Royalties: The absolute basics

Recently, I shared my previous article on royalties with a few newbies and realized that some of the definitions were still unclear for those who are new to the game. This is an attempt to clarify some of the basic terms. Here is the 10,000 ft view.

The absolute basics

Each recorded song has two copyrights: one for the song (often referred to as the publishing side), and one for the particular recording of that song (a.ka. the master side).

On each side, there are different royalty streams that fall into three main categories

  • Public performance
  • Reproduction
  • Synchronization
 Composition (Publishing)Sound Recording (Master)
Public performancePerformance royaltiesNeighboring rights
Reproduction/DistributionMechanical licenseReproduction license
SynchronizationSync licenseMaster Use License
Overview of royalty categories and their names for each side.

On the composition side:

  • Public performance –> Performance Royalties
  • Reproduction –> Mechanical licenses
  • Synchronization –> Synchronization (synch) License

On the master side:

  • Public performance –> Neighboring Rights. In the U.S., we don’t have Neighboring Rights, but we do have something similar for non-interactive streams/satellite radio only, called Digital Performance Royalties.
  • Reproduction –> Reproduction licenses
  • Synchronization –> Master Use Fee (though it is sometimes referred to as sync license too)

Publishing / Composition/ Song Copyright

The underlying musical composition.

E.g: Dolly Parton wrote “I will always love you”.

She owns the composition copyright of that song. She & her publisher own the publishing on the song. Any time someone wants to use that song copyright, they have to pay Dolly and her publisher the correct license. If I do a cover of the song, I need to pay Dolly & her publisher.

A song copyright is split into shares: the writer’s share and the publisher’s share.

What’s a publisher anyway?

Think of it as a marketing & admin person for your compositions. Their job is to find ways to “exploit” your works, i.e. finding ways to make money from your songs, and make sure you get paid for those uses. In return for this hard work, they take a cut: the publisher’s share.

The split between writer and publisher

When you write a song (i.e. create a composition), you automatically own the writer’s share. If you do not have a contract with a publisher, you can be your own publisher and keep the publisher share of your composition’s royalties. So you’d own 100% of the writer share and 100% of the publisher share.

Side note: ASCAP would show that as 50%-50% such that the total of writer and publisher shares equals 100%, while BMI would show that as 100%-100% and the total of writer and publisher shares equals 200%. Each PRO may have slightly different ways saying the same thing, just to keep things interesting 🙂

NOTE: “publishing” is usually referring to the total publishing income, whereas the “publisher share” is the portion of that total which goes to the publisher.

When there’s multiple writers

The total ownership shares always need to add up to 100%. Let’s say you, Xin and Jamila wrote a song together and decide on an equal split. If you each take 33.3%, the total will add up to 99.9%, with 0.1% missing. Therefore somebody needs to take 33.4%. Suppose Xin got the 33.4% and you and Jamila each have 33.3%

Assuming you, Jamila and Xin each have different publishers P1, P2, P3, representing you on this song respectively. Each of your publishers’ shares will be the same as your percentage of the writers’ share. Your publisher will own 33.3% of the publisher’s share, because you own 33.3% of the writer’s share.

In summary:
– You have 33.3% of the writer’s share, your publisher, P1, has 33.3% of the pub share.
– Jamila has 33.3% of the writer’s share, their publisher, P2, has 33.3% of the pub share.
– Xin has 33.4% of the writer’s share, her publisher, P3, has 33.4% of the pub share.

Co-publishing

It is worth noting that not all publishers take 100% of the publisher share. Some allow you to co-publish. I have one publisher who takes 50% of the publisher share. So I get 50% of the publisher share and 100% of the writer share, which ends up being 75% of the publishing revenue.

Now let’s say Xin is a co-publisher on the song such that she splits her publisher’s share 50-50 with them. Her self-publishing entity is X1. The revised split would be:

– You have 33.3% of the writer’s share, your publisher, P1, has 33.3% of the pub share.
– Jamila has 33.3% of the writer’s share, their publisher, P2, has 33.3% of the pub share.
– Xin has 33.4% of the writer’s share, her publisher, P3, has 16.7% of the pub share, and the remaining 16.7% of the publisher share goes to Xin as well, under her publishing entity X1.

Publishing admins

Publishing administrators are a sub-type of publishers. Basically they take care of administrating your catalog for a smaller percentage of the publisher’s share, but they don’t do the active pitching that a typical publisher would do to exploit your songs. They are often most helpful for tracking down royalties in various territories. SongTrust, CDBaby Pro are all examples of publishing admins commonly used by indie artists.

Master / Sound Recording

The particular recording of that composition.

E.g: Whitney Houston did a cover of the song “I Will Always Love You”, which was written by Dolly Parton.

Whitney & her label own that particular recording of the song. But to release that cover, they would have paid Dolly and her publishers to license the song copyright. Whenever Whitney’s recording is used anywhere, she and her label are owed royalties, and so are Dolly and her team. Whitney’s team gets royalties on the master side, while Dolly’s team gets royalties on the publishing side.

Whitney & team don’t get anything if I’m doing a cover of the song, because that would not be derived from their recording — it would only be derived from Dolly’s composition. So I only have to pay Dolly’s team to license the song and cover it.

Now if I were to sample the Whitney version and add it to my cover, then I would need licenses from both Dolly and Whitney’s teams.

Typically, whoever pays for the recording costs would own the master, unless otherwise specified in their agreements. Lead vocalists and producers will typically own a percentage, but this is negotiated in their contracts. There is no default rule per se.

Note: While sound recordings are definitely copyrightable, a lot of times when people use the term “the copyright” they are referring to the underlying composition, not the master recording, even if that recording is copyrighted. I’m not sure why that is, and I still find it confusing too…

The struggle for independent artists, writers, and producers.

Indies are often confused by the convoluted royalty streams that exist, and understandably so. That’s partly because as indies, we often represent both sides and feel overwhelmed with the double amount of work, while those on major labels typically have teams of people dealing with each aspect separately. The system definitely is complicated, but I think the hardest part is to understand how all the different things fit together.

Why me & why free

As a former data nerd, I’m used to untangling a mess of data and I have a knack for condensing complex concepts into a more digestible format. I like to use this superpower to help my fellow indies who want to learn more but can’t find a good source for comprehensive but concise info.

I am well aware that I could create a “masterclass” and charge you lots of money to present this content to you. I am deliberately choosing to share these blogs for free because the indies who can’t afford those courses are the ones who might need this knowledge the most.

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Questions?

Follow up questions are encouraged. Let me know if something in this article still doesn’t quite make sense to you and I will try to clarify. Also, if you have other unrelated questions, I’d be happy to look into them as well. Most of my blogs were inspired by someone asking me a question.

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