Diving Into The Depths Of Music Rights
Music rights – a seemingly complex labyrinth of legalities and terminologies that can initially appear daunting. This article aims to delve deeper into the intricacies of music rights, building upon the foundation set in our previous blog post “A Crash Course in Music Rights (For Sync Licensing)”. For a comprehensive understanding, we recommend reading that article first. In this piece, we’ll unravel the different types of royalties derived from the master rights and copyright, and how these play significant roles in the music licensing landscape.
Master Rights
Master rights pertain to the actual sound recording of a piece of music, and the royalties derived from these rights are typically paid out in three main ways:
1. Master Recording Rights & Royalties
These royalties are paid by streaming platforms, digital stores, and physical distributors (like DistroKid) to the rights controllers/owners. These payments are made for streams, downloads, and physical copies of the track.
For artists working with a label, these royalties are collected by the label, which then pays the rights controllers/owners directly. The agreement between artists and labels can take two forms: a transfer of ownership, where the label gains permanent control over the master recording, or a temporary transfer of control over the master for a specified period of time.
2. Neighbouring Rights
Also known as Digital Performance Rights, these royalties are paid out for non-interactive streaming (like Pandora or SiriusXM), digital radio, and background music in TV shows, retail spaces, or dance events. These rights are managed by organizations like SENA (NL) and SoundExchange (USA), which are interconnected and pay out to each other’s registered rightsholders.
However, it’s worth noting that in Europe, a known case called “RAAP” (more details here) has disrupted payments for TV usage, warranting a separate discussion.
Neighbouring rights are divided into two parts:
Producer’s Share: This half is allocated to the financial producer of the master recording, often referred to as the “producer”. This is frequently claimed by either the record label or the artists. In recent times, as artists often finance their master recordings, they may claim this share or negotiate a fair split with the label. However, claiming this does not negate the artist’s right to claim the other half of the neighbouring rights as a performing artist.
Performers’ Share: This half is for the artists and performers on the master recording. It isn’t split proportionally but rather on a point system. For example, with SENA, every main artist gets 5 points, and every session musician can claim 1 point per played instrument, up to a total of 3 points. However, the main artist always receives at least 50%, and session players cannot claim more than 50% of this share.
3. Sync Rights & Royalties (direct licensing)
These royalties come from placements in movies, TV series, games, commercials, and other media. The controller of the master right (you or your record label) makes agreements directly with the licensor. When signing with a label, artists should establish how royalties are split and who retains control over licensing decisions.
Copyright
Copyright refers to the ownership of the underlying composition or song. The associated royalties are also paid out in three ways:
1. Sync Rights & Royalties (direct licensing)
This process mirrors the master sync royalties. You or your publisher, who controls the copyright, makes the agreements directly with the licensor.
2. Mechanical Rights & Royalties
These royalties are paid by rights organizations like STEMRA (NL) and MLC (USA) whenever a copyrighted work is “copied”. This includes making a physical copy of a CD, selling a download, or even streaming on platforms like Spotify (which creates a temporary copy on the listener’s device). Interestingly, only 10% of Spotify payouts go towards mechanical royalties, with 80% paid on the master side and the remaining 10% to Performance Royalties. Publishers who control copyrights tend to claim all mechanical royalties and pay the artist a predetermined percentage.
3. Performance Rights & Royalties
Paid by Performance Rights Organizations (PROs) such as BUMA (NL) and BMI/ASCAP (USA), these royalties are collected whenever copyrighted work is “broadcasted publicly”. This includes live performances, radio, television, streaming platforms, and music played in businesses and at events. The right to publicly play your work comes with compensation, paid by entities like retail stores, radio stations, music venues, etc., to the artist’s PRO for a license. In the case of a writer working with a publisher, the publisher claims the performance royalties, with 50% paid directly to the writer and the rest distributed according to agreed-upon splits.
Conclusion
The structure of music rights and royalties can indeed appear complex, with various parties staking their claim in the pie. However, understanding this intricate system is crucial to ensure a fair distribution of royalties. The landscape is filled with various deal structures, and knowing your rights and royalties can aid in making informed decisions.
To visualize this information, we’ve made “The Pie Of Music Rights”, showing the rights and royalties in context to each other. With this interactive tool, it might help you understanding the whole “pie”.
