Types of Royalties and How Your Music Generates Them

This was first published in October 2019; now bringing it back courtesy of the following tweets by Bizzle Osikoya. Read here, here and here.

First off, Are You Familiar With the Types of Royalties There is To Music? 

This is quite a complex topic in the music business but having an idea the different ways through which you can make money from your music is important. At least, knowing the basics.

As a songwriter, performer (recording artist), producer, you’re entitled to one royalty or the other. Royalties are simply payments that artists/songwriters/producers are entitled to for the use/consumption of their intellectual property. The word "royalty" comes from the Middle Ages, when kings (royals) had rights because they owned land on which there were minerals. The person who wanted the minerals would pay for the right to take these minerals out of the land.

Today, royalties are paid for the right to use various types of intellectual property, as noted above. 

According to a 2015 report by Berklee College of Music, 20%-50% of music payments do not make it to their rightful owners. Shocker?

This gave rise to what’s referred to as “Black box of royalties” – royalties that has not been properly distributed to artists due to a faulty metadata or poor communication between services and organizations responsible for tracking the artist’s work. However, when talking royalties, there are often two parties involved:  

• The artist or label (business) that owns the intellectual property (the licenser).

• The person or business that (wants to) use this property (the licensee).

Before we take a deep dive into the crux of this topic -  we have to first get familiar with some terms as it’ll ease understanding going forward.

•Royalty

•Composition

•Songwriter

•Recording artist

•Master recording

•Publisher

•Copyright

•License

Royalty: This is the money owed to you by some party for using/consuming your copyrighted work (music).

Composition: This includes lyrics, melody, notes, chord progression etc. This is usually created by the songwriter, Producer, instrumentalist etc.

Songwriter: A songwriter creates the lyrical or melodic part of the COMPOSITION.

Sound Recording: This is simply the RECORDED VERSION of the COMPOSITION. This should include vocals of the recording artist. It's popularly known as Masters. It is the final product that is typically consumed(listened to); it’s usually in CD or MP3 form.

Publisher: A publisher is the CUSTODIAN of the COMPOSITION of a song. Whether it’s to help the composition be used by creating these opportunities or track royalties for consumption of said composition . Publishers represent songwriters and their compositions. More on this later.

Copyright: A form of PROTECTION that allows you to claim ownership of your original creations, so people can’t use it without your PERMISSION or without LICENSE, whereby you would receive some monetary compensation - in most cases. It involves musical composition, masters etc.

License: If an individual or group want to use your music for any reason, whether it’s the master recording or composition, they will need to seek PERMISSION. So, as the copyright owner, you're paid an upfront and/or royalty for use of your material. You also have some right to refuse the request. Licensing is basically granting permission to another party to use your work. Artists like Gotye is particular about the kind of license he gives off for his music.

So, when discussing Music royalties, two rights are looked into and these rights generate respective Royalties.

- Publishing Rights

- Master rights

Publishing Rights belong to the owner of the music composition. The custodians of these rights are called Publishers.

Master Rights belong to the owner of the masters (the music itself). The owner here could be the artist or the label. It mostly depends on who funded the recording and what the agreements were.

Before we proceed - Artists who double as their own Songwriter will earn royalties for both the composition and performance separately. In simpler context, you’re entitled to distinct royalties as a SONGWRITER and as a PERFORMER (recording artist).

Johnny Drille for instance, who often writes, produces and performs his song will get all royalties though distinctively. Again, the purpose of this writing is because it’s important to understand the different ways one song generates royalties.

Publishing Rights generate the following royalties:

1. Mechanical royalty

2. Public Performance Royalty

3. Sync Royalty

4. Print Royalty

Master Rights generate the following royalties:

1. Streaming royalty

2. Neighbouring Rights Royalty

3. Sync Royalty

While I allow you time to assimilate this, we'll discuss each of these royalties in the coming days.

Read this too while we wait. It concerns royalties as well.