How Song Royalties Work for Spotify, Radio, and Sync

Song royalties are applied differently for music streaming services like Spotify, spins on a radio station, or when the music is used in  movie or television show – called a “sync”. There is nothing simple about how song royalties work, but more than ever before, all stakeholders in the music industry must understand them. Once and for all we explain how song royalties work in infographic form. With this video and infographic, you can visualize and understand how royalties work and you can start taking action to collect the maximum amount on your songs.

Included in this article is a link to download our music metadata spreadsheet template. Watch and read on.

Music Rights are Increasing in Value.

The music you are writing and recording is an awesome asset and it’s increasing in value. Investors are onto this. The past year has seen the biggest ever sell off of music publishing rights. 

At the same time, society is starting to show signs of giving musicians a pay raise. There is talk of raising the price of subscription fees. Governments are trying to help. Like in the UK for example where parliament summoned the music industry in this year to a parliamentary inquiry. They heard from labels, music services, unions, and musicians, and are putting a lot of pressure on the industry to pay you more for your creations. 

You need to know how song royalties work and you just might discover a pay raise for yourself immediately. 

The video above breaks it down once-and-for-all and explains song royalties and rights in infographic form.

Why You Need to Know About Song Royalties.

There is more money out there for you.

You have more rights than you realize. Your distributor isn’t collecting all the money and neither is your PRO. Do you want to make more money? Do you want to collect it quicker? 

Or maybe somebody else is watching after your business and you’re worried about them short changing you? Either way, I want you to be motivated by all the different ways of making money for musicians. 

You might lose your money forever.

There is a lot of money uncollected, and it ends up in somebody else’s hands. Who gets it? 

Uncollected song royalties are held in suspense for usually 3 years. If uncollected, it’s past the “statute of limitations”, and the holding party usually has to pay it to a government regulated fund, or it’s divided up to that organization’s members – usually “the music industry”. 

Knowing this prevents industry corruption.

Because it will hold people accountable and prevent corruption and exploitation. 

Unfortunately most people in the music industry just don’t know this stuff. And you should never assume people do. It’s not that the industry is outright hiding it from you, though there are some that clearly benefit from your ignorance. But actually I’ve come across many people in this industry, even at the executive level who didn’t take the time to stop and fully understand music rights.

Music Rights Infographic.

I didn’t really feel confident talking about music royalties and rights until I came across an infographic that Royalty Exchange made. 

Watch the video above to see me break this infographic down.

song royalties and music rights infographic band builder academy
Used with permission from RoyaltyExchange.com

Music Royalty Terms Can Be Confusing.

Some see song royalty calculation as extremely complicated. It is, compared to the breakdown of a concert revenue, or selling a t-shirt. But if you memorize the 10 or 12 different terms and understand what they mean, it’s not complicated anymore. 

Glossary of Music Royalties Terminology.

Songsongs have unique titles that have to be exact matches for music rights consideration.
Sound Recordinga recording of the performance of the underlying composition, in which copies are made. also called the “Master Sound Recording” or “Masters”.
Master(s)this term is interchangeable with “Sound Recording”, usually used to describe ownership.
Compositionunderlying intellectual content, melodies, notes, and lyrics written down or recorded (but not referring to the sound recording) often referred to as “the Publishing side” of a song.
Reproductions / Salesthe sales or streams of “master sound recording” in any format. Usually originating from the music store, passed on to the record label or distributor, and finally accounted to other rightsholders.
Mechanical Rightsthe counterpart to reproductions (above), but on the composition side. When the notes and composition are “mechanized” and sold or streamed in any format, a “mechanical royalty” is paid to the composition rightsholders. (term derived from the old fashioned music box)
Performance Rightsroyalties paid to the songwriters and publishers of the Composition when publicly “performed” on radio, TV, stores, restaurants, and other public places. Equal amounts are paid to the Sound Recording and Composition rightsholders. Composition royalties are paid through a PRO (performance rights organization), Master Sound Recording royalties are paid through a CMO (collective management organization).
SynchronizationAlso called “Sync”. When motion picture is played in “synchronization” with music a royalty is paid. 50% to the owner(s) of the Master Sound Recording, and 50% to the owner(s) of the Composition.
CopyrightA legal right created by the law of a country that grants the creator of an original work exclusive rights for its use and distribution for a limited time. Every song has two copyrights – The Master Sound Recording and the Composition.
Rightsholdersany person or party that has a signed agreement into the rights of the song, sound recording, or composition. Musicians, songwriters, record labels, publishers, publishing administrators, and sometimes producers are examples of rightsholders.

