Ultimate Guide to Understanding Song Copyrights and Royalties

Music is not just a source of joy and inspiration; it's also a business. As a musician, songwriter, or composer, you're not only creating art but also potential revenue streams. One of the fundamental aspects of earning from your musical creations is understanding music royalties. These royalties are payments you receive for the use and reproduction of your music. In this blog post, we'll break down the types of copyrights and how they generate royalties.

Quick look at the Financial of Music Creators

Music royalties play a pivotal role in the livelihood of music creators. To highlight their importance, let's take a glance at some eye-opening figures:

In 2022, ASCAP and BMI, two of the largest royalty collection societies in the U.S., distributed a staggering $1.388 billion and $1.471 billion, respectively, in music royalties to songwriters, artists, and publishers. And this is just a portion of the entire global royalty landscape.

Breaking Down the Song Copyrights and Royalties

Songs are made up of 2 copyrights and these are: master recording and composition.

To make sure you are well informed and I don’t want you to get confused when reading other articles/blogs or watching videos, master recording is also known as sound recording and composition rights is known as publishing rights. So you will hear or read master/sound recording rights or composition rights/publishing rights go hand in hand.

These two copyrights generate various types of royalties. Below is a list of the names of all the royalties under their respective copyrights. I've also included a flow chart for your reference. (Click to enlarge)

Royalty Flow Chart

Master Recording

Neighboring Royalties

Neighboring royalties are generated due to neighboring rights. Neighboring rights royalties' income comes from terrestrial (broadcast) sources, online platforms (like Pandora), satellite radio (such as SirusXM), cable TV channels, establishments incorporating ambient music (such as restaurants, hotels, and stores), live performance venues, and a range of digital media platforms.

The United States does not recognize neighboring rights. This means when a song is performed publicly in a concert or bar, or played on radio or TV, the record label and performers on the song do not receive neighboring royalties.

Digital Performance Royalties

The United States does not recognize neighboring rights however, on digital platforms like Pandora or SiriusXM, the U.S. does remit payments to performers, this is called digital performance royalties. Digital Performance Royalties are earned from non-interactive streaming platforms like Pandora.

Recording Royalties

These are earned when your music's sound recording is digitally reproduced, streamed, downloaded, or sold. Both record labels and independent artists can collect these royalties, depending on ownership rights.

Sync Royalties

Earned from the synchronization of your music to videos on films, TV shows, commercials, video games.

Micro-Sync Royalties

These synchronization royalties are earned from your music being used in videos on platforms like Instagram, TikTok, and YouTube.

Composition Copyright Royalties

Performance Royalties

Earned when your composition is publicly performed. This includes live performances, radio airplay, and streaming on platforms like Spotify. Performance royalties form two types of share. Writer’s Share and Publisher’s Share (Writer's Share & Publisher's Share Explained)

Mechanical Royalties

Owed to you when your composition is reproduced physically (vinyl, CD) or digitally downloaded or streamed. Mechanical royalties also form Publisher's Share.

Sync Royalties

Earned from the synchronization of your music to videos on films, TV shows, commercials, video games.

Micro-Sync Royalties

These synchronization royalties are earned from your music being used in videos on platforms like Instagram, TikTok, and YouTube.

Print Royalties

Generated from the sale of printed sheet music. While not as lucrative as before, it can still be significant, especially in certain genres.

Who's Entitled to These Royalties

Understanding the copyright is essential to know all the copyright owners of a song and know the royalty split between all. Usually, the artist and their record label owns the master recording rights so they are owed the royalties generated from master recordings. How much each of them own depends on the deal the artist has with the record label. An independent artist would own everything of the master recordings.

The composition right is owned by every single person who wrote the lyrics and composed the underlying music in the song. The split between them is done evenly and fairly. Again, all of this depends on the agreement made between the songwriters and the artist. When buying beats from producers online, make sure to read the beat license contract.

One misconception artists have is that they own 100% of the Writer’s Share because they wrote the lyrics. That’s not what the “Writer’s Share” term means. Anyone who writes the lyrics and melody, chords and drums of the music is a writer and they are entitled to the Writer’s Share.

I want to add one last subtle but important clarification in this post. All these royalties are generated because of their rights. For example, performance rights generate performance royalties, neighboring rights generate neighboring royalties and so on. Royalties are not rights. Royalties are payments made to artists due to their song being used and rights are ownership and legal control over the song by the artist.

In summary, a song has two copyrights, master recording and composition. Each copyright generates different royalties under them. Master recording copyright generates neighboring (not in the U.S), digital performance, recording and synchronization royalties. Composition copyright generates performance, mechanical, synchronization and print royalties. All of these royalties are split between all the copyright owners of the song. On the composition side, the copyright owners of the song are the people who worked on the lyrics and underlying music itself (melodies, chords, drum etc). On the master recording side, the copyright owners of the song are the featured artists, record label and the non-featured artists (backup musicians and session players).