Mechanical Royalties: What Are They, How Do I Get Mine?
In this continuation of a series on music copyrights and royalties, Disc Makers’ CEO Tony van Veen here breaks down how mechanical royalties are different than other music royalties, and how artists can harness the revenue generated by them.
Guest post by Tony van Veen of the Disc Makers Blog
In our fourth video about music copyrights and royalties, Disc Makers’ CEO Tony van Veen discusses mechanical royalties — the money that gets paid to the songwriter or publisher for the “reproduction of your song.”
If you’ve been following this series, you’re aware of the two basic rights to a song: the sound recording and the composition (or publishing). Sound recording royalties go to the owner of the recording — the artist or label — while mechanical royalties go to the songwriter or publisher. Mechanical royalties are frequently the main source of royalty income for a successful songwriter.
Let’s start by restating the basics: For you to collect mechanical royalties, you need to own the right to the composition of a song, aka the publishing. That means that you need to be the songwriter or publisher. In legalese, that mechanical royalty is generated by “the reproduction of your music in mechanical or virtual form,” or, in other words, whenever CDs are manufactured, downloads are purchased, or your songs are streamed on-demand.
If you are the songwriter and the performing artist, you get to collect both the sound recording and the mechanical royalties. If someone else records your song, they, as the recording artist, own and can collect the sound recording royalty (because it’s their recording) and you collect the mechanical royalty because you own the composition.
And here is the power of owning the composition: you collect a piece of not just this particular recording by this one artist that is streamed or sold; you collect a piece of every artist recording your song, every version, every sale, every single play. If your song becomes popular enough that other artists want to record their own versions, those mechanical royalties can add up over time. This ongoing royalty stream is why there has been a feeding frenzy of publishing companies buying up song rights from publishers and famous songwriter over the past couple of years.
I addressed registering your copyright with the US Copyright office in an earlier video — but how can you make sure the industry knows you own that composition so they can pay you?
You could do this all yourself, but I can assure you that’s the WRONG approach. You’d have to affiliate yourself and register your songs directly with all the international collection societies and you’d need to hire a small army of translators to do so in dozens of languages. So let’s just forget about trying that.
Work with a publishing administrator
What’s the alternative? Sign up with a publishing administrator. A publishing administrator functions like a publisher, but you usually retain all your intellectual property rights while they take a modest commission of your royalties. It’s an affordable, sensible way to go if you’re an independent songwriter. One prominent publishing administrator is SongTrust, which is used by CD Baby for their CD Baby Pro service. Other distributors may have their own publishing administration service.
Here’s an example of how it works. If you own your compositions and distribute your music through CD Baby’s Pro service, they — through their affiliate SongTrust — will make sure your composition is registered with your performance rights organization (ASCAP, BMI, SESAC) as well as with all the streaming sites and other entities. This ensures that, whenever there are mechanicals to be paid, those entities can find and pay your publishing administrator. Then, the administrator deposits your royalties right into your CD Baby account.
How much do mechanical royalties pay?
In the United States, for physical CD, vinyl, and download sales, the mechanical royalty is 9.1 cents per reproduced “copy” of that song. And it can be a bit more if your song is longer than five minutes.
So, if someone covers one of your songs and they manufacture 1,000 CDs — they owe you $91 (1,000 x 9.1 cents), regardless of whether those CDs ever get purchased by customers. If they sell 100 downloads of your song, they owe you $9.10 (100 x 9.1 cents).
Mechanical royalty rates for interactive, on-demand streams through Spotify, Amazon, and the like are a bit murkier (and FAR lower than 9.1¢ per play). However, what they lack in size they can make up in volume since streaming mechanicals are generated with every LISTEN, as opposed to every sale.
While I can’t give you an easy rate calculation for the mechanical royalty rate on interactive streaming, on average, for every $10 your sound recording has generated on Spotify, there could be an additional $1.50 or so owed to you in (uncollected) mechanical royalties.
Now here’s what important: If you distribute your music through your distributor’s “standard” distribution service, this money will never be paid to you! To get your streaming mechanicals, you need to have a publishing administrator, which you can get by signing up for your distributor’s pub admin service.
By the way, you are owed a mechanical royalty if someone else records and releases your song, but you also get it for the sales of your music on your own albums. In the US, if you sell physical product or downloads, the distributors (or iTunes or Amazon) will pay you the mechanical royalty as part of the net payment for the sale of the CD or MP3 while the streaming companies will pay it to your publishing administrator, who will pay you. But in many countries outside the US, mechanical royalties are set aside by the retailer or streaming platform to be paid to collection societies who then distribute those royalties to publishers and writers.
But I’m an ASCAP/BMI/SESAC member — don’t they collect mechanicals for me?
Nope. PROs only collect performance royalties, not mechanical royalties. You need to be a member of a PRO, but you also need a publishing administrator to get those mechanicals.
So how do I actually get paid?
As I mentioned before, you need a publishing administrator. The easiest thing to do is to release your music through a digital distributor and sign up for that service. You also need to make sure you’re a member of a PRO. If you use your distributor as your publishing administrator, they will make sure your music is registered and they will collect your payments and deposit them right into your account. Or, if you don’t want to do it with your distributor, you can sign up directly with a publishing administrator like SongTrust.
There’s quite a bit more nuance to collecting mechanical royalties, but this is a series about the basics of music copyrights and royalties, so that’s as far as I’m gonna go.
In my next video, I’ll discuss public performance royalties, the PROs who collect them, and how you’re probably not getting all you can collect.
Tony van Veen is the CEO of DIY Media Group, the parent company of Disc Makers, Merchly, and BookBaby. As a college student, he played in indie bands, created his own LPs, cassettes, and t-shirts, and sold them at shows. Today, he collects CDs, vinyl LPs, and concert t-shirts to support the artists he loves.