Music Metadata Spreadsheet Template

To start documenting who is entitled to any song royalties and rights for your music, I recommend you fill out a music metadata spreadsheet. Here is free download of our metadata spreadsheet template.

Two Income Streams Musicians are Likely Missing.

1. The Mechanical Licensing Collective.

Remember mechanical rights are on the composition (pub) side. This brand new U.S. government regulated entity was formed in 2021 and received a 424 million dollar settlement with Spotify, Apple, Amazon and 15 other DSPs. 

This is your money. The major labels already got theirs a long time ago.

You may be able to collect “unmatched mechanical royalties derived from US music consumers” from music streaming services. Major music publishers have collected their US mechanical royalties directly with the music services. But if you were self published or your publisher left US mechanical royalties uncollected, or your digital distributor did not collect them on your behalf, then they are waiting for you to collect them here.

SongTrust can help you collect these royalties for a fee, or you can register to collect them directly from the MLC  Learn More Here

Link to MLC Payouts Spreadsheet 

2. Neighboring Rights Song Royalties.

This type of performance royalty is collected by CMO’s. CMO’s collect master performance royalties (neighboring rights) from TV/radio broadcasters, clubs, restaurants, and many other sources.

In the US, SoundExchange is the CMO and collects from non-interactive streaming radio services like SiriusXM, Pandora, iHeart, Live365, etc. Also terrestrial radio stations that stream online.

CMO’s (Collective Management Organizations) go by various names in each country. Register with the one in your country to collect your Neighboring Rights (master performance royalties).

Note: Songtrust, Audium, CDBaby Pro, and PRO’s cannot collect this money. These organizations collect “publishing” or “composition” revenue. Neighboring Rights are on the “master sound recording” side.

Here is a list of global music CMO’s by country.

 https://www.soundexchange.com/about/international-partners/.

For example, in France, self releasing artists have to register with one CMO as the performer, and with another CMO as the rights owner. In the UK, there’s just one – it’s called PPL. And PPL collects on behalf of both the Performer and the Rights Owner.

But if you’re in Ireland, you’ve got to register the Performer side with RAAP, and you’ve got to register as the Rights Owner with PPI. So some territories are like that, where you have to register separately for the Performer and the Rights Owner.

And in the US, SoundExchange is your one and only source to collect master performance royalties.

How To Implement Music Royalty Collection.

Now that you are empowered with this information, there is a lot of work to be done to collect it. And bad news, there is not ONE service that can just do it all for you. You may have to register with 4 or 5 different services to collect 100% of your song royalties.

But just the act of registering your songs, sets you up for more future earnings. Registration cuts down on your music going into “suspense” or garnished by the major agencies after 3 years. So registration is half the battle.

Total Music Royalty Collection.

Please see this blog post to learn how to collect all of your royalties.

What if I Still Don’t Understand?


If you don’t understand the infographic, watch the video again. Plugin a real world royalty example and follow the flow of each royalty to each rightsholder. In fact, inside of Band Builder Academy, we provide an example spreadsheet using real world examples of how royalties flow for different uses.

If you’re a self-releasing artist, you should control or own all of these rights. You’re the rightsholder. If you had a co-writer, other musician, producer, or another label involved, then they are also rightsholders and probably have some collection rights somewhere in the process. 

There are very few gray areas. Royalties are always based on formulas. There is always a finite answer.

You should also consider joining Band Builder Academy where we further explain this and have an active and supportive community of artists, managers, and record labels. There is no question that has gone unanswered.

Don’t forget to download my free metadata spreadsheet here.

Discuss

Let’s hear your thoughts and questions about song royalties and rights in the comments below.

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