Music royalties are a complex subject. From songwriters to recording artists and publishers, so many parties are involved in the creation and ownership of a song. Who then gets paid out every time a listener hits the Spotify play button? Let’s take a closer look at mechanical royalties.
Mechanical Royalties: Definition
Musicians get their revenue from various streams and royalties, such as album sales, performance royalties, and mechanical royalties.
Mechanical royalties are generated each time a musical composition is reproduced. Originally, for each vinyl disc a record label printed, they owed the composition owner or songwriter compensation for mechanically reproducing the song. Today, with digital music, the concept is adapted to include each digital reproduction of the song (download or streaming). However, the original name of the royalties was kept.
Of course, it gets more complicated. Mechanical royalties are approached differently in other countries and there can be contractual agreements between music bands, labels, and publishers about the royalties.
As a content creator, your best bet to license music without worrying about royalties is through royalty free music.
Who Pays and Who Collects Mechanical Royalties?
The organization that obtained the license to reproduce and distribute a given song must pay mechanical royalties. This can be a record label, download, or streaming service. But they don’t pay directly to the songwriter. The collection and distribution of mechanical royalties are overseen by specialized mechanical collection societies. In the US, for instance, this is done by the Harry Fox Agency.
A songwriter whose music is distributed internationally will have to register with the collection agencies in each country their music is available, to collect their mechanical royalties.
The current mechanical royalty rates in the US are 9.1 cents per physical print (CD) or permanent digital download for songs five minutes or less. For longer songs, the rate switches to 1.75 cents per minute or a fraction thereof. In other countries, the rates will be different, and your same song will yield higher or lower rates per unit.
If the songwriter is represented by a publisher, then the latter will register the songwriter’s compositions with the mechanical royalty collection society. The publisher will then receive the mechanical royalties from the collection society, which he will then pay out to the songwriter according to their agreement.
As of January 2021, the non-profit organization The Mechanical Licensing Collective (The MLC) issues blanket licenses to collect mechanical royalties from streaming through digital service providers (DSPs) such as Spotify and Apple Music.
What About Mechanical Royalties for Cover Songs?
Since mechanical royalties are a form of compensation to the original songwriter, artists who cover someone else’s work aren’t eligible for a slice of the pie. The cover artist might get earnings from sales, but the mechanical royalties go to the original songwriter.