Royalty payments

Royalties are payments made out to the owner– typically an individual or a company– of any entity. Actors, directors, and musicians all receive specific types of royalties. All in all, royalties are a means of compensation for any owner who has licensed out their work to a third party. 

What are royalties in music?

Music royalties are, in most cases, one of the main contributors to an artist’s income. As an artist, it is highly important to understand the difference between the types of music royalties that are out there. Not only will it help you understand how the payment process works, but it will help you leverage your royalties and ensure you are compensated fairly for your work. There are various categories of royalties that can be paid out to an Artist. We will focus on the four primary royalties that are available to artists. The royalties are mechanical royalties, performance royalties, sync royalties, and recording royalties. 

Mechanical royalties 

Mechanical royalties are paid out to the artist whenever a physical copy (CDs or Vinyls) is purchased. Streaming services like Apple Music and Spotify must also pay out mechanical royalties each time a song is played on their platform.

How are Mechanical Royalties paid out? 

Payments are made out to Mechanical License Collective (MLC) agencies. Before artists receive their payments, streaming platforms must first go through a third party to make their payment. The MLC agencies are then tasked with distributing out the payments to the Artist and/ or any other owner of the song. 

Performance royalties 

Performance royalties are paid out to the artist whenever the song is played / performed in a public space. Commercial Malls, Restaurants, Broadcasts on television, and radio stations must all pay performance royalties. 

How are Performance Royalties paid out?

Performance royalties are paid out to the artist’s performing rights organization. Typically, radio stations and other public spaces often pay a “blanket fee” allowing any song to be played. These entities track the songs played in their spaces which are then reported to the PROs. Once again, the PROs are in charge of distributing the payments to the owners of the song.

Sync Royalties

Films, video games, shows, or any form of media that broadcasts a song must pay synchronization royalties royalties. These forms of media must obtain a Sync License that gives them permission to play the artist’s song in their film, advertisement, or videogame. Sync Licenses are often negotiated by the artist and/ or their publisher, laying out the details and agreements for both parties

How are Sync Royalties paid out?

When negotiating the Sync Licensing agreements, a sync fee is paid out to the publisher and creator for the PA side and Record labels and Artist on the sound recording side.On top of the sync fee these forms of media must also pay performance royalties to the publisher.

Recording Royalties

Master-generated royalties are the royalties paid out to the artist anytime their song is streamed, purchased, or played in person. 

How are recording royalties paid out?

For the most part, we’ve seen the publishers handle the payments of royalties. Recording royalties, on the other hand, are paid out to the distributors. The distributors then pay out the royalties to the artist or — if signed– to the record label. 

Digital Royalties

Digital royalties are collected from XM satellite radio, Music choice, and other digital platforms. 

The Importance of Music Royalties

We’ve covered the four main types of royalties in music. As an artist, knowing what type of royalty you will receive is important. Not only are you able to receive funding through your own royalties– especially when you are an independent artist– but you are able to take your royalty portfolio and leverage it for even more funding. We will continue to cover royalties and delve deeper into each type of royalty.

We recognize the need for funding that artists are voicing. Learning about the types of royalties is the first step.