Songwriting Royalties Explained in Plain English
As much as you enjoy songwriting, at some point you’ll wonder how professional songwriters make money from songwriting. The next question is: how can I make money songwriting? A quick internet search and you’ll rapidly discover the confusing world of songwriting royalties. Once you understand the basics explained in this article, you’ll realize it’s not as crazy as it first appears.
In this article you’ll learn:
- The two types of music royalties,
- Where royalty money comes from,
- How songwriters are paid songwriting royalties,
- How co-writers share songwriting royalties,
- How to collect songwriting royalties when you perform your own songs live,
- Why you can’t “sell” your songs,
- Why a staff songwriting job isn’t the dream career you’d expect
- The truth behind music publishing and record label deals, and
- How music synchronization works, and how songs are placed in television and film.
I’m a songwriter and music teacher, not a lawyer. While the principles are similar, laws are different in every jurisdiction. Consult an entertainment lawyer for specific advice and before you sign any legal agreement.
What are Songwriting Royalties?
Royalties are money generated when your song is performed live in public or broadcast. There are two types of royalties for any professionally recorded song: songwriting royalties and mechanical royalties.
Songwriting royalties are paid when a song is performed live at an event, broadcast on radio or used in a television program or in a movie. Every song you’ve ever heard on the radio or television generated songwriting royalties for the songwriter(s).
Mechanical royalties are paid to the owner of the master recording when a recording is purchased, streamed or placed on a television program or in a movie. The term came from the “mechanical” act of pressing vinyl records). Usually this is whoever paid for the recording, either a record label or an independent artist.
Songwriting Royalties and You
If someone records your song and releases it, they (or their record label) owns the copyright of the recording (Songwriting Copyright). They receive receives mechanical royalties. You, as the songwriter, receive the songwriting royalties.
To legally record a cover song, you purchase a compulsory mechanical license (an agreement to pay the songwriting royalty), for the right to record your version of the song. You can buy one from a mechanical license agency (such as Songtrust, or the Harry Fox Agency in the United States), or directly from the P.R.O. that the songwriter(s) belongs to. You, as the owner of the master recording, receive the mechanical royalties. The original songwriter(s) receive the songwriting royalties from the sales and broadcast of your recording.
What’s a Split Sheet?
Songwriting royalties are paid to the songwriter(s) and split according to an agreement called a Split Sheet, a legal agreement to divide the songwriting royalties. An equal split for all songwriters is the industry standard, but royalties can be any split for each, as long as all songwriters agree.
Why You Need to Prepare Split Sheets for Songwriting Royalties
When you co-write with someone the best practice is to agree to the split before starting to work together. This avoids a disagreement you have to solve later. In most jurisdictions, an email or letter, shared between all songwriters, clearly indicating the percentage split for each songwriter is sufficient.
How Much is My Song Worth?
It depends on the song and what you’ve written. A lyric sheet or a set of lyrics with a melody can be copyrighted, but it has no monetary value. It only has the potential to generate royalties after it’s recorded and released.
A song you’ve written and performed in a social media video gets you attention online, but it doesn’t generate royalties. Social media companies have resisted paying royalties: why pay if we can get it for free?. Some are only recently starting to acknowledge the need to pay music creators. Streaming services also pay songwriting royalties, however Spotify, for example, isn’t diligent in correctly attributing songwriting royalties.
Your song only has immediate potential to make money with royalties when it’s professionally recorded. A song recording can generate royalties through radio airplay or by placing a song in a television program or movie. Until recently, you could only get a professional quality recording by recording in a professional recording studio. Now, radio ready music can be produced with a laptop and less than $1000 of software and microphones.
What Your Songs Are Actually Worth ($)
The short answer is your songs aren’t worth money unless it’s professionally recorded and being performed &/or broadcast, or placed for music synchronization (see below). A song creates royalties when it’s performed or broadcast, that’s where the money is. Otherwise you song only has potential to create royalties, but it’s not worth anything yet. This is why you can’t “sell” your song or song lyrics, it’s not worth money.
Paul Simon and Bob Dylan could sell their music catalogues (all the songs they’d written) because their songs are still generating songwriting royalties. They chose a massive payment instead of annual royalties. Paul Simon reportedly received $250 million US, Bob Dylan was paid $400 million US. You might get there one day, but for now: you’re just not at that level yet….
How Do I Get Songwriting Royalty Payments?
