You recorded an album and released it online. Now you just sit back and wait for the checks to roll in, right? If only it were that easy. Last year, a Berklee College of Music report found that between 20-50% of music payments don’t make it to their rightful owners. That’s no big surprise – after all, each recorded song may generate dozens of separate payments, none of which are programmed to automatically reach your bank account without you having to affiliate or register with some kind of service. Especially if you’re an independent artist without a label or publisher, you need to be proactive to collect the payments to which you’re entitled, and that means you need to know which payments are associated with which uses of your songs, and why. At the conclusion of this series of articles, I’m going to provide a flowchart walking you through how to collect all relevant royalty payments. Our first segment covered some basic information and terminology. Now let’s move on to something a little more exciting: getting paid! If you’re a songwriter, then you need to know about the following sources of revenue.
Part Two: Revenues for Songwriters
Performing Rights Organizations
As a songwriter, whenever one of your musical compositions is publicly performed, e.g., on the radio, television, or in clubs or restaurants, then a royalty is generated. Performing rights organizations (PROs) collect royalties on your behalf. The three biggest PROs in the United States are ASCAP, BMI, and SESAC.
All songwriters should join a PRO. That catch is you can only join one. Which one you join is largely a matter of personal preference. The PROs take the revenues they receive from public performances of musical compositions and divide them into two. Half goes to the songwriter directly (the so-called “songwriter’s share”) and half goes to the publishing company (the so-called “publisher’s share”). If you signed a publishing deal, then your publisher will collect the publisher’s share, and then pay you your share of that according to your deal with the publisher. If you are a self-published songwriter, then you need to signal to your PRO that you’re entitled to the both shares. How you do that varies depending on the PRO, but the process is easy across the board – just make sure you’ve done it properly.
Example – Willie Nelson is affiliated as a songwriter with BMI. BMI collects performance royalties whenever any version of the musical composition “Crazy” is played on the radio or in a bar or restaurant. It pays half to Willie’s publishing company, Sony/ATV, which then pays Willie his percentage of the publisher’s share according to his deal with Sony/ATV, and half to Willie Nelson directly as the songwriter. Note that even if it’s Patsy Cline’s famous version that gets played, neither Patsy Cline nor her record label get anything because, in the United States there is no terrestrial broadcast performance right for sound recordings or compensation set aside for artists featured on those sound recordings.
Okay, this is a big one. These are royalties generated through the licensed reproduction of recordings of your musical compositions. In other words, whenever a sound recording embodying your musical composition is manufactured for sale in a CD, downloaded from a music retail site, or streamed from a music-streaming site, you are owed mechanical royalties, also referred to as “mechanicals.” In the United States, the rate you are paid is generally equal to 9.1 cents per reproduced “copy” of the song. This is the “statutory” rate set by Congress, although parties are free to contract at a lower rate.
Your mechanical royalties are paid to you directly if you are self-published, or to your publisher if you have signed a publishing deal. Note that your PRO does not collect mechanical royalties – they only collect performance royalties. The person or entity that has reproduced your composition (e.g., the record label who is releasing the album) pays mechanical royalties. You are owed a mechanical royalty even for sales of your own albums, assuming those albums contain your own songs. If you’re self-releasing, obviously no money has to change hands, but if you are releasing an album through a label, then, unless you agree otherwise, your label must pay mechanicals.
I really don’t want to get too complicated here, but interactive streaming services pay both a mechanical royalty and a performance royalty for use of your musical compositions. Your PRO will collect the performance royalty, but the mechanical royalty goes to a mechanical licensing agent (e.g., Harry Fox Agency), or directly to a major publisher. If you are an independent artist, then there is an extremely good chance that you are not receiving your mechanical license from interactive streams because you are not affiliated with a mechanical licensing agent or a major publisher.
So what can you do? One option is to affiliate with an administrative publishing company, including the publishing programs offered through services like Tunecore, SongTrust, CD Baby, and Audiam. Those companies can also help you to collect foreign mechanical royalties, which is a whole other can of worms but something you should think about if you have global sales and streams.
Example – You are an artist and a songwriter and are releasing a 10-song album through a record label. You wrote all 10 songs. In your record deal, your label agreed to pay you 75% of the statutory rate, i.e., 75% of stat, which is 6.825 cents. For each 10-song album, your label owes you 6.825 cents. If they pressed 1,000 CDs, then they owe you $682.50.
Typically referred to as a “sync license.” If someone wants to use your song in a television show, commercial, or movie, then they need to obtain a synchronization license from you, assuming you own the copyright in the musical composition, or your publisher. The “synchronization” is for them to use the musical composition that is embodied in a sound recording.
This is a simple but relatively complete overview of songwriter revenues. Next time we’ll discuss a few other key terms to know and understand regarding this topic, and maybe get into other types of revenue streams: namely, those that are reserved for artists. Until then, please don’t hesitate to email me your thoughts or questions.
ABOUT THE AUTHOR
John Seay is the founder and principal of The Seay Firm, an entertainment and intellectual property law firm based in Atlanta at the Goat Farm Arts Center. As an artist himself, John has over a decade of experience as a musician, tour manager, and writer. In addition to his work at The Seay Firm, John is also Of Counsel in the entertainment and media practice group in the Nashville office of Loeb & Loeb, one of the largest and most comprehensive entertainment and media practice groups in the world. Before founding The Seay Firm, John worked for Turner Broadcasting. In 2016, John was recognized as a Georgia Super Lawyers Rising Star in Entertainment & Sports Law, a designation only awarded to 2.5% of attorneys in Georgia. John is on the Board of Directors of #weloveatl and serves as a volunteer attorney at Georgia Lawyers for the Arts. He is a graduate of the University of Georgia School of Law. John works exclusively with artists and arts-related businesses. You can read more about his practice via the links below.