Understanding the Difference Between Mechanical and Performance Royalties

To preface this post, we must point out that the state of music royalties and copyright law in the U.S.—and worldwide—is actually much more complex than a binary royalty system thanks to the advent of digital music services and other ways the music industry has evolved. However, for the purpose of this blog, we will take a look at the two traditional types of royalties singers and songwriters should be aware of: mechanical royalties and performance royalties.

Mechanical Royalties

Mechanical royalties are paid-for reproductions of a musical copyright on a mechanical medium. Traditionally, this meant vinyl records and CDs. This now includes digital downloads and streaming, ringtones and more. The U.S. government sets compulsory rates which must be paid to the songwriter, music publisher, and recording artist on a per-unit basis. The current mechanical royalty rate is set at 9.1 cents for songs that are less than 5 minutes long plus an additional 1.75 cents for each minute longer than 5 minutes.

When it comes to licensing, collecting, and distributing mechanical royalties, the Harry Fox Agency has somewhat of a monopoly in the U.S., which means this type of royalty can be difficult to collect without going through the Harry Fox Agency.

Performance Royalties

Whereas mechanical royalties are collected any time a recording is physically reproduced, performance royalties must be paid any time a licensed song or composition is performed in public. This can include live performances, digital streaming media, music played over the radio, and even live performances that are recorded on physical media.

Performance rights organizations (PROs) like BMI, ASCAP, and SESAC collect the songwriting performance royalties from whomever uses the music and distributes them to the composers and publishers. Another PRO called SoundExchange collects performance royalties for specific recordings and distributes them to recording artists and labels. Digital streaming services like Pandora are actually required to pay mechanical royalties, songwriting performance royalties, and recording performance royalties to various authorities. 

PROs that collect songwriting royalties are limited by the U.S. government in the amount they can negotiate and collect for this royalty type. SoundExchange, on the other hand, is not limited by the government in how much they can negotiate for recording performance royalties and can therefore negotiate freely with music users.

Other Royalties

While mechanical and performance royalties are the two main types of music royalties artists and publishers can collect, there are a few other less significant types of royalties like print and synchronization royalties. Print royalties are paid when the actual music (think sheet music) written by a composer is sold. Synchronization royalties cover the use of musical compositions in mostly visual media (such as DVDs). This would include film scores and music used in movie trailers; the use of the music is usually negotiated for a one-time fee.

The Anderson Firm Serves Top-Notch Entertainers

The legal team at The Anderson Firm understands the nuances of entertainment law and has operated as lead counsel for countless entertainers. We protect and enforce agreements that provide a strong legal framework for key players in the music industry and would be honored to serve you, as well. Reach out today to set up a consultation with our team.

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