Music Royalties Explained

The main types of royalties - mechanical, performance and synchronisation - how streaming pays per play, and why payouts per stream are tiny.

Royalties are payments for using music.

Types

Performance royalties: when music is played publicly, broadcast or streamed.
Mechanical royalties: for reproducing compositions, like in streams or CDs.
Synchronisation (sync) fees: for using music in films, ads, games or videos.
Master recording royalties: paid to labels and artists for the recording.

Streaming payouts

Streaming services pay a share of revenue, often around two-thirds, to rights holders.
Money is pooled and divided by share of streams (a “pro-rata” model).
Per-stream payouts are often a fraction of a US cent, and much less in lower-priced markets like India.

Who gets what

Labels, publishers, songwriters and artists split royalties based on contracts. Artists signed to labels may receive a small share after recouping advances.

User-centric model

Some argue for a user-centric model where each subscriber’s money goes only to artists they listen to.

The million streams

A song streamed a million times may earn only a few thousand dollars in total, split among the label, songwriters and artist.

Thinking a viral stream count makes artists rich

Per-stream payouts are tiny and split among many parties.

Key takeaways

Royalties include performance, mechanical and sync fees.
Streaming pays around two-thirds of revenue to rights holders.
Per-stream payouts are very small.
Contracts determine how artists share royalties.