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Venturing Into the World of Music? Here’s What You Need to Know About Royalties

MetaComet® Systems’ Royalty Tracker® Solution helps music publishers manage royalties, but you need not focus exclusively on music to add such licenses to your revenue stream. If you are a book publisher or other media company interesting in expanding into music licensing this article will help explain how music royalties work. Please note that the following pertains to the U.S. only. International copyright laws regarding music vary widely and must be approached on a country-by-country basis.

The primary reasons for a songwriter or composer (the terms are synonymous here) to work with a publishing company is to receive an advance against future income and to get help in licensing their music. Traditionally, music publishing royalties are split evenly, with half going to the publisher and half going to the songwriter (or songwriters). Once a musical composition is copyrighted by the songwriter only the copyright owner may profit from it. Others wishing to use a composition must first get permission from the copyright owner. It’s important to note that recording companies and performing artist have separate copyrights and royalties. For example, when a song is played on television two people are paid: the songwriter (or publishing company) and the recording company who paid for the recording.

A musical copyright grants the right to:

  • Make print or recorded copies of a song;
  • Distribute a song to the public for profit;
  • Perform a song, either live or through a recording;
  • Create a derivative work that includes elements of the original music, as in an advertisement.

Songwriting copyrights owned and controlled by publishing companies are valuable forms of intellectual property that can earn profits from a variety of sources. There are five different kinds of music royalties:

  • Print rights – Royalties paid for printed sheet music that includes the score and lyrics.
  • Mechanical royalties – These are royalties due to the songwriter or publishing company when music is recorded onto CD, LP, DVD or other media for public distribution. These royalties are paid by a record label or manufacturer to the songwriter/publishing company for each song sold to a consumer. Mechanical royalty rates are set by the U.S. Copyright Office and are currently 9.1 cents per song or 1.75 cents per minute of use.
  • Performance rights and royalties – Royalties paid for public performance of a song whether live, recorded, or broadcast. These licenses may pertain to a single song or to a “blanket license” that allows the licensee to play an entire songwriter’s collection for a set fee.
  • Synch (synchronization) royalties – A synch license is required to use or adapt a song in a movie, advertisement, television show, etc. If a specific recorded version of a song is used then both the songwriter/publishing company and record company must be paid. Unlike mechanical royalty rates, synch rates are negotiable and can vary greatly depending upon usage, medium used, and other factors.
  • Digital royalties – These licenses pertain to compositions that are downloaded, streamed, played in a webcast, or otherwise used via the Internet or a wireless service.

In the U.S., music societies such as ASCAP, BMI, SESAC, and SoundExchange collect performance royalties on behalf of their members (composers and publishers) from companies and establishments that play recorded music. This includes night clubs, bars, restaurants, radio stations, Internet radio, office buildings (for music in elevators or lobbies), among other users. Mechanical royalties paid to publishers by record companies are generally handled by the Harry Fox Agency or the American Mechanical Rights Agency, although smaller competitors also exist.

As the lines between mediums continue to blur in the digital age you may decide that it makes good business sense for your publishing company to start licensing music. If you are currently using a flexible rights and royalty management system, such as MetaComet® Systems’ Royalty Tracker® Solution, incorporating this new revenue stream should be seamless and efficient–and before long, profitable.





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