How to make money from your music: royalties, part 1

Whatever your relationship is with the music and entertainment industry, you have surely heard about royalties on more than one occasion. However, despite being a very present concept, it is still perceived as something abstract and sometimes difficult to understand. A lack of knowledge that on many occasions results in artists, publishers, composers, etc. not receiving the money that corresponds to them. That is why we have decided to dedicate the first chapter of our series “How to make money with your music” to royalties. What are they? How many types are there? And what does each one consist of? are the questions we will answer.

Royalties are the legal mechanism through which you receive profits for the use of creations you have copyright for. There are several different types of royalties. In this article we are going to focus on what we consider to be the three most important ones: performance royalties, mechanical royalties, and sync royalties with a special mention of streaming royalties.

Performance royalties

Performance royalties are those that you receive when an item to which you have copyright is transmitted in a public setting. In other words, every time a song of yours is played on the radio, television, streaming platforms, performances, clubs, bars, elevators, waiting rooms, and any other type of business, a percentage corresponds to you.

What does that percentage consist of? The answer is that there is no fixed number. Why? Because not all countries operate under the same legislation. Therefore, depending on the country in which your music is played, your percentage will vary and the way to claim it will do too. Of course, the same logic operates in all of them. The more times it is played, the longer the playback lasts, and the more people listen to it, the higher the earnings you will receive.

Most businesses that operate in public settings and use music have general licensing agreements with Performance Rights Organizations. These are then in charge of informing about the reproductions and making the payment according to whoever it corresponds to. This is how radios, televisions or spaces that organize live performances operate, for example.

Mechanical royalties

Mechanical royalties are those that you receive when an item to which you hold copyright is reproduced mechanically, that is, without interpreters. In other words, every time a composition of yours is captured in a physical format (CD, vinyl, etc.), downloaded from an online store or listened to via streaming, a percentage corresponds to you. Of course, these royalties are only aimed at composers and publishers.

Again, there is no fixed percentage. There are a sea of variations depending on countries, laws, platforms and agreements. In fact, if you want to receive all of the mechanical royalties that correspond to you, you will have to register your creations in multiple rights management companies. An arduous process that will force you to operate in multiple languages and face multiple bureaucracies.

Synchronization royalties

Synchronization royalties are those you receive when an item to which you have copyright is included or synchronized with visual media. In other words, every time a composition of yours is used in movies, TV shows, commercials, video games, YouTube, Tik Tok and any other type of audiovisual format, a percentage corresponds to you.

In most cases, sync royalties are obtained through prior licensing agreements. A note that is very important to keep in mind. Synchronization means that the use of your creation has been sought. If your song is playing at an event that is being filmed on or in a bar where someone is recording a Tik Tok, you do not receive these sync royalties.

Streaming royalties

Streaming royalties are those you receive when an element to which you hold phonographic rights is reproduced on a digital platform. In other words, every time a song of yours is heard on any streaming platform or online radio, a percentage corresponds to you. Taking into account that today most listeners use this system, to reproduce a song digitally without having to download it, we are facing one of the most important royalties. The operation of this type of royalties can be through direct licenses or a system through which those known as DSP, pay directly to distributors.

In addition, there are two types of streaming royalties:

Interactive: those derived from services that allow listeners to select the songs they want to play. They are therefore the royalties derived from all streaming platforms: Tidal, YouTube, Spotify, Deezer, etc.

Non-interactive: those derived from services that do not allow listeners to select songs. They are therefore the royalties derived from online radios such as SiriusXM, Pandora or TuneIn.

We know that it is a lot of information and that it is not particularly simple. That’s why in this first publication we wanted to lay the foundations of fundamental knowledge to delve further into the subject later on. In subsequent posts we will address issues such as who corresponds to what type of royalty, what are the royalty claim processes, what do we mean by accumulated royalties, how many types of royalties may overlap; and we may even see some practical examples.

After reading all of this, you probably have a better understanding of the existence and role of Republic Network. When we say that our mission is to take our clients’ careers to the top, we mean it. To help them with everything that has nothing to do with the creative part, avoid the headaches of bureaucratic procedures and not let anything escape. In the meantime they can dedicate themselves to what really matters: their music.

Pic © Ferrari + caballos + fuerza = cerebro Humano 

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