Music Royalties 101—Recording Royalties

  in Investor Guides

Feb 10, 2021

The rights for the use of the Sound Recording copyright are called “Recording Rights.” Recording royalties are due whenever music is sold or streamed, performed publicly (with some limitations), or licensed for TV or film. 

(For more detail on how these payments are collected and administered, see the Who Collects What For Who? Article).

Reproduction 

Reproduction royalties (sometimes called “distribution”) are paid when the recording of the song is sold (physically or digitally) or streamed. The royalty is paid for each use. 

Unlike the similar mechanical royalties owed to the composition copyright, the reproduction royalty rate for the sound recording is determined through a negotiation between rightsholders (typically record labels) and service providers or retailers. 

These rates are not disclosed publicly, but they are notably higher than the compulsory rates set for mechanical royalties. Streaming services, for instance, pay over 3.5 times more for their use of the sound recording than for the composition. 

Performance 

Performance royalties are generated for the sound recording whenever the recordings are broadcast over digital or satellite radio services. Unlike songwriters, recording artists in the U.S. do not collect performance royalties when their music is broadcast over traditional radio stations (i.e. using terrestrial-based radio transmitters), or in public venues. They only collect performance royalties for digital/Internet radio and satellite radio. 

This is because the U.S. considers radio a promotional format that helps sell albums. This isn’t the case in other countries. Outside the U.S., recording artists collect what’s called “neighboring rights.” For more detail on this, read the article “What Are Neighboring Rights?

There is a legislative effort underway to change U.S. law to force radio stations to pay a performance royalty for the sound recording, but so far it’s had very little movement or support. 

Synchronization

Synchronization (or “synch”) royalties are owned when a song has been licensed for a TV show, film, ad, and so on. It is a one-time, upfront payment for the right to use the song, and the price is negotiated between the rightsholder and the company licensing the music.

The synch license generally initiates with the composition copyright, negotiating with the song’s publisher. If a specific recording of a song is also used, then a "master use" license is required from the record company for the sound recording.

Because sync licenses are one-time payments, they do not re-occur with use like performance and reproduction royalties. 

READ MORE:

Music Royalties 101—Who Collects What For Who?

Music Royalties 101—Intro to Music Royalties

Music Royalties 101—Intro to Publishing Royalties