The rights to a song’s Composition, including the music and accompanying lyrics, are typically called “Publishing Rights.”
The three types of publishing royalties are Mechanical royalties, Performance royalties, and Synchronization royalties. In this article, we’ll examine each, how they generate earnings, and how the rates are set. (For more detail on how these payments are collected and administered, see the Who Collects What For Who? Article).
Mechanical royalties refer to the right to reproduce and commercially distribute copyrighted songs in physical and digital formats. The term “mechanical” stems from the first format that reproduced sheet music… player piano rolls, where the composition was “mechanically reproduced” into a product that could be sold. The term has since stuck and is applied even to non-physical formats like downloads and streams (each stream is considered a “mini-sale” of sorts).
Standard mechanical rates are set by a panel of federal judges called the Copyright Royalty Board. These judges set royalty rates and re-evaluate them every five years. To establish a non-bias, the CRB hears from all interested parties during the proceedings, which include:
Songwriters: represented by Nashville Songwriters Association International (NSAI)
Music publishers: represented by the National Music Publishers’ Association (NMPA) and the Association of Independent Music Publishers (AIMP)
Record labels: represented by the Recording Industry Association of America (RIAA)
Digital media and streaming companies: represented by the Digital Media Association (DiMA)
Mechanical royalty rates differ based on the format. The mechanical royalty for physical album sales is 9.1 cents per unit sold. The mechanical royalty for a stream is a percentage of revenue earned by the streaming service and increases over time (11.2% of streaming revenue in 2018, to 15.1% of streaming revenue by 2022.)
A public performance license and royalty payment are necessary whenever a song is played or performed "publicly" (outside of a private circle of family and friends). That means if you’re having a BBQ and you play music through your backyard speakers, you don’t owe a public performance royalty. But if you’re at a BBQ restaurant that is streaming music into the dining area, the restaurant owner does.
Public performance royalties collect from multiple sources. These include:
TV and film broadcasts
Performance rates are negotiated on behalf of songwriters and publishers by Performing Rights Organizations (like ASCAP and BMI) changed with tracking, collecting, and distributing these royalties.
If you’ve ever watched a TV show or commercial, or seen a movie, or streamed a video online, you’ve probably noticed the amount of music they use. Well, the use of this music has a cost, and the payments made for the rights to use music in this way is called a Sync Royalty.
The term “sync” is used because the producers have to pay a license fee to synchronize the songs to their audio or video. This means that any time the marriage of music and visual images occur, a sync license is necessary.
There are no set rates for sync licenses like there are with mechanical and performance royalties. They are fully negotiable with custom rates for each. Factors include the popularity of the song, the production budget, the stature of the artist, and other factors like the timing and prominence of the song in a particular scene.
Sync licenses are one-time payments. So we de-emphasize sync revenue when evaluating a catalog and we suggest others do as well, because there’s no telling if a song that was licensed last year will get licensed again in the following years. It’s different from streaming by fans, which is more predictable and measurable.
(Note, music placed in TV or films also generates a performance royalty when broadcast. This is separate from the original sync license granted to place the music in the movie/show.)