Song and Royalty Breakdown
When dealing with the composition or publishing portion of a copyright there are two main types of royalties: Public Performance and Mechanical. All of the money collected from the publishing portion of a song is split between the songwriter(s) and the publisher. On the other hand, when dealing with the song recording or master of a song, we deal with Digital Performance and Master Recording Royalties. These are distributed amongst the recording artist(s) and the record label.
The following guide separates the songwriter and the recording artist as two separate entities because this is how most collection organizations classify the different shares. However, if you are both the songwriter and the recording artist of a song, take into account that you would be receiving royalties from both the composition and the master of your song.
Digital Performance Royalties
Digital performance royalties are dues that are paid to performing artists each time a sound recording is streamed on non-interactive digital streaming services like Pandora, iHeartRadio, SiriusXM, and many others. These services are classified as non-interactive because the individual songs that are played are all chosen based on an algorithm, though stations are selected by the user. This structure is what separates non-interactive streaming services from interactive services such as Spotify or Apple Music, which allow users to select the exact song they prefer and pay the musician through Mechanical Royalties.
Master Recording Royalties
Master Recording or Master-Generated Royalties are exactly what the name entails. They are essentially the payment that recording artists and labels earn when the sound recording is streamed, downloaded, or physically bought. For example, services like Spotify or Apple Music. These royalties are collected by distributors from record stores and streaming platforms and distributed back to the label where they then collect the percentage owed to them and the rest is given to the recording artist.
Public Performance Royalties
Public Performance Royalties are paid by PROs (Performing Rights Organizations) to songwriters and publishers for the use of public broadcasting of their music. For artists to broadcast original or covered music, they must pay a blanket license fee to a PRO. However, this also refers to radios, TV stations, live venues, restaurants, stores, etc. For example, every time that Whitney Houston’s I Will Always Love You plays on the radio, Dolly Parton, along with the publishers of that song, will receive a cut from that play. Dolly Parton gets her share because she is the original songwriter of the music. Because performance royalties are under the composition copyright of the song, the percentage of performance royalties goes to the songwriter and the publisher (if there is a publishing deal at play).
Mechanical Royalties
The Mechanical Royalty is the second half of the copyright associated with the song's composition. A mechanical royalty is a payment owed to the songwriter whenever a copy of their music is made. For example, if a record label or some retailer that sells music (CDs, streams, digital downloads, etc.) wants to use an original song, they need to pay the artist to acquire a mechanical license. These payments are then collected by Collection Agencies or Mechanical Rights Organizations. Then they pay the artist a lump sum of these royalties after a certain amount of time (usually every six months). However, some countries deal with mechanical royalties differently, and they can also be negotiated within terms of contracts with bands, labels, publishers, etc.
All in all, like performance royalties, mechanical royalties go to the songwriter(s). However, a songwriter may have to share these royalties with other band members or a producer that may have been involved in the writing process (all detailed under the copyright of a song). If there is a publishing deal at play, before paying out the shares owed to the songwriter, the publisher will receive a percentage (also known as recoupment) of the mechanical royalties as well.
Synchronization Royalties