Performing Rights Organizations are companies that collect music licensing fees. They distribute them to songwriters as royalties, usually through quarterly payments to songwriters. Some P.R.O.s require a fee to join. To register a song (usually this is free), with most P.R.O.s is filling out an electronic form. This includes: your name, co-writers, the name of the work and its length and genre.
There is one P.R.O. in each country. A songwriter can only belong to one P.R.O., the one in their country. The United States is an exception, with three P.R.O.s, ASCAP, BMI and SESAC. U.S. songwriters choose to join ASCAP or BMI. SESAC can only be joined by invitation). Reciprocal agreements between the P.R.O. in each country transfers royalty payments to the P.R.O. in a songwriter’s country.
Without a P.R.O., a songwriter would have to request a royalty payment from every possible source throughout the world. Imagine writing an email every year to every radio station everywhere, asking them if they’d played your song, how many times it was broadcast and if they would be so kind as to send you payment for your songwriting royalties.
Look into learning opportunities, some P.R.O.s offer training or conferences for their members. They benefit from your success so it’s in their best interest to help you. Check their website, sign up for their newsletters, look for local and national opportunities they offer to their members.
When Do I Join a Performing Rights Organization to Receive Songwriting Royalties?
As a songwriter, you’re ready to join a Performing Rights Organization when your song is about to be professionally recorded. You’re responsible for registering your song with your P.R.O. so they can track plays and pay you songwriting royalties. If you’ve co-written a song, it’s up to you to ensure that you’re listed as a songwriter when the song is registered with a P.R.O.
Which Performing Rights Organization Should I Join?
Join the P.R.O. in your country. You can only join one P.R.O. They all have agreements so you receive your royalties no matter when in the world your songs generate royalties.
You only get a choice unless you live in the United States, then you choose between ASCAP and BMI. SESAC is invitation only. These two P.R.O.s use different formulas for royalty payouts but it won’t likely make much difference when you’re starting out. Personally, I’d recommend you decide by which offers more help for you to create more opportunities for your songs.
Where Do Music Royalties Come From?
Money is collected from businesses and companies that use or broadcast music. The biggest contributions come from radio stations and television networks. Music festivals and music venues, where live music is performed for a cover charge, also pay an annual (or per event) fee. In some jurisdictions restaurants, fitness clubs & gyms, retail stores and business offices that play background music also pay an annual fee. The Blank Media Tax in many countries also contributes to songwriting royalty payouts.
These fees are paid to the Performance Rights Organization in that country. It’s then distributed as songwriting royalties to member songwriters. A P.R.O. keeps a small percentage of these fees to finance their operations.
Performing Royalties: PRO tips about P.R.O.s… Collection Songwriting Royalties When You Perform Your Own Songs
Check with your P.R.O., when you play a show in a venue that’s paid for a performance license. If there’s a cover charge more than a threshold amount, which varies by country, you can submit your set list to your P.R.O. The payment is divided evenly among all songs represented on your set list to the songwriters of each song. You can get paid to play the gig and collect performing royalties for playing your own songs… legal double dipping!
What’s a Music Publisher?
You are. Any songwriter can be their own music publisher. However, there are also companies that specialize in helping songwriters find ways to “exploit” (create revenue, it’s a good thing in this context) their songs.
Typically a music publishing company receives 50% of a songwriter’s royalties. In exchange, they help the songwriter find more opportunities for their songs to make money. This includes, connecting them with co-writers, and with artists who might perform their song. They provide support from a specialized team and with legal advice. Their goal is to help you exploit your music to make more money for you and their company. Songwriters working with a publishing company expect to make 50% of a much larger amount of royalties, than the 100% of what they might make on their own.
Want to Write for a Music Publisher?
Some music publishers “hire” staff songwriters. It sounds like the songwriter’s dream, sit in a room and get paid to write songs. However, songwriters are really getting a loan called an advance, not a salary. It’s expected that future royalties will be more than a staff songwriter’s advance. If that doesn’t happen the songwriter’s contract won’t be renewed.
What’s a Record Label?
A record label represents performing artists, like a publisher represents songwriters. A record label provides a loan to an artist or band to record their albums and then promote the music. For most record deals the artist / band assigns the record label the mechanical royalties. In exchange the label provides help to increase the income that the artist / band could make on their own. The label’s goal is to generate more money from mechanical licenses than they loan to the artist or band.
