Royalties: Music, the Industry and What it Means
The last installment of this column assessed the song in its legal form. Just as a quick overview, songs break down into two components: master, and composition. Master royalties go to the label/master rights holder and the composition royalties go to the composer. Great! That’s it right?
It may be a shock to some, and an affirmation of the grim reality of life to others, but music royalty payments break down even more. In this article I will be discussing the different agencies and what they do to track, collect, and distribute royalty payments. I will also discuss how all of the agencies together produce an extremely intricate web of confusion which I hope to unwind for everyone - and then succinctly set that shit on fire. For those who wish to continue… drink that coffee now.
Master rights are fairly simple to grasp. As I covered previously, these are the royalties accrued by downloads, sales, streams, etc. A distributor will collect these royalties and give them to the label who will give them to the artist. There are exceptions of course, such as iTunes. Apple does not use a distributor and pays directly to the label, because they are all about vertical integration.
These guys are basically the hustlers. They make sure that the revenue that the songwriter earned from having their tracks played goes directly to the songwriter. Before the songwriter creates a blood bond with one of these companies they will need to administer the composition rights to their publisher. Once the songwriter administers the rights over, the publisher is now the copyright holder of the music on the composition side.
The publisher represents this piece of work for the songwriter, acting in the songwriter’s best interest. The publisher collects, pitches and basically does whatever they can with a song so that everyone involved makes as much money as possible from it.
For example, publishers place songs in TV shows or films. These types of licensing deals are called sync’s (synchronization licensing for placement in television and film). When these types of deals happen the parties first agree upon an advance, but we can cover the in’s and out’s of synchronization licensing in another article. From my past experience in working in production music, the target market for heavy metal right now is reality TV that’s edgy, video games, and online media. Bands that gain notoriety can try for commercials. The publisher that got Mastodon and Darkest Hour played during Christian Bale’s scenes in ‘The Big Short’? That’s probably the guy young bands want to try and talk to.
PRO (Performing Rights Organizations)
PRO’s collect money on the songwriters behalf and serve as an intermediary between the copyright holders and the parties using the music in a public space. For example, songs played on the overhead speakers in stores. PROs tracks every time each of those songs iss played. Royalties are generated from those plays, and the PRO gives that money to the copyright holder.
Publishers and PRO’s are buddies. The PRO will go to music users (say, a department store) to get payment and the publisher’s will distribute that payment.
Let’s say you, dear reader, have recorded and commercially released an album. PRO’s such as ASCAP, BMI, SESAC, GEMA, PRS, etc. will pay publishers and songwriters as a single unit equivalent to 200%; 100% to you and 100% to your publisher. This does not mean they will issue double payment, but wouldn’t that be nice? Going back to our handy idea of a song, it now splits between master and composition, and then splits even further so composition has its own messed up math of two sides equalling 100%.
Funny enough, these companies have only been around for the last hundred or so years, when recorded music playing in a public space has been an option. The first PRO was established in France during the 1850’s. U.S. based PRO’s, in typical American fashion, came later in 1914.
Performance Royalties (AKA Public Performance)
PRO’s collect royalties when a song is broadcasted or performed publicly. By legal definition this is any music performed in a PUBLIC SPACE that isn’t your family or friends.
No, the whole bar is not your friend.
And yes, so many businesses/venues break this law. You see that sticker on the door of a bar that says ASCAP or BMI? That bar tracks their plays to give royalties to musical artists.
This is the royalty artists receive from duplicating a sound recording. Think of it as the mechanical duplication of the song. Every time a label presses a CD of a song, for example, the artist is due a mechanical royalty although there are other kinds of duplication besides pressing a record.
The Statutory Rate is the amount paid for each duplication composition. In 2017 the rate for an average 3:30/4ish minute song is 9.1 cents. Any song over 5 minutes adds 1.75 cents per extra minute. Typically no one needs to know that, but I realize I am talking to a bunch of metalheads who have at least 20 riffs that all are slammed into one 8 minute anthem. For that I applaud you.
This mechanical license will grant the rights to reproduce and distribute music compositions physically, on interactive streams, ringtones, and other configurations. These mechanical royalties will also be paid when music is streamed because streaming is replicating the sound recording.
This about sums it up for 101 in the royalty business of music… in it’s physical form. Streaming is a entirely different beast. We’ll cover streaming royalties in a future column.