Understanding Music Royalties Pt. 2: Mechanicals, Publishing and Sync

In the second installment of his series on music royalties, Dubspot contributor Michael Emenau tackles the big question of how to navigate the convoluted world of mechanicals and publishing.

blog_graphics_may_royalties2_header_finalIn my previous article I started a discussion on music royalties focusing on performance royalties and Performing Rights Organizations.  In this article I will be looking more deeply into other potential revenue streams you as a songwriter and performing artist can capitalize on.  I will also be discussing how the mysterious world of publishing fits into this equation.

In the Beginning…

Once you write a song you have the right to 100% of any revenue generated. The song is automatically copyrighted once it is in a complete form.  If you wish to sue someone for copyright infringement you must first have registered the song at the Library of Congress ($35 per group submission), preferably before the songs are first released in the public domain (web site, iTunes, CD, Vinyl, etc).  On a personal note, I often register my work, especially if I know it will be on TV or in movies, but for more obscure tracks I make, I tend not to bother as the $35 fee doesn’t seem to be worth it.  I have had my tracks show up on commercially released compilations without my consent or me receiving royalties. Unfortunately I felt it was not worth suing over as the cost of suing an independent record label in Austria or South Korea is much greater than any amount I would ever be compensated. If a track I made showed up on American Idol, that would be a different (and rather surprising) matter. This is by no means legal advice and should be taken as anecdotal.

Writer/Publisher Mechanical Royalties

Mechanical royalties are royalties paid to a publisher whenever a copy of one of the songs the publisher represents is sold. The publisher then pays the composer a share of the royalty, typically a 50/50 split. To further clarify; every time a song is sold as a CD, downloaded on a digital music retail site, or streamed through services like Spotify and Rdio, you are owed a mechanical royalty which should be collected by the publisher and paid (50%) to the composer. If you are signed with a record label, the statutory rate (2009) is 9.1 cents per track or 1.75 cents per minute of playing time or fraction thereof, whichever is larger, for both physical and permanent digital downloads. Ringtones are 24 cents. If you independently sell your music (ie: Tunecore, iTunes, personal website, CD’s from shows, etc) you are acting as the songwriter, performing artist and publisher so you keep all the money.

Recording-artist mechanical royalties

Artists are paid royalties usually somewhere between 8% and 25% of the suggested retail price of the recording. There are  many deductions the labels make, most of which have to do with the production and distribution of physical product (which for the most part no longer exists, but interestingly the fees do). The labels also take out  all the recoupable costs including recording, videos, promotion etc. Again, if you are self-producing and have no publisher, you are in theory paying yourself the recording artist mechanicals.

Synchronization rights and royalties

A music synchronization license is a music license that allows the holder to “sync” music to some kind of media output. Sync licenses are used for TV shows and movies, but can also be used for any kind of visual paired with sound.  It is called this because you are “synchronizing” the recording to a film, TV commercial, or spoken voice-over.  The synchronization royalty is paid to songwriters and publishers (via a PRO: ASCAP/BMI/SESAC) for use of a song as background music for a movie, TV show, or commercial.  A sync fee is usually charged as well which is a is a one-time fee.  The songwriter and publisher will also receive mechanical royalties from physical and digital sales of a soundtrack. If a specific recorded version of a composition is used (ie: your track), you must also get permission from the record company in the form of a “master use” license. This is because most record contracts have a clause where the artist and label split sync fees no matter who actually made the sync deal happen.

There has been a very unfortunate trend in sync licensing the last few years with many companies demanding a 100% flat rate buyout of all your songwriting/publishing rights. This means you give up ownership of your music and any performance royalties go to the TV show/advertisement agency.  This trend is very common in the video game industry.  If you are offered a buyout of your music, my advice is to try and get every dollar you can up front because that’s all you will ever see. I am not implying you should not accept the offer but rather, beware of what you are agreeing to.  Your music may be streaming 18 hours per day at Six Flags and you will never see a dime of those royalties.

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Publishing

The publisher is like your song manager. Their job is to collect all royalties owed to you and they should actively try and place your music in TV, films, advertising, etc.  For this they take a fee of typically 50% of the generated revenue. There are of course pros and cons to having a publisher. The pros being it is in their interest to get your music placed as much as possible; the more money you make, the more they make. They also deal with the arduous and mind-boggling task of revenue collection from organizations worldwide, it really is a full time job to be on top of all publishing revenue sources. If you go without a publisher, you will most likely miss out on revenue unless you only intend to sell your music on your website or negotiate 100% buyouts. The main con is their fee structure so if you use a publisher, make sure they are actively pushing your music. If they are not pushing your music, this leads to the question:

Should I set up my own publishing company?

If you decide to publish yourself, the set up procedure is not so bad.  You will need to pick and clear a name, register with a Performing Rights Organizations and you should set up a business bank account to keep it all legal and above board. If you do go this route I recommend you hire an independent company to administer your publishing. They will take care of all the business of collecting and disbursing the monies that are generated by your songs without actively selling your music (and they charge much less than 50%). These revenue opportunities are very time consuming and easy to miss and I think your time would be better spent developing contacts to sell your music to. And of course, making more music. If you are confident that you are the best person to sell your music, you have solid contacts TV/film/advertisement and you are willing to deal with administration then go for it.

Final note

In case you feel the tone of this article slants towards animosity at record labels and publishers, it is not intentional.  They are easy targets for music creators, but in fact most of my relationships with people in the music business have been very positive.  Publishers and labels play a very important role, and the services they provide are tasks I personally don’t want to have too much to do with.  Most people in the music business are there because they love music, not because they want to make a lot of money or capitalize on us poor struggling artists. The reality is most labels and publishers are in very difficult times and sadly, most will not survive, which means the artists themselves are going to have to be much more on top of the music business.

Now go make some great music, sell it with pride and get paid properly.


Michael Emenau a.k.a. MNO has worked professionally as a musician (vibraphone, percussion, laptop), producer, remixer and arranger for 25 years, playing such diverse genres as, jazz, rock, drum’n’bass, salsa, techno, country, Hindustani, gospel, baroque and orchestral music. He has recorded on over 150 CDs, composed music for eight films, toured internationally, and lived on three continents. Michael was the house studio mallet percussionist for Sony Records (Japan) in the 90s, was a founding member of the award winning “Jazz Mafia” as well as working as a producer/remixer for Six Degrees Records in San Francisco, arranged and produced contemporary multimedia productions of the 16th-century composer Henry Purcell in Paris and is now writing a musical based on the life of Dionysus and dividing his time between Montreal and New York.


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