Remember those one hit wonder bands that had a smash hit on their debut album? Often they didn’t make back the money they spent. Some artists and bands ended up owing their record labels huge sums of money, so they didn’t get to record a follow up album.
Why Record Deals aren’t a “Deal” for Artists and Bands
With the rise of social media and streaming, the role of a record label changed. Industry revenues have changed and aren’t as stable as they used to be. Record labels are now reluctant to gamble on a developing artist. Labels now wait for artists to prove themselves before they take any interest in them. A band or artist first needs to establish a large social media following, profitably release their music and tour at their own expense. Many successful independent artists and bands aren’t interested in a record label contract because: you have to already be living the dream before a label helps you live the dream.
What’s a Synchronization License?
A Sync License is a legal agreement, a license to “synchronize” the music to the video in a television program or film. The total payment is usually divided equally, with half divided between all songwriters and the other half to the owner of the master recording (the artist or their record label).
License costs vary depending on the budget of the project, and range from a few hundred to thousands or even tens of thousands of dollars. Usually it’s a one time payment, but occasionally agreements include a back end… additional royalties in the future. A cable television show pays less than a network television show. An independent film pays less than a Hollywood blockbuster. A local commercial pays less than a national advertising campaign.
A music supervisor is in charge of placing music in a video project. They choose the songs and ensure that all songwriters and the owners of the master recording agree to terms & payment. There is no set rate for a sync license, payments are negotiated for each project between all copyright holders. All have to agree to the terms and any party can veto an agreement. Best practice is to confirm all copyright holders agree to a possible placement before submitting a song for a project. Consult an entertainment lawyer and do your own due diligence before signing any legal agreement.
Want to Write for Music Sync
With the explosion of media created by networks and streaming services, there is a growing market for sync licensing. It’s a complicated and very competitive market. There is a great deal of money divided between many different players in the industry.
Music supervisors are extremely busy and work within strict deadlines it’s difficult to get their attention. Generally, they have access to more music than time to listen to it. Be sure you understand the basics of sync before you approach a music supervisor. If you act like an amateur or waste their time you won’t get a second chance. They’re too busy!
Your best option is to get to know someone already writing music for sync and then ask them for help. A mentor is worth 1000 blog posts!
Songwriting Royalties: Summary
Professional Rights Organizations in each country collect music licensing fees from broadcasters and businesses that play music. This money is distributed to songwriters as songwriting royalties, which vary depending on when and where the songs were played or broadcast. For example, a spin is worth more on a major market radio station than a college radio station. It’s based on the strength of the radio transmitter, the more people that might’ve heard it, the more a spin is worth in royalties.
Your song only has monetary value if it’s generating royalties. Royalties come from live performances, radio broadcast and synchronization with video. Until then, your song only has the potential to be worth money. Because of royalties, it’s rare for any professional to “sell” a song, or their ownership of a song, for money. Only an amateur songwriter or lyricist will think to offer to “sell” their creations. Professionals co-write a song, where all lyricists / songwriters share in creating it and all share the royalties. The money is in the royalties!
Your Next Steps…
- Write lots and lots of songs!
- Record your best songs.
- Purchase a compulsory mechanical license if you’re planning to professionally record a cover song.
- Complete a Split Sheet when you co-write (do this before you start writing together)
- Join a Professional Rights Organization when you have songs recorded and ready to release (or someone else is recording your song) .
- Register your songs with your P.R.O. (check their website for details).
- Be sure you’re registered as a co-writer and that the split is correct on all your co-writes
- When you perform at any venue that’s purchased a music license, register your set lists so you can collect performance royalties.
- Learn more about Songwriting Royalties… check with your P.R.O. and read the articles below…
Sources and Further Reading
How to Make Money with Music, musicianonamission.com
2 Copyrights in a Song, the Laywer-Drummer.com
How Spotify Pays (or Doesn’t Pay) Songwriters, Nova Southeastern University
Blank Media Tax, wikipedia
Compulsory License, wikipedia
Mechanical License, wikipedia
Music Publisher, wikipedia
Record Label, wikipedia
Performing Rights Organizations
Performing Rights Organisation (wikipedia) an explanation of and listings for P.R.O.s throughout the world.
Canada: SOCAN (Society of Composers, Authors and Music Publishers of Canada)
United Kingdom: PRS (Performing Rights Society)