Music Royalties - Who Gets Paid

(Photo by Andrea Piacquadio from Pexels)

What are Royalties?

A music royalty is a payment that is given to a rights holder to license the use of their music. Licenses are the agreements that a user makes to pay the copyright holder for their work. It's important to know who is exactly getting paid for what type of use because there are two copyrights for every song. The rights holders are the owner or partial owner of either the song copyright (ex: composer/songwriter and publisher) or sound recording copyright (ex: recording artists and record labels). Royalty payments vary depending on the country, but I will only be focusing on the United States.

The current royalty rate for a mechanical license (CDs or permanent downloads) is 9.1 cents for every song that is under five minutes long. Any song over five minutes has a statutory rate of 1.75 cents for every minute (rounded up to the next whole minute). For example, a song that is 8:32 in length would be treated as 9 minutes so you would multiple .0175 (1.75 cents) by 9, giving you a royalty of 15.75 cents.

Streaming platforms are significantly less, according to CD Baby, royalties are usually between 4% to 6.75% of revenue.

Two Copyrights:

For every song, there are two separate works protected by copyright. The musical composition and fixed song recording are separately protected and receives different compensatory payments. In most cases, the songwriter/composer is usually different from the musician/recording artists. The songwriter or composer gets royalties when the the song is used except when its played in public. The recording artists get royalties when their version of the song is played or used (with the exception of terrestrial radio). The US Copyright Office has a helpful graphic to help illustrate the difference:

(Image from US Copyright Office)

Example:

Now that you know the two separate copyrights, let's look at what rights they grant and the rights holders (who collect royalties).

Below is an example of the song "Knockin' on Heaven's Door" by Bob Dylan:

(Image from Royalty Exchange)

This is a really helpful diagram because you can not only see each right granted by the copyright, but also who the rights holders would be.

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