HOW ROYALTIES AND COPYRIGHTS WORK
Royalties are payments for the right to use copyright owned music. The payments come from anyone who has a license to play the music. Performance Rights Organisations hand out these licences and make sure money comes from music users to rights holders.
Sounds easy? It is not. In fact, royalties are notoriously known for being hard to get a grip of. But don’t worry. We are here to guide you!
Royalties cannot be well explained without also talking about copyrights. PRO’s need to be mentioned as well. In a world where over 60,000 songs are released every day, your songs also need to be properly identified, for the royalties to come your way. It’s a jungle. That’s why we’ve made an overview of how royalties and copyrights work, just for you!
Royalties come in many forms and they work in different ways, and involves different people.
To understand how royalties and copyrights work, we have to break them down, as well as talk about other parties involved. This article will give us a bird’s-eye-view of the following:
- Songwriting Copyright
- Sound Recording Copyright
- Mechanical Royalties
- Performance Royalties
- Synchronisation Royalties
- Print Music Royalties
- Performance Rights Organizations (PRO’s)
- ID-tags for your music: ISRC’s, IPI’s, etc.
All songs recorded are protected by copyright law. A copyright stands for the ownership of the song. This copyright is split into six exclusive rights that belong to the owner. However, a recorded piece of music is protected by two different types of copyright.
Your songs are protected by composition copyright the moment they are made in a tangible form.
Tangible form means that your song is fixated on some kind of medium. It could be a piece of paper, a napkin, a note on your phone, or any other form that makes it available to be read or heard.
If you sign a publishing deal, you are giving up a part of your songwriting copyright to the publisher. This deal is often made to let the publisher administer and promote your songs to the world for a fee, but there are of course variations on these deals.
Sound Recording copyright
When your song is recorded, there is another type of copyright that is created and this is known as the sound recording copyright. This protects the unique recording that was just made. If a new recording is made, even with the same composition, a new sound recording copyright is created for that particular recording.
These two copyrights give rise to the two general types of royalties; one that is paid for when a particular recording is used, and one for when a particular composition is used.
Your copyrighted songs generate mechanical royalties through reproduction and distribution, either physical or digital. Every time a copy of your song is produced, you have the right to be payed for that copy. Mechanical royalty is generated, regardless if the copy being made is on a cassette or through a streaming service.
The term performance in this case often causes confusion. Even playing a recording of a copyrighted song is considered a performance! Performance royalties are generated whenever your song is played to the public. A common example is when your favorite café is playing music for its guests: this generates performance royalties.
Performance royalties are split in two halves known as songwriter royalties and publishing royalties. Both halves are most often collected by Performance Rights Organisations.
Synchronisation Royalties are generated by the use of your copyrighted song in synchronisation with visual media. An example is if someone with a synchronisation license uploads a video on YouTube with your song playing with it, or if your song is used with a commercial on TV. If your own copyrighted recording is to be used, a master use license is also required though. This is due to the different copyrights we were talking about before. A license for the songwriting copyright is enough if a cover is recorded and used for the commercial.
Print Music Royalties
A source of income not as big as it once was, this royalty stems from your copyrighted music being transcribed to sheet music. Your songs generate royalties by being printed on paper, distributed and sold.
We’ve already done an article on the automated royalties from streaming and how they’re calculated, if you want to dive deeper. More is yet to come and we will focus in on each of the royalty types!
PERFORMANCE RIGHTS ORGANISATIONS (PRO’s)
Performance Rights Societies (or in the case of the UK; Performance Rights Society), collect royalties on behalf of songwriters and publishers. The PRO’s work a bit different around the world. In the US you have different competing PRO’s that collect performance royalties. There are also Mechanical Rights Organisations (MRO’s) that are dedicated to collecting mechanical royalties.
In Europe, the PRO’s and MRO’s of each country often work as one common society. Every country has its own laws and regulations about this.
The PRO’s and MRO’s are both parts of a bigger family of organisations called Collective Management Organisations (CMO’s). There are also different CMO’s dedicated to digital performance royalties from webcasters, and digital collecting societies focusing on streaming services around the globe. Nevertheless, the global music industry still generally refers to all these organisations as PRO’s.
But what do PRO’s ACTUALLY do?
PRO’s basically do three things, regardless what type of royalty they are focused on. Their three main tasks are these:
- The PRO’s issue licenses to someone who wants to use your music.
- Someone with license plays your music. The PRO’s then monitor which songs were played, and how often.
- Collecting and Distributing
- The PRO’s collect money from the music user and distributes to you. But before you get the money, the PRO’s take a cut for their efforts.
ID-TAGS FOR YOUR MUSIC
There are many different codes that serve to identify you as a copyright holder and your copyrighted songs. Without them, no one knows where to send your money. In other words, they are very important! Here is a list of all the different codes used and what they identify:
- ISRC: International Standard Recording Code
Serves a digital fingerprint for each of your different recordings. The ISRC is the most important of these codes, as you need it for the song to be published. You should never have to pay for an ISRC code, and you will of course get if for free when releasing your work through us!
This is a similar code, but one that references the individual composition. This means that if someone records a cover of your song, it should have the same ISWC. The ISRC will be different however, since it is a different recording.
The IPI is your personal identification. The PRO’s use this code to identify you as the composer or author. They can then link your ISWC’s to your IPI.
The IPN is the identity of the musicians performing on a recording. CMO’s managing mechanical royalties handle this.
The UPC is like a bar code for your albums. This means they are used to track sales of collections of songs more than the individual tracks themselves.
So you now know the basics of how royalties and copyrights work. Good job!
But we’ve only just scratched the surface, and the music industry is constantly evolving. If you want to be sure that your music is looked after, and that your royalties are coming your way, sign up and be confident in that we have your back!