Physical/Analog Songwriter Royalties (generated from old school music industry),
and Digital Songwriter Royalties (generated from the modern digital music industry).
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 Rdio, 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. TuneCore
can now help artists make more money on YouTube, as our Music Publishing Administration
service includes YouTube monetization. Plus, our new partnership with INDMUSIC helps you
develop your channel, which results in even more money for you. 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 ownto 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.
When you get a publishing deal with a publishing administrator, 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.
Source: Billboard