Show Me the Money: A Beginner’s Guide to Rights and Royalties

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In the music business, money can be generated from live shows, merchandise sales or, for those still slinging physical copies of their CD, music sales. But what happens off-stage, when the merch tables are put away? Now, more than ever, it’s important for artists to learn about the revenue that comes from the purchase and broadcast (TV, internet, radio) of their music and ensure they’re properly registered to receive the royalties they’re entitled to. Let’s break it down to its simplest form…

There are two copyrights of a song which can receive revenue

  1. Master = the recording of the song: pays the artist that recorded the song and the record label
  2. Composition = the written work: pays the songwriter of the song and publisher

Here are some terms you’ll need to familiarize yourself with as you read through this info:

  1. Owner = The individual(s) or company who owns the masters (recording) of the song. This may be a record label, or, if an artist is not signed by a label, they are the owner of the master.
  2. Performer = Musicians who have performed on recordings (eg. fiddle player, back-up vocalist, guitar player, etc.)
  3. Composer = The individual(s) who are the creator of the written piece of work
  4. Publisher = The company who has rights to the written piece of work

There are four kinds of performance (broadcast) and reproduction royalties to be aware of:

  1. Neighbouring Rights for Owners 
  2. Neighbouring Rights for Performers  
  3. Mechanical Rights for Composers
  4. Performance Royalties for Composer and Publishers

Example: “American Woman”, written by The Guess Who

1. Recorded/performed by The Guess Who and released by label RCA in 1970: The Guess Who perform their own composition and their record label, RCA, owns the recording of this performance

  • The Guess Who will be entitled to performance royalties for composers, as they are the writers of this composition
  • The Guess Who will be entitled to mechanical rights for composers, as they are the wrote the composition on this recording
  • The Guess Who will be entitled to neighbouring rights for performers, as they performed on the master of this specific recording
  • RCA (record label) will be entitled to neighbouring rights for owners as they own the master of this, specific recordin

2. Recorded/performed by Lenny Kravitz, and released by label Virgin in 1999: Lenny performs the composition by The Guess who and his record label, Virgin, owns the recording of this performance

  • The Guess Who will be entitled to performance royalties for composers, as they are the writers of this composition
  • The Guess Who will be entitled to mechanical rights for composers, as they are the wrote the composition on this recording
  • Lenny Kravitz will be entitled to neighbouring rights for performers, as he performed on the master of this specific recording
  • Virgin (record label) will be entitled to neighbouring rights for owners as they own the master of this, specific recording

There are various PROs (performing rights organizations) and CMOs (Collective Management Organizations) who collect for each of these royalty streams:

Neighbouring Rights for Owners

Royalty revenue for the owner of the sound recording (typically the recording artist and/or the label). If you have self-released any music or are signed by a label, but own your master rights for your recordings, you are eligible to register your music and videos.

Connect
Distributes neighboring rights for recording owners in Canada. 

SOPROQ
Distributes neighboring rights for recording owners in Canada.

Neighbouring Rights for Performers

Royalty revenue for the performers on a sound recording.

  • Register with only one of the organizations below
  • For musicians who have performed on any recording, whether the lead vocalist or a session player. Note that the split is different between featured (main artist/band) and non-featured (session players) performers. In Canada, the split is 80/20, and in the U.S., it’s 90/10.
  • Each agency has some reciprocal agreements with other countries, some have more than the others – check their websites for more info

ACTRA-RACS
Distributes neighbouring rights for recording performers in various territories across the globe.

Artisti
Distributes neighbouring rights for recording performers in various territories across the globe.

MROC
Distributes neighbouring rights for recording performers in various territories across the globe.

Important Note: In the U.S. radio broadcasters and public venues need only pay public performance royalties on the composition (which pays only songwriters and publishers), but not the performing artist or the label behind the sound copyright. On digital platforms like SiriusXM, however, the U.S. does pay performers through an entity called SoundExchange.

SoundExchange (U.S. Neighboring Rights)
Collects satellite radio (XM and Sirius), streaming (Pandora), and webcast royalties in the U.S. for owners and featured performers (not non-featured). 

  • Some Canadian stations end up being transmitted across the US so this is relevant and can be lucrative.
  • A W-8BEN must be completed correctly to avoid 30% withholding taxes
  • A self-releasing artist would register as both artist and copyright holder

Important Note: You have the option to sign with Sound Exchange, but the Canadian organizations collecting neighboring rights can collect your US royalties for you.

Mechanical Rights for Composers and Publishers

The royalty earned whenever a recording of a song is reproduced a.k.a. copied. Generated by:

  • MP3 sales via iTunes
  • Sales of CD, vinyl, or other physical copy by a record label
  • Streaming services

CMRRA
Collects mechanical royalties in Canada

SOCAN RR
Collects mechanical royalties in Canada and internationally

Performance Royalties for Composers and Publishers

SOCAN
Distributes worldwide performance royalties (radio/tv etc.) as well as mechanical royalties for Canadian songwriters and publishers under SOCAN RR.

  • If a songwriter is not signed with a publisher, they are the publisher and own 100% of the songs
  • The songwriters get paid when songs are performed at a live performance, even if the song hasn’t been released yet. SOCAN takes 3% of gross ticket sale revenue from all concerts in Canada to pay the songwriters. Make sure songs are registered and live performance info is submitted to SOCAN.

Which organizations should an artist who writes, records, and releases their own music (and is not signed by a publisher or a label) register with to ensure they’re fully covered?

Individuals should only register with ONE organization per royalty stream. Here’s what we recommend for those just getting started:

  1. SOCAN: Covers performance and mechanical royalties for composers in Canada, and internationally
  2. ACTRA-RACS or MROC or Artisti: Covers neighbouring rights for performers in Canada, and internationally, including royalties from SoundExchange
  3. Connect or SOPROQ: Covers neighbouring rights for owners in Canada, and internationally

Last but not least, how do these organizations know who the rights belong to? ISRC Codes!

An ISRC code is like a fingerprint for a recording so when it’s played, it can be traced back to the rights holders such as the composers, publishers, performers, and owners. This should ideally be added to the recorded tracks at the time of mastering, but digital distributors such as CD Baby, DistroKid, and Tunecore will offer ISRC codes for free. ISRC codes are also available through Connect for those who do not obtain them during the mastering or through a distributor. The ISRC codes must be included in the metadata for digital releases, and registered before any physical products are manufactured.

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