collect from MLC/publishing administrator.

  • Sync Licenses: collect fee from licensee.

Final Notes

After you have signed up for the relevant entities to collect your royalties, be proactive about registering songs with your PRO/publishing administrator (as applicable) and SoundExchange. Most collection agencies will only hold your royalties for about 3 years maximum, so the sooner you get set up and register your works, the sooner you can collect your hard-earned bag. 

If you’ve made it this far and want to test your knowledge of music royalties, take our quiz!