Song Royalties 101

When Eddy and I were discussing the subject of songwriting royalties, it brought back a memory I had back when I was working in a Fine Art Gallery in Los Angeles and a woman brought in a certificate for custom framing…  As I was getting matting and frame samples ready, I could see that it was actually a Publishing Certificate commemorating two million plays (on radio) for the song “Windy” made famous by the group The Association and that she was the writer, Ruthann Friedman.  Being into music and also being a bit curious, I acknowledged that I’d heard the song (who hasn’t - “Everyone knows it’s Windy”) and that I didn’t mean to be rude, but I had to ask…  

“Are you able to live off the royalties from this one song?”

Ms. Friedman smiled like she’s been asked that question a few times before and was very open and gracious with her answer.  She said that she was married with a family and that the song wouldn’t support a group that large, but she added, “…If I was single, living by myself, then yes, it could.”  As I was processing her information, she continued, “Now think about people like Elton John, Sting, Barry Gibb, Billy Joel and others who have twenty, twenty five, thirty songs or more like mine or BIGGER…” We smiled at each other as we both did the accounting in our heads.  It was mind-boggling.

After I looked into song royalties and how they worked, the easiest way to break it down is like this; If you can write songs that get recorded and become hits, THAT’S where you want to be.  If you’re just the recording artist singing another writer’s hit songs, well, it’s not bad but it’s not the “pension for life” you’re looking for in terms of a big dollar return unless you’ve got millions of albums sold and recordings used everywhere in some fashion everyday.  The percentage of what a songwriter makes obviously gets divided when there are co-writers involved.  If you talk to many songwriters, their single biggest frustration is making sure that royalties that are owed to them are properly collected.   Many songwriters see and hear their work being used on a regular basis and know that they’re got going to be compensated for it.

The first thing most songwriters should want to do is find a SONG PUBLISHER who will promote your songs to record labels or artists.  It is the publisher’s job to bring attention to your song and keep track of it once it’s been recorded.  The Publisher also makes sure that you are being paid your royalty for the use of your recorded song with the assistance of a Performance Rights Organization such as ASCAP or BMI.  In exchange for this service, publishers get partial or total ownership of the song copyright, known as TRANSFER or ASSIGNMENT of the copyright to the publisher.  The Publisher then has the ability to license the use of your song for a fee to other artists or for the use in TV shows, movies, commercials, etc.  The fees collected are usually split 50/50 with the songwriter.

Recording Artists/Performers do not get “performance royalties” for songs played on the radio/TV or in bars or restaurants.  SONGWRITERS do.  The only time recording artists get royalties for “public performance” is when the song is played in a “digital arena” such as SATELLITE RADIO (Where listeners can’t choose what song to hear) and the listener is a SUBSCRIBER.  Performers of a song don’t have any control over it.  That goes to the songwriter or publisher.  The record label usually controls an original recording of a hit song.

There are five different types of royalties:

Mechanical licenses and royalties - A mechanical license refers to permissions granted to mechanically reproduce music onto some type of media (CD, DVD, etc.) for public distribution. The music publisher grants permission for the musical composition to be reproduced. The mechanical royalty is paid to the recording artist, songwriter, and publisher based on the number of units sold.

Performance rights and royalties - A performance-rights license allows music to be performed live or broadcast. These licenses typically come in the form of a “blanket license,” which gives the licensee the right to play a particular PRO’s (Performance Rights Organization’s) entire collection in exchange for a set fee. Licenses for use of individual recordings are also available. All-talk radio stations, for example, wouldn’t have the need for a blanket license to play the PRO’s entire collection. The performance royalty is paid to the songwriter and publisher when a song is performed live or on the radio.

Synchronization rights and royalties - A synchronization license is needed for a song to be used in a television program, film, video, commercial, radio, or even an 800 number phone message. It’s called this because you are “synchronizing” the composition, as it’s performed on the audio recording, to a film, TV commercial, or spoken voice-over. If a specific recorded version of a composition is used, you must also get permission from the record company in the form of a “master use” license. The synchronization royalty is paid to songwriters and publishers for use of a song used as background music for a movie, TV show, or commercial.

Print rights and royalties - This is a royalty paid to songwriters and publishers based on sales of printed sheet music.

Internet Royalties

With the explosion of the Internet and the ease of downloading music onto your computer, a whole new royalty arena has opened up in recent years. Record companies usually treat downloads as “new media/technology,” which means they can reduce the royalty by 20% to 50%. This means that rather than paying artists a 10% royalty on recording sales, they can pay them a 5% to 8% rate when their song is downloaded from the Internet. In the case of downloaded music, although there is no packaging expense, many record company contracts still state that the 25% packaging fee will be deducted. An alternative to this royalty payment method also exists for Internet music sales. While it is most often used by Internet record labels, it may still catch on as recording artists begin to push harder for it in their contracts. This other method creates an equal split of the net dollars made on music downloads between the record label and the artist. This net figure is arrived at after the costs have been deducted, including costs of the sale, digital rights management costs, bandwidth fees, transaction fees, mechanical royalties to songwriters/publishers, marketing costs, etc.

Above are the basic building blocks of music royalties and how they work.  For a more complete explanation, read the extremely informative complete article (Portions which were used here) by Lee Ann Obringer at http://entertainment.howstuffworks.com/music-royalties4.htm

Scott Gross is a correspondent for Inside MusiCast based in Tampa.

Comments

[Billy]

Very informative, Scott. I recall reading about songwriter Jimmy Webb, who by the time he turned 19, was a millionaire based on his songwriting royalties. He penned hits for Glen Campbell, "By The Time I Get to Phoenix" and "Wichita Lineman" and also the Fifth Dimension "Up, Up and Away." Jimmy "lived on the royalties" at first without recording the tracks himself in the beginning.

Thanks for the insight!

[eddy]

Amazing! Can you imagine what a writer such as Carol Bayer Sager receives from all of her songs? Incomprehensible!