Often you hear about musicians who haven’t recorded new material in decades living off of their royalties. They write one catchy song, and can cash in for the rest of their lives if it’s still popular enough to be used in films or played on the radio.
You might wonder how is that possible, and what exactly is a royalty?
A Music Royalty is basically the musician or songwriter being paid for the use of their song. There are a few different ways that royalty revenues are broken down. Often the artist will collect money from the song being played on the radio. So say every time their song gets played on the radio or streamed on Spotify they get a percentage of the money being made from it.
It’s spilt up into different percentages depending on where the money is coming from. So they may only get cents for the song being played, but if it gets played enough they can begin to make a lot of money. This is usually called a Performance Royalty. It is called this because the song is considered to be played publicly. So because of that, even if it’s in a restaurant, the artist will make money from it.
Streaming on Spotify can also be considered a Mechanical Royalty. Because the songs on platforms like Spotify are often licensed out the streaming service, music on CDs are also considered to be in this category too. But Spotify if a hybrid of the Performance and the Mechanical because it is licensed to be used on the service, but it is also considered to be publicly performed. So they often pay both royalties to artists.
The last category of Royalties is Recording Copyright. These are often paid out when the recorded version of a song is used in a TV commercial, TV show, a movie, or streaming service. Sometimes these can be used if one artists wants to sample from another artists previously recorded song. These are usually paid injunction with Synchronization fees (for being used in some kind of media) or Performance Royalties.
You can also gain royalties from using the Monetization of Youtube, where you allow ads to be placed on or before your videos. If your music is used in a video, either your own or another persons, you gain the money from it.
So, how do you go about collecting these royalties? There are 3 main organizations that will collect these for you. They are called Performing Rights Organizations (or PROs for short) it is their job to ensure that you get paid for your work. There is The American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, INC.(BMI), Society of European Stage Authors and Composers (SESAC). They work with Music Publishers, Songwriters and Musicians to ensure they gain the monetary revenue from their work. There is also the Harry Fox Agency, which works similarly to the 3 PROs, but it works primarily with Music Publishing companies to make sure they get their mechanical license fees.
Music Royalties can be very confusing, especially if you’re just beginning to try to understand it. All of the PROs have great websites and dedicated staffs that will be happy to answer your questions and try to help you.