How A Song Makes Money
How Does A Song Generate Revenue?
There are many ways Artists can Get Paid to Create however in this article, we’ll be focusing on the various types of royalties a single song generates.
For those who don’t know, a royalty is the sum of money that is paid to singers, songwriters, performers, and/or publishers whenever their songs are played on tv, radio, digital streaming services, sold to stores, performed, or used in any other way.
An important note to remember is that every song has two parts:
The composition, which involves the lyrics and the melody of the song
AND
The sound recording, a.k.a. the master audio recording of the song
Songwriters typically own the musical composition whereas labels typically own the master recording. Independent musicians often own both parts, however, there's a lot more work to do if you're not signed to a label.
Types of Royalties
TV, Movies, Video Games, and Commercials (Sync Rights & Master Use)
When your music is used in TV, movies, or commercials, you get paid for a synchronization license AND a master use license. Typically there are separate fees for the sound recording and the musical composition.
In order for someone else to use your song, or sound recording, they would need a master-use license. Typically there is a one-time fee to use the audio recording or “master” of the song. If your record label owns the master, then your record label would discuss payment options, collect the revenue, and distribute earnings if applicable. If you own the master and someone is interested in using your song, they would need to contact you or your management directly and discuss the price for a master-use license.
A synchronization license is also required when someone wants to use your musical composition (melody/lyrics) to follow their visuals. This license is typically discussed with the publisher, the publisher collects the income and distributes the sync royalties to the songwriter(s). If you're the publisher and the songwriter, good news, you receive all the sync royalties. (If you’re signed to a record label they may receive a percentage).
You also receive performance royalties when your music is used in TV, movies, or commercials, but we’ll talk more about those later on.
Mechanical Royalties
Mechanical royalties are paid when a copy of your song is created.
In the physical world, you receive mechanical royalties when a physical copy of your song is created. For example, when CDs or vinyls are sold at live shows or record stores.
In the virtual world, downloads and streams are described as virtual reproductions or copies of your song. Every time you get a listen on Spotify or someone downloads your song through iTunes or Amazon, you get paid!
If you want to distribute your song to major platforms like Spotify, you might want to consider signing up for a digital distribution company such as Distrokid. Although technically possible, trying to distribute your song completely independently would be extremely difficult and time consuming as you would need to make deals with a lot of people and companies.
Mechanical royalties are typically collected by the record label, if there is one, and they distribute the songwriter(s) and publisher(s) their share of the money. If there is no record label involved then the publisher would still need to collect the money.
Digital distributors such as Distrokid typically only collect the mechanical royalties for the master recording part of the song.
Mechanical royalties for the musical composition are typically collected by an agency that specializes in collecting mechanical royalties. Here are a few options for these agencies in the US:
The Harry Fox Agency (HFA)
The Mechanical Licensing Collective (MLC)
Music Report
These agencies only collect mechanical royalties in the US.
Songtrust is an organization you can work with to collect all your mechanical royalties worldwide!
Performance Royalties
We finally made it to the performance royalties section! With performance royalties, you get paid every time your song is performed publicly, even if you're not present.
If your song is played on the tv or radio, it's being performed. When you someone hears your song on Spotify or Pandora, it's being performed. Even if you're hearing it in a Walmart bathroom, then it's being performed. Basically anytime it's heard by the public, it's being performed. Of course if you're playing live at a professional venue, then you’re definitely going to get some performance royalties.
If a record label is involved, they usually receive a percentage of the royalties for the master recording of the song and distribute the artist’s share to the artist. If there’s no label involved, SoundExchange can help you collect the sound recording digital performance royalties.
For the musical composition, royalties are typically collected by a PRO, also known as a Performance Rights Organization. PROs collect performance royalties for songwriters and publishers. If you're both the publisher and the sole songwriter then you would get all the royalties. The main PROs in the US are ASCAP, BMI, and SESAC. Each one has its pros or cons, which you can read about in my other article specifically focused on PROs in the US.
PROs will collect and pay for songwriters and publishers, while SoundExchange will collect for artists and labels. So if you're an artist, songwriter, and a publisher or even just an artist and a songwriter then it would be best to sign up for one of the PROs AND SoundExchange.
Print Music Royalty
Print music royalties are paid anytime your musical composition is printed onto paper (also called sheet music). Print music royalties are typically one of the least lucrative types of royalties in today’s world. Most artists are not receiving much, if any, print royalties.
Print royalties shouldn’t be a major focus for most artists because most won’t sell sheet music, until after becoming, or working with, a more established as artist or songwriter.
If a songwriter is interested in printing their music onto paper they will typically work with a print music publisher to create and distribute print music. Both the songwriter and the publisher, if you have one, would get paid a royalty when the print music is sold. A couple examples of some print music publishers are: International Music Company and Edition Peters.
Final Thoughts
I hope this article helped you gain more knowledge about the royalties your song generates and what organizations can help you collect the money that is owed to you. This article is also focused on companies and organizations in the U.S., so it may be different in other countries. There are so many ways an artist can Get Paid to Create. If you want help setting up your music business, feel free to schedule a complimentary music business consultation, and most importantly, never give up, because if music is your dream then you should always reach for it!