Every musician knows royalties are important…but what exactly are they? Put simply, a royalty is an “agreed portion of the income from a work paid to its author, Composer, etc., usually a percentage of the retail price of each copy sold,” according to Dictionary.com.
Royalties pay a rights holder for the use of some kind of intellectual property, so while they don’t only pertain to music, that’s obviously what we’ll focus on in this piece.
Back in the day, music royalties were very simple, as much of the music industry was a simple retail business. People would walk into a record store and buy something, and there was only one kind of radio. In just the past decade or two, royalties have become incredibly complex, and now there are a number of kinds of music royalties coming in from dozens, if not hundreds, of sources.
As the industry continues to change, new types of music royalties pop up and their value shifts. They have taken over from pure sales in regards to how the business functions and how many musicians and Songwriters (not to mention their teams and even their record labels) make their money.
There are two kinds of music royalties, which are based upon the two different components discussed above: the master and the publishing. Each one of those has three specific royalties that fit under one of the two labels which we will dig into.
Up first are master-generated royalties.
How much are royalties for a song?
There are multiple types of royalties for different uses, so the amount you earn can vary widely (see below for the different types of royalties). The one type of royalty we can quickly mention is the mechanical royalty rate (set by the United States government), which is $0.091 per CD sold or digital download.
How are royalties calculated in music?
There are different factors that come into play when calculating music royalties, such as the type of royalty being generated, the location of where the royalty was generated, the company that must pay the artist royalties, and many other things.
Generally speaking, every song has two rights attached to it: composition rights and master recording rights. The songwriter(s) own the composition rights and whoever records the song owns the master recording rights. Every time a royalty is generated for a song, both songwriter(s) and recording artist(s) earn a portion of the royalty.
What are the 4 main types of royalties?
The main types of music royalties are mechanical royalties, performance royalties, micro-sync royalties, and print royalties.
- Mechanical royalties are generated when someone streams or buys your music.
- Performance royalties are generated when you or someone else performs your song in public, which includes live performances, an establishment playing your music over its sound system, songs played on TV, and radio stations playing your music.
- Micro-sync royalties are generated when your music is paired with moving images, such as on YouTube, TikTok, TV, film, or video games.
- Print royalties are generated when your sheet music is sold.