MAKING MONEY WITH YOUR MUSIC: THE 4 TYPES OF ROYALTIES & HOW TO COLLECT THEM
As an artist, you want to get paid for your work – and rightfully so. But did you know there are different ways to collect royalties? Depending on the type of work, where it's being used, and other factors, you may be entitled to performance royalties, mechanical royalties, digital royalties, or sync fees.
In this article, we'll go over four ways you can collect these as an artist. By understanding the different types of royalties and how they work, you can ensure that you're getting paid for your art in all the ways you deserve.
The Various Kinds of Royalties to Which You're Legally Entitled as an Artist
Depending on the use of your art, as an artist, you may be entitled to the following royalty payments.
1. Performance Royalties
Performance royalties are earned when your music (composition) is played or performed in a public setting - that means whether it’s being performed live at a music venue (whether played by you or someone else), at a bar or coffee shop, or even over the radio.
Note that streams from on-demand streaming services, like Spotify or Apple Music, earn both a performance royalty and a mechanical royalty - this is unique among types of music usage. The creator and or owners of the music - songwriters or their publishers - collect performance royalties.
All performance royalties are collected and distributed by collection societies such as performing rights organizations (PROs) or collective management organizations (CMOs) to the relevant rightsholders.
2. Mechanical Royalties
Mechanical royalties are owed to you when music featuring your composition is physically or digitally reproduced. For example, if your EP is streamed or pressed to vinyl, you are due mechanical royalties. These royalties are collected by collection societies such as The MLC in the US, mechanical rights organizations (MROs), or collective management organizations (CMOs), and paid out to the songwriter or their publisher.
Streaming mechanical royalties are collected via blanket licenses with the Digital Service Providers (such as Apple Music, Spotify, or Deezer), while physical-mechanical royalties (such as those earned by pressing a vinyl record), are paid based on individual licenses, often requested directly from a publisher.
3. Digital PERFORMANCE Royalties
Digital performance royalties are royalties that must be paid to performing artists each time a sound recording is streamed on a non-interactive digital streaming service. What’s a “non-interactive streaming service”? Think of internet radio stations like Pandora, Sirius XM, or various other webcasts found on the web. Non-interactive essentially means that the listener has no control over playback - they can’t skip or choose songs, they just listen to what’s being programmed.
An important distinction to keep in mind for Digital performance royalties is that they are generated from the use of the recording - not the composition. To explain that a little better: If you have a cover song that gets on a Sirius XM station, you (or whoever owns the recording) will collect the Digital Performance Royalties, while whoever wrote the composition will collect Performance and Mechanical royalties.
In the US, digital performance royalties are collected by SoundExchange.
4. RECORDING REVENUES (NOT MECHANICALS)
Recording Revenue, also known as Master-generated royalties, or recording royalties - are royalties that are generated on behalf of the recording (again, not the composition) when songs are downloaded, streamed, or even sold in a physical format.
This is the most basic royalty artists / labels will get every time their recordings are streamed (Spotify, Apple Music, etc.), downloaded (Amazon Music, iTunes, etc.), or physically purchased.
If you are an independent artist, your distributor will collect these royalties for you.
4 steps to Collecting Your Royalties
Now that you know the different types of royalties your music can earn, it’s time to learn how to collect! There are essentially two steps for each side of the royalty - the recording, and the composition. All-in-all, you’ll need to take four steps to collect everything you’re due as both the artist and songwriter.
Step one: Choose a Music Distributor to release your music & collect recording revenues
The first step is to get your music out there, right? To get your music onto streaming platforms like Spotify, Apple Music, Tidal, and others, you need to choose a music distributor (We recommend Distrokid! Save 7% by clicking here). Your distributor will collect revenue generated from the sales and streams of your recordings on streaming platforms.
Step two: SIGN UP WITH SOUNDEXCHANGE TO COLLECT DIGITAL PERFORMANCE ROYALTIES
The second step to collecting all royalties on your recording (again, assuming you own the recordings), is to register your songs on SoundExchange. You will need to register as whoever or whatever entity owns the recordings. If you are in a band and you haven’t figured this out yet, have this discussion internally and decide whether you as individuals will own equal shares of recordings, or if the band as an entity will own 100%. If you decide to split ownership, each member will need to make an account to claim their designated percentage.
Step three: affiliate with a pro & the mlc to collect the writer’s share of composition royalties
Now that you’ve covered collecting all of your recording royalties, it’s time to make sure you have what you’re due as a songwriter.
The first step is to register with a PRO to collect performance royalties. The most common PROs in the US are BMI, ASCAP, SESAC, and GMR.
The second step here is to register with The Music Licensing Collective (MLC) to collect digital mechanical royalties.
Step Four: sign up with songtrust to collect the publisher’s share of composition royalties
If you have signed a deal with a publishing company, then you don’t need to worry about this step. Assuming most artists are also their own publishers (which they are), this is the fourth and final step to make sure you are collecting all of the money your music is making.
The easiest way to collect the publisher’s share of writer royalties is to sign up for a service like SongTrust. SongTrust will work with PROs in the US and CMOs worldwide to organize your catalog and collect all of the writer royalties due to you as a publisher.
The Bottom Line
As an artist, it's important to understand how royalties work and how you can get paid for your music. By releasing with a digital music distributor, registering with a PRO, joining the MLC, and signing up for a publishing admin like SongTrust, you can ensure you get all the royalties you're owed.
OVERWHELMED? This is a lot of information to take in. If you want direct hands-on help on how to complete all of these steps, apply for our Artist Mentoring Program.
