Understanding Royalties

Royalties are what you will earn from the sale or streaming of your music. This is referred to as NET royalties. GROSS royalties are those before any cuts and/or payments.

Unlike other forms of intellectual property, music royalties have a strong linkage to individuals – composers (score), songwriters (lyrics) and writers of musical plays – in that they can own the exclusive copyright to created music and can license it for performance independent of corporates. Recording companies and the performing artists that create a “sound recording” of the music enjoy a separate set of copyrights and royalties from the sale of recordings and from their digital transmission (depending on national laws).

With the advent of pop music and major innovations in technology in the communication and presentations of media, the subject of music royalties has become a complex field with considerable change in the making.

A musical composition obtains copyright protection as soon as it is written out or recorded. But it is not protected from infringed use unless it is registered with the copyright authority, for instance, the Copyright office in the United States, which is administered by the Library of Congress. No person or entity, other than the copyright owner, can use or employ the music for gain without obtaining a license from the composer/songwriter.

Inherently, as copyright, it confers on its owner, a distinctive “bundle” of five exclusive rights: (a) to make copies of the songs through print or recordings (b) to distribute them to the public for profit (c) to the “public performance right”; live or through a recording (d) to create a derivative work to include elements of the original music; and (e) to “display” it (not very relevant in context).

Where the score and the lyric of a composition are contributions of different persons, each of them is an equal owner of such rights.

These exclusivities have led to the evolution of distinct commercial terminology used in the music industry.

There are 4 different kind of royalries

(1) royalties from “print rights”

(2) mechanical royalties from the recording of composed music on CDs and tape

(3) performance royalties from the performance of the compositions/songs on stage or television through artists and bands, and

(4) synch (for synchronization) royalties from using or adapting the musical score in the movies, television advertisements, etc. and

With the advent of the internet, an additional set of royalties has come into play: the digital rights from simulcasting, webcasting, streaming, downloading, and online “on-demand service”.

In the following the terms “composer” and “songwriter” (either lyric or score) are synonymous.

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