How Do Music Royalties Work in 2023?
Our guide helps explain how the music royalty process works from an independent musician’s perspective, who is involved, and the different ways that you can earn money for the use of your music in 2023.
What are music royalties?
Essentially, royalties are the payments generated from the usage of your songs. When recordings get played and streamed - or performed or covered - a song’s rights holders receive payments. There are a few different ways you can monetise these song rights, with the four main types of royalty being mechanical, public performance, print music, and sync royalties.
Each royalty stream is dependent on the type of copyright it is associated with, with every song being attached to two different types of copyright:
- Master Rights - covering the original sound recording.
- Publishing Rights - protecting the lyrics and melody of a song
Within both stages, it's likely that multiple stakeholders will collect a percentage of the royalties generated.
Musicians often sign recording contracts with labels, handing over their music’s master rights to the label. The label then owns and exploits the copyright, paying band members according to their contract. This can include multiple band members, as well as producers, session musicians, and others who all are due their cut for their work on the recording.
Note: As an independent and unsigned musician, you will receive all of your royalties without any label share deducted.
Songwriters often sign publishing deals with music publishers. The publisher takes ownership of the publishing rights and in return has the task of licensing the track and collecting royalties. Ditto Music Publishing can claim and help pay out all of the royalties you’re owed
There are often multiple songwriters attached to a song, with each owed different percentages of the collected royalties. Each songwriter may also be working with different publishers to collect their share.
Who receives music royalties?
Who receives what royalty share will all depend on how many people are involved in your individual arrangement. Asides from songwriters and artists, there might be many others involved in the process, ensuring you collect all the royalties you’re eligible for.
Recording artists and songwriters
Recording artists are the ones who record the song themselves. They own the master rights to a song and will receive money from:
- Digital sales (streaming & download royalties)
- Physical sales
- Neighbouring rights royalties
- Sync licensing fees
Songwriters are the ones who wrote the song, lyrics, and created the melody, so they own the publishing rights/music composition. This may be you yourself or a third-party songwriter.
Publishing rights owners will receive money from:
- Mechanical royalties
- Performing royalties - including public performances
- Sync licensing fees
Record labels and publishers
If you sign to a record label, things will obviously be a bit different. Each label provides different resources and has individual contracts with their artists, but most deals include agreements with the artist to acquire the master rights of music - in exchange for the marketing and the promotion of the recorded product.
Record labels will take ownership of the master rights of your songs, administering earnt royalties and forwarding a share to you.
Music publishers take care of the admin side of royalties, making sure your music is properly registered and you are receiving the money you deserve. Publishers control the publishing rights of your music and forward a share to the songwriters involved.
How do music royalty payments work?
In many cases, royalty payments happen once a month, but exactly when and how much artists get paid depends on their individual agreements with their record label or distributor.
The general process will run something like this:
- Create your music
- Distribute it
- Your music is played - either digitally or physically
- Royalties are collected and spread out amongst rights holders
- Rights holders get paid
As soon as a user has played 30 seconds or more of your tracks digitally on streaming platforms like Spotify or Apple Music, royalty money will be generated. The platform will collect this money, take their share, and distribute a large proportion back to your distributor.
There’s a lot made about how streaming platforms like Spotify calculate and distribute royalties built up on their platform, with each platform offering different rates for streams.
Physical sales are slightly different, with consumers paying a price to buy your CDs, vinyl and tapes. A part of this money will be transferred to the physical distributor which will take its share and deliver the rest to either you as the artist or to your record label. A physical sale will generate mechanical royalties for the track's songwriters and publishers.
Types of music royalties
If you’re making music, there are numerous ways that you can earn royalties for your work. Whether that be through TV sync opportunities or live performance payments. Here’s a breakdown of the different types of royalty you can be earning as a musician.
Mechanical royalties are generated every time a copy of musical work is made. This applies when a song is recreated in just about any format.
You'll generate mechanical royalties through:
- Physical sales, such as vinyl and CDs
- Digital streaming of your tracks
- Downloads of your tracks
Any cover of an original track will result in mechanical royalties being paid out, as will remixed versions sampling an original song. For example, one of the most famous songs of the last couple of decades, “Valerie” by Amy Winehouse triggers mechanical royalties for the original track's songwriters (David McCabe, Abi Harding, Russell Pritchard & Sean Payne) and publishers (Warner Chappell Music and EMI Music Publishing) each time it is played or purchased.
Performing right royalties
A potentially untapped income stream for musicians is through performing right royalties. This useful but often overlooked source of income for artists is available to songwriters and publishers whenever a musical composition of theirs is performed or broadcast publicly.
This includes cases like:
- Public and Live performances
- Public broadcasts
- Radio airplay
- Digital streams
Performing royalties are collected by Performing Right Organisations (PROs) such as PRS for Music, which are responsible for passing this revenue onto music publishers, songwriters and composers.
In short, sync licensing refers to all the music that is used to accompany visual content, whether that be for music on video games, TV shows, films, adverts and even video games. Think of the songs you recognise from car or food adverts, or classic tunes from old FIFA games.
This kind of exposure can introduce your music to a whole new audience, as well as forming an association between your sound and a particular brand, product or idea.
Independent artists should consider working with a sync agent as they are experts in finding placements for your music - and will also be fully dedicated to finding these opportunities, allowing you to crack on with other important parts of your release!
Print music royalties
The least common type of royalty, print music royalties are pretty much what you’d expect them to be - they’re royalties that come from sheet music sales.
These royalties are usually split between songwriters and publishers. Naturally, this type of royalty applies only to songwriters who release their songs as sheet music.
Print music royalties are typically very small compared to other music revenue streams, as most music is obviously digital these days, but they do still exist. If you’re a composer or musician who creates full-ensemble or concert music, then this type of royalty payment is probably relevant to you.
Getting paid for your music isn’t quite as straightforward as your standard 9-5, but there are several effective ways for you to forge a good living as a musician. To do this however, you’ll have to make sure you’re getting the most out of your work and collecting all of your owed royalties.