Understanding Music Royalties, Rights

In this piece Disc Makers’ CEO Tony van Veen offers a quick crash course in the basics of how royalties and rights work, and what you, as an artist, need to do to ensure you get paid.

Guest post by Tony van Veen of the Disc Makers Blog

Disc Makers’ CEO Tony van Veen has started a new video series aimed at answering your questions about copyrights, how you’re paid for them, and what you need to do to collect your royalties.

Let me start by saying I’m not a lawyer, and frankly, I’m not even a super in-depth music-rights expert. But, I’ve been around music rights for a long time and I’ve found that I’m pretty good at explaining the basics of how rights and royalties work in simple terms. That said, if you find yourself in a thorny music-rights situation, seek advice from an experienced attorney.

Rights vs royalties

One question I’ve gotten multiple times from artists is, “What is the difference between music rights (or copyrights) and royalties?” At its most basic it’s this:

• Music rights are intellectual property (i.e. copyrights) you own for music you have created (or bought)
• Royalties are what others owe you if they want to use the music to which you own the rights

So let’s look at what rights exist for the music you create. Basically, all recorded music contains two copyrights:

1. The rights to the RECORDING (also called the sound recording, or SR). The sound recording covers the actual recording of the music on the release (e.g. Jimi Hendrix’s famous recorded version of “All Along the Watchtower”). This right is usually owned by the record label, or if you’re an independent artist, you own it yourself.

2. The second right is the right to the COMPOSITION. This, as its name indicates, covers the underlying composition — i.e. the song itself, NOT any particular recording of it. In the case of “All Along the Watchtower,” that belongs to Bob Dylan, who wrote the song. In many cases with famous/popular artists, the copyright owner is likely to be a publishing firm. In common industry lingo, this is frequently referred to as the rights to the publishing.

These two rights, the sound recording and publishing, can be monetized in many different ways as your music is distributed, published, and licensed and a number of organizations exist to collect and distribute the royalties that are generated.

These royalties include:

1. Royalties on the sound recording. When a site streams your music or a distributor sells your CD, most of the money you’re paid is because you own the sound recording rights. However, it’s not just streaming companies or distributors who pay for sound recordings. Many other types of companies, and uses, require payment for sound recordings.
2. Publishing royalties. These are the royalties on the underlying composition, also called mechanical royalties. Most uses of music require a mechanical royalty to be paid.
3. Public performance. When your music is performed at a public venue, a public performance royalty is due to the songwriter and is collected by a Performance Rights Organization (or PRO), like ASCAP, BMI, or SESAC.
4. Neighboring rights. When performance rights are paid to songwriters or publishers, the neighboring rights are the public performance royalties that are due to the owner of the sound recording – i.e. artists and labels. However, in the US this gets really tricky, and I’ll delve into this in a later video. In a nutshell, in the US, neighboring rights mostly cover you when your music is played on non-terrestrial radio, like Pandora, or SiriusXM. The organization that collects these is called Sound Exchange. Outside the US, neighboring rights are collected for radio and public performance broadcasts by a Performance Rights Organization.
5. Synchronization rights. This is a royalty or license that is paid to rights-holders whenever your music is used in a video medium, including film, TV, commercials, or games.

Only two rights to your song, but so many uses, and so many royalties? Are you confused yet?

Fear not! In the next few weeks, I’ll delve into each of these topics and discuss how you can get your slice of the pie.

Tony van Veen is the CEO of DIY Media Group, the parent company of Disc Makers, Merchly, and BookBaby. As a college student, he played in indie bands, created his own LPs, cassettes, and t-shirts, and sold them at shows. Today, he collects CDs, vinyl LPs, and concert t-shirts to support the artists he loves.