WHAT ARE MUSIC ROYALTIES ?
Music royalties are payments that goes to recording artists, songwriters, composers, publishers, contributors and other copyright holders for the right to use their intellectual property. The International copyright & intellectual property laws including of World Trade Organization (WTO) to which 164 countries is signee inclusive of Nepal, gives such owners these exclusive rights to their work.
Music Royalties are also generated for various types of licensing and usage. The four main royalty types includes mechanical, public performance, synchronization, and print music.
The music industry relies on these royalties as a primary form of payment to musicians. Contracts then define royalty agreements between the creator and the distributor.
WHAT ARE THE TYPES OF MUSIC ROYALTIES ?
1. MECHANICAL ROYALTIES
Mechanical royalties generate music income for the physical or digital reproduction and distribution of copyrighted works. This applies to all music formats such as vinyl, CD, cassette, digital downloads, and streaming services. Every time your song gets played on digital platforms a mechanical royalty is generated.
For example, record labels pay mechanical royalties to songwriters every time they press a CD of their music. or Mechanical Royalty is owed to copyright owners every time their work gets streamed in Spotify, Youtube, Apple and other digital streaming platforms. You will need a Music Publisher to claim such royalties.
2. PUBLIC PERFORMANCE ROYALTIES
Public performance royalties generate music income for copyrighted works performed, recorded, played, or streamed in public. This includes terrestrial radio, television, bars, restaurants, clubs, live concerts, music streaming services, and anywhere else your music plays in public. To receive and manage such royalty operations you will need a Publisher. Publisher also keeps record of your work, registers them with appropriate Public Performance Royalty Collection Organizations, provide licenses to use your work and stops third party from exploiting your copyrighted work without a proper license and permission. NEPCINE provides the Publishing services to all creator in worldwide territory.
3. DIGITAL PUBLIC PERFORMANCE ROYALTIES
Digital performance royalties are royalties that non-interactive digital streaming services and webcasts must pay to performing artists each time a sound recording is streamed on their services. These are royalties owned to artists who performed on a song and the owner of the sound recording any time that track is played via non-interactive streaming. The Digital Public Performance Royalties on Sound Recording are divided on Following basis.
- Record Label/Producer 50%
- Featured Artist 45%
- Non-featured artist 5%
4. NEIGHBORING RIGHTS ROYALTIES
Neighboring rights or related rights refers to the performance rights in sound recordings. Neighboring Rights Royalties are paid out to performers and the master owners for the public performance of their recordings. This is similar to the Digital public performance royalties on sound recording. The revenue is generated from:
- Played on Internet Radio such as Pandora, Spotify, iHeart radio and more
- BBC Radio, Sirius XM or any satellite radio platform
- Cable TV music channels
- Terrestrial radio
- Played in Public on Public Devices
- Businesses and retailers as background music (Ex. Restaurants, hotels, etc.)
- Live Clubs, Bars and other performance venue
- Various new online media
Such royalties are collected by the Neighboring Rights Collection Societies such as Sound exchange in USA, PPL in UK, PPCA in Australia and more. You will need a professional metadata manager to make sure your informations are adequately registered within the sound recordings for such societies to identify you, connect royalties to your record and release a payment. Also you are required to register your every songs to these individual societies in every country following a strict international compliance in order to collect such royalties.
Contact NEPCINE to manage, register and collect your neighboring rights royalties.
5. SYNCHRONIZATION ROYALTIES (SYNC)
Synchronization royalties generate income for copyrighted music paired or ‘synced’ with visual media. Sync licenses grant the right to use copyrighted songs in films, television, commercials, video games, online streaming, advertisements, music videos, and any other visual media.
However, a synchronization license does not include the right to use an existing recording with audiovisual media such as a YouTube video. A licensee will need a master use license before using copyrighted music with a new audiovisual project. This is an agreement between the master recording owner, such as a record label, and the person seeking permission to use the recording.
Any use of protected music in an audiovisual project will need a master use license and a sync license. It doesn’t matter if it’s a full song or short sample. For example, you need both a master and sync agreement before syncing up the latest Filmy track with your “how to do dance on this song” video on YouTube.
6. PRINT MUSIC ROYALTIES
Print royalties are the least common form of payment a copyright holder receives. This royalty applies to copyrighted music transcribed to a print piece such as sheet music and then distributed. However if you’re a songwriter and your lyrics is published on online media, then you will receive a royalty in such publication.
Additionally, the copyright holder pays out these fees based on the number of copies made of the printed piece or per visitor or on the basis of income generated on the webpage consisting your lyrics and chords.
WHAT ARE THE EXCLUSIVE RIGHTS OF COPYRIGHT HOLDER ?
Usually Copyright law grants six exclusive rights to control the use and distribution of copyrighted work. The copyright owner has exclusive rights to (subject to distribution, master and publishing deals a creator has entered into):
- Reproduce and make copies of the original work. For example, a digital music download and physical formats like a CD or vinyl.
- Prepare derivative works based on the original work. For example, a new original product that includes aspects of an existing song. This consists of a cover song, remix, or any altered version of an existing song.
