Now that you have all your music copyrighted, it’s time to start looking at how to exploit these copyrights. As a copyright owner, you have the right to sell licenses to your rights to other people so they can rightly use your rights for the right cause that you deem righteous. Alright?
Licensing takes a number of different shapes, but for starters there are three major royalty streams that come into play: mechanical licenses, performance licenses, and synchronization. For each of these royalty streams, the net royalty is distributed among all owners of the copyright. This could include band members, publishers, etc. and the royalty check will be split up among these people. Let’s start with mechanical royalties, as it is most relevant to the traditional industry model that includes record labels.
The mechanical license has to do with the recorded reproduction and sale of a song. In the industry model, the record label will ask the copyright owner for permission to record a particular song so they can sell their recording to the masses. In return, the copyright owner is paid in royalties from the record sales. Royalties for mechanical licenses are governed by law, and they cannot be withheld by a record label or any other entity for recoupment. This means that even if the copyright owner happens to be the musician and still owes the record label thousands of dollars from advances for recording, he or she will still get a check in the mail for publisher and songwriter royalties. The statutory rate (determined by law) for mechanical licenses is 9.1%, although this is often negotiated when entering into a record deal. At the statutory rate, every time a song is sold, the publisher or publisher-songwriter is owed 9.1% of the sale.
Let’s say Razzmatazz Records records Beyoncé singing Carey Composer’s composition, and Carey owns the copyright, then Razzmatazz will pay Carey 9.1% of the song’s retail price for every instance that the song is sold. HOWEVER, if Carey is no longer the copyright owner and has signed away a portion, or all, of her copyright to a publisher, the check will be sent to her publisher, who will then split the check with Carey accordingly.
There is one more catch to this whole scenario: a record label may not always offer 9.1%, but instead ask for what is called a three-quarter rate. This is often the case for emerging artists and composers, and no, they don’t mean to pay you 75¢ per song. The label will offer to pay three quarters (75%) of the statutory rate (9.1%), which comes out to 6.8% of the retail price of every song sold. Chop that up with your publisher and the rest of your band mates, and who knows what you will have left.
As you can see, the whole process can be nuanced, and depending on the number of people involved, the final check from record sales at the end of the day can be unexpected. But thankfully, mechanical licenses aren’t the only source of royalty income that songwriters or singer-songwriters can get from licensing their copyright. Read on to learn about the Performance License and find out what a PRO does.
Written by Jin Park
“How Music Royalties Work.” HowStuffWorks. N.p., n.d. Web. 13 Aug. 2014.
Passman, Donald S. All You Need to Know About the Music Business, Eighth Edition. New York, NY: Simon & Schuster, 2012.
Poe, Randy. The New Songwriter’s Guide to Music Publishing. Ohio: F+W Publications, 2006.
Images: Wikipedia, Jin Park