Who collects my royalties?

Royalties are collected depending on the nature and source of the revenues. There are four (4) potential types of royalties in the music recording and music publishing industry:

(1) Mechanical Royalties: Domestic (US) mechanical royalties are collected by domestic record companies for records sold. Foreign mechanical royalties are collected from foreign Performance Rights Organization (“PRO”) by sub-publisher(s) for records sold in their territory.

(2) Performance Royalties: Domestic (US) performance royalties are collected by one of the three main Performance Rights Organization: (1) ASCAP; (2) BMI; and (3) SESAC. These PRO’s issue blanket licenses to music users for publicly performing their songs in the operation of their businesses and broadcasts. To ensure prompt and timely payment of performance income from a PRO, each songwriter and music publisher must first join as a member and properly register their songs and current whereabouts.

Foreign performance royalties are collected by foreign, government-owned PRO’s. To ensure prompt and timely payment of performance income from a foreign PRO, each songwriter and music publisher should enter into a “sub-publishing” agreement and properly register their songs and current whereabouts with the sub-publisher in each territory their songs are performed. The foreign performance societies contact each sub-publisher in their territory and request they designate an agent for the performance rights in all their songs. They then contact the users of those songs in their territory (e.g. local radio stations, nightclubs, TV, etc.), and grant them performance licenses to use all the songs of all the sub-publishers they represent. The foreign PRO’s then collect and pay the publisher’s share of performance income to sub-publishers, and pay the writer‘s share to one of the American PRO’s (ASCAP, BMI or SESAC), which then pays the artist. If there is no foreign sub-publishers, the publisher’s share eventually is paid to the US music publisher via one of the American PRO’s, but this process takes much longer.

(3) Synchronization Fees: Synchronization fees are collected by the song writer and/or music publisher that grants a synchronization license to users or broadcasters of the songs, which then create a derivative audiovisual work in the form of movies, TV programs, commercials, etc.

(4) Print Music Income: Print music income is collected by the song writer and/or music publisher that grants a print music license to music printers which then prints sheet music or folios.

Case Studies: Royalty Collection in the Music Industry

Case Study 1: Mechanical Royalties

John, a singer-songwriter, signs a record deal with a domestic record company in the United States. As his records are sold, the domestic record company collects mechanical royalties on his behalf.

Additionally, when his records are sold in foreign territories, sub-publishers in those regions collect foreign mechanical royalties and remit them to John’s domestic record company.

Case Study 2: Performance Royalties

Sarah, a music artist, joins a Performance Rights Organization (PRO) like ASCAP, BMI, or SESAC. These PROs issue blanket licenses to music users, such as radio stations and TV networks, for the public performance of their songs.

Whenever Sarah’s songs are publicly performed in the United States, the PRO collects performance royalties and distributes them to Sarah as the songwriter and her music publisher.

Case Study 3: Foreign Performance Royalties

Alex, a songwriter and music publisher, enters into a sub-publishing agreement with a foreign Performance Rights Organization. This allows the foreign PRO to collect performance royalties when Alex’s songs are performed in their territory.

The foreign PRO contacts local music users, like radio stations and nightclubs, and grants them performance licenses for all the songs represented by sub-publishers. The foreign PRO then pays the publisher’s share of performance income to the sub-publisher, who further distributes it to Alex.

(Reprinted with permission of Ruben Salazar, Esq.)