- Distribute copyrighted work to the public. For example, release the song through a music distributor, digital download, or record label.
- Perform copyrighted work publicly. For example, live concerts or live performances in a public setting.
- Play copyrighted work publicly. For example, through music streaming, satellite radio, music videos, FM radio, a TV show, etc.
- Display the copyrighted work publicly. A public display means to show a visual copy of the work to others. For example, sheet music or photos from performance pieces.
The copyright owner can transfer these exclusive rights or parts. The two methods of transfer are licensing and assignment. Transfers must be in writing and signed by the copyright owner or an authorized agent. Sound Recording or Master rights are usually provided to Administrator or the distributor where Composition rights are licensed to Publisher for administration of such rights.
WHO GETS MUSIC ROYALTIES AND ADMINISTERS THEM ?
The following roles either receive or distribute royalties for copyrighted music:
1. SONGWRITERS
Songwriters are those who writes the music and lyrics for a song. They receive either mechanical, performance, or sync royalties depending on the usage of their recordings.
If multiple songwriters contributed to a song, they would split such ownership and the royalties. If a written agreement is missing, both Writer and Composer will equally share 100% rights on Composition, meaning both will be the 50% owner of a composition. Incase if there are two lyricists, the lyricists will further divide the 50% composition ownership of a writer into 25% for each or in accordance to their contribution and their agreement.
2. PUBLISHERS
The publisher is the person or company responsible for ensuring copyright holders receive payment for using their music. For example, a music publisher will obtain the songwriting copyright in exchange for royalty privileges.
A publishing company will also issue licenses for using music they represent. They also monitor them and collect licensing fees. These publishing royalties get split between the publisher and the songwriter.
3. RECORD LABELS
Record labels market and distribute an artist’s original work. They often have the master rights to a recorded song, but not the publishing rights. In country like Nepal, record labels are the producers who invests in the production of the song and the aggregators if you have sold the complete ownership to one of them.
Record labels generate income from mechanical and public performance royalties. They issue contracts that allow them to exploit the recordings in exchange for royalty payments over a set length of time. Depending on the contract the artist then receives a flat rate or percentage of these record label royalties. However U.S. Copyright Law dictates Public Performance royalty of Sound Recordings to be distributed in the following way:
a. Record label/Producer: 50%
b. Featured Artist: 45%
c. Non-featured Artist: 5%
4. DIGITAL MUSIC DISTRIBUTOR
Digital music distribution services help independent artists and labels get their music on major online music stores and streaming sites worldwide. These digital aggregators distribute music on iTunes, Apple Music, Spotify, Beatport, Amazon, Google Play, Pandora, and other leading music platforms.
A digital music distributor collects mechanical royalties for every music purchase, download, or stream. They also collect public performance royalties generated from the public performance of your song, such as a live performance or radio broadcast.
5. PERFORMING ARTISTS
A performing artist is anyone who performs the songwriter’s original work. Performing artists do not have publishing rights unless they are also the songwriter.
Public performances of copyrighted music generate performance royalties for songwriters. These fees are often collected by a Performing Rights Organization and administered by your Publisher.
6. PERFORMING RIGHTS ORGANIZATION (PRO) or CMO’s
A Performing Rights Organization collects public performance royalties and distributes them to the songwriter and music publisher. These organizations also monitor performances and broadcasting of registered music played in public. In Nepal MRCSN is the PRO organization. However, your publisher can also directly license and collect royalties on behalf of you.
The another benefit of Publisher is, PRO uses radio play and other similar algorithm and payment structure to distribute the performance license fees. Depending on your music industry it is possible that your songs may never receive a airplay in foreign countries. Imagine Beyonce and you releasing a song the same Friday, where Beyonce generates 50 Million radio play in USA and you none making your royalty $0 in the eyes of PRO, however a restaurant in New York and the concert organizer in Boston may have paid thousands of dollar to publicly perform your songs. Publisher tracks such under reporting and communicate with PROs to fix such errors or could directly license to these organizers and businesses for greater royalty for you.
7. MECHANICAL RIGHTS AGENCY
Mechanical rights agencies manage mechanical licensing rights for the music publisher. They also issue those rights to anyone reproducing and distributing copyrighted musical compositions.
These agencies often charge a set percentage of gross mechanical royalties collected for their services. In the U.S., the Harry Fox Agency is the group that issues mechanical licenses and collects royalties on behalf of the rights holder. A percentage of gross mechanical royalties collected are then paid to the publisher of the song or music composition.
8. SYNC LICENSING AGENCY
Sync licensing agencies acquire the rights from record labels and music publishers to issue licenses for syncing music with visual media. They also distribute royalties for sync licenses to whoever owns the master recording rights.
Music users typically work with a music supervisor for sync licensing. Remember all such users must license the songs from Sound Recording rights holder and the Composition rights holder. A music supervisor oversees all music-related aspects of television, film, advertising, video games, and other existing or emerging visual media platforms. They also serve as middlemen between the artists and the companies or directors licensing the music.
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