In this video I’m going to talk about how to collect all your music royalties as a record label.
OK, let's start with some basics! There are two main ways royalties are generated from music. One is from Music Sales and one is for Public Performance of Songs.
When most people think of music royalties, they imagine a fan buying a record at a shop for $5, who then sends the money to the record label who in turn pays the artist their share.
Or with streaming, when someone listens to a song on Spotify and Spotify sends $0.0001 to the record label who pays the artist their share - and yes, it is a very tiny share. Those are both examples of royalties generated from Music Sales.
Public Performance of Songs
Other royalty streams can be earned for the performance of a song in public, online, in films, on radio, or streamed, and these royalties change for different countries, and change if the song is being sold physically, downloaded, or streamed. These types of royalties are generated from the Public Performance of Songs.
Types of Copyright and Royalties
Now you understand the two types of copyright, Sound Recordings and Compositions, and the two main ways they generate royalties, through music sales and public performance.
We can now go into more detail on how they all work together and how to make sure you collect all your royalties for you as a label and for your artists' music.
To keep things simple, just remember there are four main areas of royalties:
- Sound recording royalties from music sales
- Sound recording royalties from public performance of songs
- Composition royalties from music sales (a.k.a. "Mechanicals")
- Composition royalties from public performance of songs
The ones we are concerned with as a label are SOUND RECORDINGS.
Responsibility as a Record Label
As a general rule of thumb, Sound Recording Royalties from Music Sales are tracked and collected by record labels, and the remaining three royalties are tracked by various Performance Rights Organisations (PROS) and distributed to publishers, labels and artists.
Thus as a record label you are primarily focused on the royalties for sound recordings. It isn’t the job of a record label to sign or collect the royalties for compositions. That’s what publishers do.
So if you are an unpublished artist or artist manager, you will be responsible for ensuring you are registering and collecting these other three areas of royalties related to compositions.
And if you are a published artist, your publisher will be responsible registering and collecting these royalties.
What are these revenue Streams from Sound Recordings?
In summary the main areas of revenue streams for Sound Recordings are:
- Sales Royalties that are generated from physical and digital downloads of records.
- Streaming Royalties that are generated from digital streams on Spotify, Apple Music, Amazon Music, Deezer, and all other music platforms in the world.
- Digital Performance Royalties that are generated through neighbouring rights organisations like SoundExchange and PPL when songs are performed publicly.
- Sync Royalties that are generated from TV, film, video games and ad commercials, paying for the rights to use master Sound Recordings. These come from direct deals or via a 3rd party agent who will take a cut.
So how do we collect?
Collecting Royalties as a Record Label
As a label you will collect the sound recording royalties from music sale downloads when you release music. These will be passed on to yourself if you are an artist or to your signed artists if you are a label. These royalties are collected from your distributor.
As a label you collect these royalties when the sounds recording is played in interactive streaming services such as Spotify, Apple Music, Deezer, Tidal. These royalties are collected from your distributor.
Digital Performance Royalties
These are generated from playing copyrighted work publicly, for example, through non-interactive music streaming, satellite radio, music videos, FM radio, or a TV show. These are called neighbouring rights.
If you are in the UK, you register with PPL. PPL will also take registrations from any label based anywhere in the world, so if you are outside the US or UK you can still use PPL to collect and pay your digital performance royalties.
These are generated when a TV show, film, ad commercial, trailer or video game requires the master licence. You get paid directly from the TV studio, advertising producers, or film production company, or games company.
Typically, you will have a sync agent acting as an intermediary between you and the studio who will handle the paperwork for a small fee and will usually handle the sync (composition) license too.
If you allow YouTube to monetize your music uploads and run ads, you can earn revenue from these ads, which are split 45%/55% in your favor.
Most distributors have an opt-in box to collect these for you, or as a label you can also sign up to YouTube and become a verified partner or you can use a 3rd party that specializes in YouTube monetization such as Audiam and AdRev.
As a label you don’t collect any royalties, as you are expected to pay royalties to the copyright owner in the form of mechanical royalties.
Most distributors will have an option for digital download mechanical royalties to be paid directly to the publishers or copywriter owners who then take care of paying the artist.
You should do this if your artists are published or expect them to be published in the future so the distributor can take care of mechanicals. You can set this option for each music release separately too.
But what about the individual artist?
Collecting Royalties as an Artist
Music you have signed to a record label will have the label pay your record sales royalties, determined by your record agreement. If you own your record label, the royalties will be going straight to you from the distributor.
As above, music you have signed to a record label will have the label pay your streaming royalties, determined by your record agreement. If you own your record label, the streaming royalties will be going straight to you from the distributor.
Digital Performance Royalties (US)
To collect your digital performance royalties in the US, you need to register with SoundExchange. They pay out 45% to the featured performing artist, and the remaining 5% to the AFM / SAG-AFTRA funds for non-featured artists. If you are a non-featured artist, you need to register with AFM / SAG-AFTRA.
Digital Performance Royalties (UK)
To collect your digital performance royalties in the UK, you need to register with PPL. They also collect for non-featured and session artists too. If you are outside the UK and US, you can still register with PPL to collect your digital performance royalties.
Mechanical Royalties (US)
If you are in the US, you will need a publisher, admin publishing company or royalty collections company to collect your mechanical royalties for you. If you are published, your publisher will register your music and collect and pay for you.
If you are not published you can either sign up to admin publishing company to collect your mechanical income such as Kobalt, Tunecore Publishing, Sentric Music and SongTrust (who I personally recommend).
They will collect your mechanicals for a 10-15% admin fee and you still retain ownership of your publishing. Alternately, you can register yourself as a ‘publishing company’ with ASCAP and with just your mailing address, email address, and US tax ID number.
Mechanical Royalties (UK)
Performance Royalties US
If you are based in the US you need to register with one of the PRO's, either ASCAP, BMI, or SESAC to collect your performance royalties. Which one depends on your preference, they all offer similar deals, the two most popular being ASCAP and BMI.
TIP: If you play live, it's important you register your live sets with your PRO. This means uploading your track list to their system, so they can track your public performance to collect your royalties generated. Even a support act on tour can make thousands of dollars.
Performance Royalties UK
If you are based in the UK, you need to register with PRS to collect your performance royalties. As mentioned, they work closely with MCPS and once you have registered with both companies, you can collect both your mechanicals and performance income from PRS.
Like the US, if you play your own music live, or you DJ and play your music in your sets, it is important you register your live sets with PRS. Once they have your live set in the database for the shows you played, you can collect your performance royalties generated.
Performance Royalties Internationally
If you are outside the US, Canada, or UK, and your country supports music copyright, you can find your PRO on the Wikipedia page.
If your music is featured in a TV show, film, ad commercial, trailer or video game, they require a sync licence. You get paid directly from the TV studio, advertising producers, or film production company, or games company.
As with master recording license, typically you will have a sync agent acting as an intermediacy between you and the studio who will handle the paperwork for a small fee.
They will usually handle both the master and composition license fee, often as a ‘all-in-deal’ with the fee being spit evenly between the master and sync licence.
If you want to find out more about how to run and grow your record label successfully and access to a host of marketing and distribution tools then you may want to join The Label Machine and get access to more content like this for running your music career. Just check the link below.
Available in all major podcasting platforms.
DOWNLOAD THE RECORD LABEL STRUCTURE TEMPLATE