If today it is generally accepted that intellectual property is the basis for world culture and economic development, then royalties can be safely called the foundation of both intellectual property and copyright. Quite often this term sounds in the music industry, so in this article, you will know everything about royalty in this area, its types and how does it work.
What Are Music Royalties?
On the whole, royalties are any payment received as a fee for the use of any copyright to works of literature, art, or science, including computer programs, records, media, registered design, drawings, formulas, process, as well as industrial, commercial, or scientific experience. In short, royalty for music is a fee that track creators/owners receive for using their work.
In world practice, royalties are the main source of the author`s income. Developed countries pay enough attention to grace performers to stimulate the art evolution. Thus, according to the 2015 CISAC report, 8.6 billion euros of royalties were collected globally. This payment to authors is mandatory for all music users, including cases with:
- public performances;
- mechanical performances;
- audio compilation;
- audio processing (if the user wants to mix/master online someone else’s track).
Thus, royalties should be paid to authors both by TV channels and radio stations, as well as by organizers of concerts, owners of cafes, bars, and restaurants in which music is played both live and on record, as well as organizers of all kinds of social events.
Types of Music Royalties
Currently, performers can receive six types of royalties:
- For streaming — when their works are broadcast on a streaming service, payment is collected from all users and divided among the artists represented on the platform. Typically, the service`s owner negotiates an individual rate with the content owner.
- For related rights — royalties that are paid to the copyright holders of recording artists and companies.
- For digital performance — works only if the streaming service is licensed by SoundExchange, and the artist is registered on this platform.
- For sync licensing — artists receive this commission when their tracks are synced to other content: videos, advertisements, TV shows, and so on.
- For public performances — it is the standard fee for performing a musical composition in a commercial environment.
- Mechanical royalties — it is a commission that is automatically charged from any user in favor of the copyright holder when music is used in physical or digital form.
By the way, some types of royalty are often confused — for example, mechanical and public performance fees. The key difference between them is the customer`s choice: if the user selects a song on the platform on-demand, then public performance royalties and mechanical royalties are generated. If the song is played on a non-interactive platform (such as the Pandora radio), only performance royalties are paid.
How Do Music Royalties Work?
Typically, there is a standard royalty distribution:
- 50% is received by the actual owner of intellectual property:
- 45% are received by main involved musicians/artists;
- 5% is received by side musicians/artists.
If musicians work independently, then they can receive all the royalties, but it`s a very rare case. More often, the amount of royalties is divided among several figures: performers, the ultimate copyright holder, and an intermediary (distributor).
However, there is one more nuance: some copyright holders offer to purchase royalty free music for commercial use if the content consumer needs to use a particular track often and for a long time. In this case, a license for content usage is purchased once for a fixed amount and can subsequently be applied without restrictions.
To summarize all of the above, music royalty is a payment for using audio content (it can be either permanent or one-time — when purchasing a royalty free music license). There are different fee types depending on the content use, such as streaming, public and digital performance, mechanical, and other royalty kinds. And, of course, receiving royalties is available not only to the musician but also to any person who officially took part in the creation, patenting, and content promotion.