Navigating the Dual Copyrights of Music: Understanding Masters and Publishing Rights
Recorded music is complicated, from a legal and business perspective. There are two kinds of copyrights involved (the musical composition or “publishing” or the song, and the sound recording or “master”). This means that for every song that you hear on the radio, there are two sets of rights owners. Typically the record label or independent (or very savvy) artist owns the masters, and the publishing company or independent songwriter owns the publishing. Each copyright is guaranteed five exclusive rights under the U.S. Copyright law, which include the rights to public performance, reproduction (copying), and distribution of the copyrighted works.
This can get complicated, and is often not well understood among much of the music community. Let’s try to simplify it.
The Song
Public Performance Royalties
The musical composition copyright covers the harmony/chord progression, melody, lyrics, and arrangement of a song.
When a song is performed publicly, it generates a public performance royalty. “Public performance” includes live performance (by the songwriter or by any other artist), FM/AM radio play, satellite radio play, Internet streaming, and the use of recorded music as background/overhead music in restaurants, bars, hotels, doctor’s offices, and music venues.
These royalties are collected by one of the performing rights organizations (PROs): BMI, ASCAP, SESAC, Global Music Rights (GMR), and Alltrack. It’s free (BMI) or fairly cheap (ASCAP, $50) to sign up as a songwriter with one of the major PROs, and free to register your original songs. Then, every time a business plays your song or you or someone else plays your song live, you earn a public performance royalty, paid out quarterly by mail or direct deposit.
Mechanical Royalties
Every time the song is reproduced “mechanically” – i.e. every time a recording of the song is copied – the songwriter earns a mechanical royalty (or “mechanicals” for short). In our modern era, mechanical royalties are generated by sales of physical units and permanent digital downloads, streams, and limited downloads (i.e. the time-limited downloads that some streaming services make available for “offline mode”). Mechanicals for physical units are collected by labels or by artists directly as part of the sale price and then must be paid out in accordance with the terms of a record deal or distribution deal at a rate set by the copyright statute and the Copyright Royalty Board. As of January 1, 2024, the statutory mechanical royalty rate is 12.4 cents per copy of the composition sold (and an additional 2.4 cents per minute for songs over 5 minutes in length). This rate also applies to permanent digital downloads, but who collects and pays for those is a little more complicated. The newly created Mechanical Licensing Collective (MLC) collects streaming mechanicals directly from digital streaming services. The MLC has collected hundreds of millions in mechanical royalties since January 2021. It’s free for songwriters to sign up and register or claim their songs on the MLC portal.
When a songwriter has a publishing deal, the publisher will typically collect 50% of the public performance royalties (commonly known as the “publisher’s share”) through direct payout from one of the PROs. The publisher will usually collect 100% of the mechanical royalties on the songwriter’s behalf, and then pay out a portion as determined by the publishing deal.
The Recording
Sales and Streaming
Every stream of a recording generates revenue through a negotiated fee paid out by streaming services, directly to labels or to the distributors used by independent artists. Similarly, every sale of a physical or digital unit generates revenue through a retail sales price – collected by an independent artist or an artist’s label. For an artist with a record deal, these revenues count toward the “artist royalty.” For an independent artist, these revenues represent the majority of the sale price for a physical unit or a download, or the royalties paid out by a distributor such as Tunecore, Distrokid, or CDBaby.
Public Performance
This is a unique area of copyright law because sound recordings are categorically excluded from the standard public performance right that applies to all other kinds of copyrights (including musical compositions, films, and other works of performing art). Instead, a special, very limited type of public performance right was added to the copyright statute in 1995. This allows for a royalty when sound recordings are used in non-interactive digital streams only – i.e. satellite radio, Internet radio, and Internet simulcasts of traditional radio stations. These royalties are collected by SoundExchange, and paid out to both the owners of the sound recording copyrights and the featured artist on the recording. It’s free for rights owners (i.e. labels or independent artists) and for featured artists to sign up for SoundExchange and claim their recordings.
Holon Law Partners, LLP is available to assist recording artists, record labels, songwriters, and publishing companies with registering and claiming from PROs, SoundExchange, and The MLC. We’re also able to help with disputes over royalties, correcting work registrations, and assisting with catalog rights clearance. Contact us at info@holonlaw.com to set up a consultation.
