Introduction
Do you want a deeper understanding of music royalties and revenue streams like mechanicals, performance royalties, and sync licensing?
The best way to get a clear picture of the inner workings, is to explore each major technological advance and the corresponding copyright laws that evolved to shape and monetize the music industry.
Disclaimer: The information in these articles has been compiled from research and experience working in the music industry. The legal terms and historical details provided are indicative and may not be exact. Please seek professional legal advice before entering into any legally binding contracts. — Tim Bern (Head of Education at DISCO).
Music Copyright Overview
Intellectual Property (IP) refers to original creations you make. Copyright law grants you the right to control how others copy, reproduce, and monetize your IP.
The music industry focuses on monetizing two distinct types of IP: Songs and Sound Recordings.
1. Songs, Compositions or Musical Works consist of the melody, harmony, and lyrics.
- Songs are owned by the songwriter(s)
- Music Publishers make deals with songwriters to monetize their songs.
2. Audio Recordings or “Masters” capture the performance of a song (or any sound!) fixed in a tangible medium that can be reproduced - like a tape, vinyl record, CD, digital file etc.
- Recordings are owned by the performer(s) or the entity that financed the recording.
- Record Labels make deals with musicians/recording artists to monetize their recordings.
A song can be recorded thousands of times, by anyone, as long as the songwriter has publicly released a recording of the song, or given permission for someone else to do so.
All other people who record the song, own that recording. The recording of their performance is its own unique IP, separate from the song, which is still owned by the original songwriter(s).
Song and recording owners should each be compensated separately whenever their work/IP/copyright is reproduced and monetized.
💡 Music IP owners usually earn revenue by licensing their music, which gives others the right to use and monetize it under set conditions.
Examples of reproducing/copying musical IP
Keep these ideas in mind as you read the list below:
1) the difference between a business generating revenue from the reproduction of music (IP) in a public space vs personal use at home.
2) An initial copy/reproduction vs selling/monetizing it.
- Printing a song on paper (sheet music)
- Selling sheet music
- Performing a song (each performance reproduces the song)
- Selling tickets to view a public performance of a song
- Running a business with music in the background (live or recorded performance)
- Making an audio recording of a song (a mechanical reproduction)
- Selling the recording (e.g., vinyl records, cassette tapes, CDs)
- Radio broadcast of a live performance of a song
- Radio broadcast of a sound recording of a song
- Synchronizing the live performance of a song or an audio recording to "moving pictures" / video / film / television
- Selling tickets to a film screening in a cinema or elsewhere (every screening is a public performance of the songs in the film’s soundtrack)
- TV Broadcast of a screen production with songs in the soundtrack (a broadcast performance of the songs)
- TV Broadcast of music videos
- Selling DVD, VHS of Film or TV shows (songs in the sound track are being mechanically reproduced)
- Downloading music from the internet (mechanical reproduction of songs and recordings as digital audio files)
- Streaming music on subscription services like Spotify (each stream is a reproduction of the recording and both a mechanical and performance reproduction of the song!)
- Streaming Film and TV content on platforms like Netflix etc.
Let’s start in the 1800s with the printing press.
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Mid-Late 1800s
Before the advent of the technologies that allowed printing, recording, vinyl records, radio, film, TV, cassette tapes, CDs, internet downloads, and streaming services, there was songwriting and live performance.
The modern music industry began during the Industrial Revolution, driven by mass production of musical instruments, advancements in the printing press, improved mass transportation (train lines connecting cities for distribution), and a cultural shift that brought music consumption into the home via new technologies.
💡 During this time, copyright protection for songs was poorly regulated, allowing many individuals other than the songwriters to profit from their work!
- Mass production of musical instruments, especially the piano, made them more affordable, leading to an insatiable appetite for new songs to learn and perform for friends at home.
- Music Publishers signed deals with Songwriters to print and sell sheet music splitting profits 50/50 (Randall Wixen’s book does an amazing job of explaining music publishing).
- Tin Pan alley in NYC became a hub for songwriters and publishers to meet, write songs, and make deals.
- Music stores (selling pianos and other instruments) expanded sheet music distribution and sales opportunities.
- Instead of shipping sheet music around the country, publishers issued print licenses to other publishing businesses in different territories to print and sell music locally in exchange for ongoing royalty payments.
💡 What is a royalty? A “royalty” is a payment for using intellectual property or copyrights. Even though the work was created in the past, it earns royalties whenever it is used or reproduced in the future.
