Music Royalties: What They Are, How They Work & How Not To Get Screwed Over
Hello Creatives!
Today we’re demystifying how musicians earn royalties. From the several different types to how they are calculated to some famous cases of artists fighting against their record labels, we’ve got a lot to unpack. So let’s jump in.
What Are Royalties?
According to U.S. intellectual property laws, the creator of a thing (books, movie script, songs, inventions, etc) has several rights that allow them to monetize whatever that thing is. In music, there are two main types of copyright that are the bedrock of monetization: composition and master. Composition rights pertain to the lyrics, melody and harmony of a song. Meanwhile, master rights pertain to the finished product that is the recorded song. These rights might be owned by different people: the songwriter, the producer, the label and/or the musician.
Royalties are the payments that musicians receive when they license their work (either the composition or the master rights) to other entities to be used in commercials, TV shows, movies, etc. There are 5 main types of royalties:
mechanical
digital performance
public performance
synchronization
print music
Mechanical royalties are received when a musician licenses a song to be digitally or physically distributed. So, this category encompasses CDs and streaming services. Digital performance is the gray area between mechanical and public performance, which covers AM/FM radio airtime. Public performance is pretty self-explanatory. If anyone wants to perform a song they have to have the license to do it. Synchronization rights are licensed for TV commercials, video games, movies, or any other format that would have the audio synchronized with video. Personally, I think that’s a weird way to put it, but whatever. Finally, print music rights are (again self-explanatory) when the song is printed and distributed on sheet music. Ever listen to your local marching band trying to blast an Adele song? That’s print music copyright at work.
How Are Royalties Determined?
The short answer: it depends.
On a lot, actually.
Such as whether an artist chooses to go with a label or go indie, the clout of the label if they have one, the popularity of the artist/band/songwriter, and what distribution channels are used to monetize the composition and the master rights of the songs. And whether or not the monetization of the work is considered a “license” or a “sale” in the contract with the label. Basically, the music industry is the Wild West with no sheriffs and the townspeople are held hostage at the bank.
Generally, mechanical and digital royalties can range anywhere from 10-20% depending on these factors with up to a 50/50 split on performance royalties. For sync and print licenses, the payout varies wildly. I’ll point you to the SoundChart blog and to the Indie Music Academy YouTube channel for a deep dive into it all the nitty gritty details.
Music Business Law & The Case of the Screwed Over Artist
So, the bank robber in my Wild West scenario turned out to be the sheriff who swindled everyone.
Shady record labels have entered the chat
So, here’s the thing about intellectual property rights that I’ve mentioned in a previous blog post about the publishing industry: they can be signed away unknowingly because the jargon is confusing to the unsuspecting gifted artist who doesn’t know better.
Examples abound dating back to the “golden days” of the music industry like how Elvis’ Hound Dog classic wasn’t originally written for him, but for an African American singer, Big Mama Thornton, who ended up in poverty because she wasn’t properly paid for her work. And in 1984, rock musician John Fogerty was sued by his former label for self-plagiarism of an old song he was no longer allowed to perform or receive royalties from and had to sing to a jury to prove that his new music had been composed differently. Or how Taylor Swift’s former label was bought out and certain rights to her music weren't accessible to her until just this year.
Music business law is rife with traps, just as is the case with many creative fields because intellectual property is hard to defend if you don’t have the resources to help prove yourself.
How Not To Get Screwed Over By A Record Label
Know your rights!
Learn everything you can about what rights you have to your music and what goes into a label contract. It’s harder to swindle you when you can spot the scam. Take an intellectual property course, read up on the latest music business law cases. You’ll get a glimpse at what could go wrong and that could protect you from making the same faux pas.
Do your homework.
Google is your best friend. Research the record label. Have they been in any lawsuits in the past? If so, what for? These might be red flags if it’s over royalties. Do other artists talk about their experiences with them? What do they do well? Are they hospitable or hostile with the artists they sign?
If they ask for money up front, run away!
Legitimate record labels won’t ask you to put up a large sum of money to do what is their responsibility to do (marketing, PR, and other resources to produce an album). Otherwise, what was the purpose of signing with them? You could have taken that same amount and gone indie.
So as you can see, the music industry is complex and nuanced and can’t possibly be fully explained in one blog post. That’s all I have for today. I hope this was helpful.
Until Next Time,
Rochele Rosa