A music royalty is generated when someone uses a copyright. And there are two copyrights associated with every song: the composition (written form of the song — lyrics, chords, sheet music) and the recording (even if you never publicly release the recording).
That brings us the name “mechanical royalties.” Why that name?
Well, this goes back to when songs were mechanically produced on vinyl records and piano rolls (originally used to operate player pianos).
Here’s an example: if someone wanted to buy a piano roll for their player piano, they had to get a mechanical royalty, which would be paid to the owner of the composition on the piano roll.
The United States government sets mechanical royalty rates depending on the terms of the U.S. Copyright Act, which first came about in 1909. Up until then, Music Publishers dictated the music industry.
Until recently, mechanical royalties applied to physical reproductions of music, like CDs, vinyl records, and cassettes. But today, this can refer to digitally streamed and downloaded songs.
So you can see why it’s confusing to still call these royalties “mechanical.” But that’s where we are.
All of this has changed how Songwriters are paid these royalties.