Songs in Public Performance
Early 1900s
The rise of printed songs expanded the repertoire for live performers and amateur musicians, leading to increased demand for both sheet music and live performances as songs gained popularity.
While songwriters were paid only once for the sale of printed music, venues and performers benefited from the same songs night after night by selling tickets, food and drinks etc. Songwriters needed a way to receive royalties each time their songs were performed.
Fortunately, the US copyright act was revised in 1909 to include musical compositions. If you recall, each performance of a song is considered reproduction or copy of that IP. The songwriter has the right to give permission and be compensated for that copy.
💡 In 1914 the songwriters and publishers in the USA formed the American Society of Composers, Authors, and Publishers (ASCAP) to collect royalties when their songs were performed in public. Check out the history of ASCAP here.
Almost every country has an equivalent organization to ASCAP, known as a Performing Rights Organization (PRO) such as APRA in Australasia, PRS in the UK and SOCAN in Canada. The US actually has a number of orgs including BMI and SESAC which we'll touch on later.
Note that performing rights had been developing in Europe for quite some time with one of first PROs, SACEM, forming in France in 1851.
How Does a PRO Work?
- All the songwriters and publishers in the territory join as members of the PRO and register their songs to establish the PRO’s licensable repertoire.
- The PRO issues performance licenses to venues (for a fee), allowing them to play any song in the PRO’s repertoire.
- Venues and/or performers submit set lists of songs performed — these are called performance reports.
- The PRO reviews these set lists and distribute performance royalties to the songwriters and their publishers.
- Every country or region has a local PRO that represents the repertoire of every other PRO to pass through international royalties.
Keep in mind, each PRO is handling millions of songs and gazillions of data points, from thousands of sources, making the accurate distribution of royalties an imperfect science.
What is the Difference Between a Publisher and a PRO?
Music Publishers are for-profit businesses that own or represent song copyrights - they are "rights holders". They buy and sell songs and monetize all the different income streams like print, mechanical, and sync (which I'll cover later), not just performance income.
Music Publishers seek out and sign deals with songwriters to help develop their craft, connect them with opportunities and proactively grow their careers. Traditionally a music publishing deal is based around the songwriter delivering some number of songs each year to be released by notable record labels. It is a tight, long term relationship with vested interests.
In contrast, Performing Rights Organizations (PROs) are typically not-for-profit entities that maintain a registry of their members' songs. They collect royalties generated from public performance licenses issued to venues and businesses that benefit from the use of music. It’s important to note that PROs do not own the copyrights to the songs themselves and only focus on income generated from song performances.
When a song is performed and royalties are collected, the PRO pays out the income 50% to the songwriter and 50% to the publisher. These are referred to as the writer and publisher shares.
If a songwriter does not have a publisher they automatically receive the publishers share as well.
Additionally, “original” publishers (who have the deal with the songwriter) often create sub-publishing networks to ensure their catalog is represented in different territories.
Sub-publishers work with their local PRO to accurately register songs and receive royalties on behalf of the original publisher. This arrangement allows international income to flow more quickly and directly back to the original publishers and their songwriters, bypassing the PRO network.
Without a sub-publisher, income from a given territory would travel from the international PRO back to the original publisher's local PRO.
Depending on the territory it can take a very long time songs to be registered between PROs and for international royalties to make it back to the songwriter.
A publishing administrator specializes in registering and collecting royalties on behalf of publishers and songwriters. This can serve as a beneficial alternative to a full publishing deal, as they do not take ownership of the songs but ensure that they are well managed.
Must Know Publishing Terms
What is an ISWC? Songs are issued with an International Standard Work Code (ISWC) when registered with a PRO. Each PRO also creates their own work number to track the song in their region. ISWC’s always start with T and contain 10 numbers e.g: T-123.456.789–0
What is an IPI number? Every Songwriter and publisher has a unique ID, like a social security number, that links to the song ISWCs that they own or control. The Interested Party Information (IPI) number, also known as Interested Party Name Number (IPNN), ensures that song royalties are distributed to the correct right holders.
What is "at source income"? At source income is paid directly from the source (often a PRO) to a original publisher, without a sub-publisher or third party acting as an intermediary and taking a cut.
Part two of the series introduces audio recording technology, how mechanical royalties are generated for songwriters, and how radio disrupted the industry.