by Joyce V Harrison

Created on: December 28, 2010   Last Updated: December 31, 2010

Your royalties as an artist are primarily determined by the terms of your contract with a music label, but also by who owns the copyright of the song and the recording. One thing for sure: royalties can be very confusing.

No label? You still receive royalties on sales of your own recordings (except you call them profits if you collect yourself at gigs) as well as royalties for public performances (including radio, television, and film soundtracks) if you’re also the songwriter and/or publisher.

Performance Royalties

Three performance rights organizations (PRO) in the U.S., representing songwriters and publishers, collect performance royalties: ASCAP, BMI and SESAC. Each PRO licenses songs and uses its own survey method to track performances. If you have a big hit that makes the charts, you can expect to receive a good size check in the mail for domestic performances, as well as separate mailings for foreign performances. If your track is played occasionally on a small radio station for instance, you will likely get nada in performance royalties.

Mechanical Royalties

Mechanical royalties are strictly related to sales of your recording. You can sign, as some labels and publishers do, with companies (such as the Harry Fox Agency) that take a commission for collection. Mechanicals go to the label, eventually to share with the artist, and also to the songwriter and the publisher. The rate for the songwriter and publisher is statutory, that is set currently at 9.1 cents per song. If you’re recording a song you didn’t write, you (or your label) need to get a mechanical license from the owner of the song copyright, usually the publisher, who is basically granting you permission to record the song.

New Media Royalties

This area is still very murky and keeping the courts and lobbyists busy. Issues revolve around downloaded songs, streaming music, ring tones, video game tracks, and any other digital method of delivering music. One source of information is the National Association of Record Industry Professionals. If you can understand it, the Digital Performance Right in Sound Recordings Act of 1995 does define some performance compensation for the artist. In 2009, the Copyright Royalty Board set 24 cents for writer/publisher ring tone royalties but that is being appealed.

Synchronization Fees

These fees totally depend on what you negotiate with the film or TV company to use your track. You can read a detailed legal document by attorney Steve Gordon on this subject. 

Advances on Royalties

The trouble with record label contracts is that whatever advances you receive, in other words whatever amounts the label has spent on you as an artist, usually have to be paid back. That’s a good reason to always have an attorney specializing in entertainment to advise you on any contract.

Three Quarter Rate

Some time ago, record labels negotiated deals that gave the artist a three quarter rate in mechanicals if the artist was also the songwriter. Amazingly, this practice is still around.

Best Advice

Music contracts are not only complicated, they can leave you in a financial mess. If you can’t afford to hire an attorney to look out for your interests in any negotiation, you owe it to yourself to become educated on every aspect of the business. A famous quote by author Hunter S. Thompson reads, “The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side."

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