Music Royalty Fees Explained – The Recording
This blog takes the perspective of a recording artist who either releases music independently or with the assistance of a record label and/or a music publisher.
First off, if you as a recording artist are having your music produced by someone else, you need to ensure you own the recording by way of an agreement in writing with the producer. On its own, simply paying a producer does not mean you own the sound recording copyright. Other names for a recording are sound recording, master recording, and master.
There are different types of record labels ranging from major labels to major indies to independent labels. Record labels act differently from each other but there are some generalizations that can be made about what role a record label takes in the distribution and exploitation of recordings you make and the basis on which they pay you.
What are the Types of Music Recording Royalties?
| Form of Royalty Payment | Details | How are Recording Royalties Paid? | |
| Artist Signed to a Record Label | Independent Recording Artist | ||
| Digital distribution | Streaming platforms, digital downloads | The label collects all this money, and pays the artist a share or royalty based on their written agreement | Artist signs up with a distributor (DistroKid, CD Baby, etc.) who pays the artist streaming royalties based on streams, downloads, etc. |
| Sound recording owner share of neighbouring rights music royalties | Half of the “SoundExchange” music royalties – mostly based on plays from satellite radio stations | The record label collects all this money, and either shares it with the artist or not | Registering with CONNECT or Re:Sound in Canada and/or SoundExchange in the US |
| Master use license for music placements | The right to have the recording be used in a moving picture – half of the overall fee paid to have a song be in a TV show, film, ad, video game, radio airplay etc. | The label collects all this money, and pays the artist a percentage (of the music royalties) based on their written agreement | Direct agreements with companies licensing music to appear in audio visual content. Sometimes an artist will have a sync agent who seeks placements for the artist. In those cases, sync royalties may flow directly to the artist from the companies licensing music or from the agent after the agent takes an agreed-upon commission, and possibly fees / expenses too. |
| Physical distribution | Vinyl | The label generally sells your physical product and pays you a percentage based on their written agreement. For offstage sales and limited sales through your website, you buy the product from your label, and get to sell it at whatever price you want and keep the funds you received from sales without needing to pay the label anything else | You make vinyl yourself and pay all costs to do so and sell on the road or online and retain all sales. Hopefully a profit is made. |
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Music Royalty Fees – Digital Performance Royalties
| Form of Royalty Payments | Details | How Are Digital Performance Royalties Paid? |
| Share of neighbouring rights music royalties for the featured and on-featured artists | The other half of the “SoundExchange” music royalties – mostly based on plays from satellite radio | Sign up with an organization that collects it such as MROC, ACTRA RACS, Re:Sound, or SoundExchange |
More info: https://edwardslaw.ca/blog/neighbouring-rights/
What are the Types of Music Composition Royalties?
Each recording has an underlying composition with music and lyrics. Every recording has one composition, but each composition may have many recordings – performed by the recording artist and others who cover the artist.
Generally, an artist will only have one main recording for each composition but sometimes they have multiple versions – such as a regular version and an acoustic version, or a regular version and a version with a special featured artist.
The first item is what percentage you get as a writer – you need to establish your splits with other creative collaborators.
There are different types of publishers in the music industry from a co-publisher who would co-own the compositions with you, to a publishing administrator who would not have any ownership but would have rights to collect your publishing music royalties. Publishers act differently from each other. The distinction between having a publisher or not includes some generalizations about how publishers operate.
| Form of Royalty Payments | Details | How Are Publishing Royalties Paid? | |
| Writer Signed to a Music Publisher | Independent Self-Published Writer | ||
| Public performance royalties | The right to publicly perform a composition. Performance royalties are triggered when music is played on terrestrial radio, TV, and when publicly performed (in concert by the writer or anyone singing their music). | Writer’s Share of the performance royalties (50% of your entitlement as a writer) – Collected and kept by writer
Publisher’s Share of the performance royalties (50% of your entitlement as a writer) – The publisher (or publishing administrator) is responsible for collecting royalties – they pay the writer based on their written agreement. |
Paid by SOCAN to the writer |
| Mechanical royalties | The right to digitally or physically reproduce the composition. This occurs when music is streamed, downloaded, and used on platforms like TikTok, or when “pressed” into vinyl records and/or CDs. | Mechanical royalties paid by publishing administrator are received from organizations such as CMMRA in Canada and the MLC in the US | The writer can sign up with organizations such as CMMRA in Canada and the MLC in the US to get paid mechanical royalties |
| Synchronization license for music placements | The right to have the composition be used in a moving picture – half of the overall fee paid to have a song be in a TV show, film, ad, video game, etc. | A publishing company would collect the royalties generated and pay to the writer their share based on their publishing deal.
A publishing administrator would generally not collect this money. |
Direct agreements with companies licensing music to appear in audio visual content. Sometimes a writer will have a sync agent who seeks placements for the writer. In those cases, the royalties generated may flow directly to the writer from the companies licensing music or from the agent after taking an agreed-upon commission, and possibly fees / expenses too. |
© 2023 Edwards Creative Law, LLP
Updated to May 9, 2023
Edwards Creative Law is Canada’s Entertainment Law Boutique™, providing legal services to Canadians, and international clients who partner with Canadians, in the Film & Television, Music, Video Games and Apps, Publishing and Literary industries.
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* This blog is for general informational purposes only and is not to be construed as legal advice. Please contact Edwards Creative Law or another lawyer, if you wish to apply these concepts to your specific circumstances.
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