Over the last few months, I have interacted with many artists and a common FAQ I seem to come across is the question of Royalties. Of this group of artists, most seem aware of one one royalty -Mechanicals, which starts off with their hate for streaming sites. Accepted but the conversation of why streaming must be accepted in my true opion is for another time. Let's get with a pre-requisites before we start with royalties.

Prequel to Royalties

Sound Recording

When we are talking about a song, there are usually two or three different things we are talking about. First is the recording of the song, sound recording or the master. This is always done in a studio, be it a massive studio like Abbey Road or AIR studios or at a home studio. The final recorded, mixed and mastered version of a recording that is ready to be shared with the world is what we call the master or sound recording. Sound recordings are not to be confused with compositions.  Artists record sound recordings.

Composition

The next part is the composition. Back in the day when music was only possibly consumed as live music, the songs would be saved as notations in the form of sheet music. If required to copyright, the sheet music would then be copyrighted. Just like we had publishing for books, the same process would be used to publish sheet music. That is where publishing comes from. So, the composition is basically the notation and lyrics in addition if any. [Note: when it comes to copyright, sheet music is only notation and lyrics require a different copyright.]

Artist

Artists record sound recordings. Record labels represent artists.  A band is an artist.  A rapper is an artist.  A singer is an artist.  Typically whatever name is on the album, is the artist. An artist can also be a songwriter but it's not a necessity.

Songwriter

Songwriters write the compositions.  “Diamonds” was written by 4 songwriters: Sia Furler, Benjamin Levin, Mikkel S. Eriksen, and Tor Erik Hermansen.  Publishing companies represent songwriters.

PRO's

Performing Rights Organizations. In India we have the IPRS (Indian Performing Rights Society) and PPL (Phonographics Performance Limited).  These organizations represent songwriters NOT artists.  These are organizations that collect performance royalties. The way these PROs make money to pay their songwriters and publishers royalties is PROs collect money from thousands of venues (radio stations, TV stations, department stores, bars, live venues, etc) by requiring them to purchase “blanket licenses” which gives these venues permission to play music in their establishment.   The PROs then pool all of this money up and divide it amongst all of their songwriters and publishers based on the weight of each song based on frequency of play. The PROs then pay the publishing companies and songwriters. PROs split publishing and songwriter royalties equally.  50/50 is not a deal you negotiate.  This is just how they do it for everyone from Taylor Swift down to you and me, if I were a songwriter. Don't worry about understanding performance royalties, we will get to it in a bit.

What are the 4 kind of royalties?

Finally coming to the point. Before we go forward, I would like to mention that many artists and songwriters here may think that these are not relevant to their genre or their market. Wrong. Songwriter royalties are infact an important source of income for anyone that writes music or writes their own music. This may range from pop to rock  to electronic music. Moving on:

1. Mechanical Royalties

Yes, sure many of you have heard of this phrase. Yea mechanical royalties are the money you get from the sale of your music. One of the most important revenue streams for the successful songwriter comes from mechanical royalties. The term refers to per-unit payments made by the record company to the music publisher for the reproduction of copyrighted musical compositions appearing on CDs, cassette tapes, vinyl albums, and other such manufactured formats. Basically, each time a consumer purchases a sound recording, publishers receive a mechanical royalty payment, which is then passed on to the songwriter. One thing to keep in mind is the musical formats have changed drastically from the initiation of recorded music. The practice has continued with the advent of the digital age, as download providers are required to pay mechanical royalties. Now, since sales of music has been on a decline, with physical sales coming close to close shop, it is very important to know the most popular form of mechnical royalties - streaming mechanical royalties. Streaming Mechanical Royalties - A mechanical royalty is a royalty paid to a songwriter whenever a copy of his or her song is streamed via an interactive service. Interactive Service: The user selects the specific song so a mechanical royalty is due (e.g. Spotify, Wynk, Saavn, Gaana.com etc) Non-Interactive: The user does not select a specific song so only a performance royalty is due (e.g. Pandora, Online radio stations) Whenever a song is streamed via any interactive service (e.g. on Spotify, Saavn, Wynk), a mechanical royalty is owed to the Songwriter/Publisher. The royalty owed varies by digital service and is based on subscriptions and ad revenue. On average, a mechanical stream pays around $.0008 (Rs.0.5) per stream.

2. 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 athe entire collection managed by the particular PRO's 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. The artist and the venue or broadcaster both need to be associated with the PRO to get the royalties due. This usually tends to be a good amount of money that in most cases artists, specially indepedant or undergound miss out on.

3. Sync rights and royalties

A synchronization license is needed for a song to be reproduced onto any visual media be it television program, film, video, commercial, radio online and terrestrial. It is called this because you are "synchronizing" the composition, as it is 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 publishing company for the composition as well as record labelrecord 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. So technically, YouTube requires a sync license too. A publisher (remember, publishers represent songwriters and compositions), could legally get YouTube to remove your cover if they wanted.  But no publishers are really doing this because they realize how great the promotion is.  And, YouTube is now monetizing cover videos and getting the publishers (and songwriters) paid through ad revenue.

4. Print rights and royalties

This is a royalty paid to songwriters and publishers based on sales of printed sheet music. The simplest of them all. Don't get confused here. There are many more royalties that the ARTIST involved in recording may recieve. But that's for us to understand next time!