What Type of Royalties Exist?

For creators and their managers as well as others engaged in the entertainment, arts, and similar industries, royalties are a necessary, but potentially confusing, aspect of the industry to grasp. In order to move forward, it is important to understand what forms of royalties exist. There are numerous types of royalties that may require a legal degree and intimate knowledge of intellectual property law to fully comprehend the intricacies of each, but luckily, there are overarching categories that royalties can be classified into. Let’s use the music industry as the example for discussing royalties.

Royalties from print rights deal with royalties that are earned for printed sheet music. They occur when the music is transcribed into a sheet form and sold to the general public to play, in both songbooks or per song. Typically, the songs that earn these types of royalties tend to be the more popular songs. Print royalties are the simplest to deal with but also the least common. 

Next, mechanical royalties are royalties earned from when music is sold through something that “mechanically” reproduces it. While this used to mean physical channels such as a CDs and tapes, it now includes the modern-day download. In short, a music publisher will give permission for the music to be reproduced in some form and then a royalty is paid to the artist, writer, and publisher according to the quantity sold. It is more difficult, however, to collect royalties as independent songwriters (those who are unsigned and not a part of a larger record label) and many agencies may not actually allow songwriters who are not signed under a label to receive mechanical royalties. This can be a tricky situation to navigate for both unsigned musicians and other independent professionals in the music industry, particularly for startups, so it can be helpful to consult with an intellectual property lawyer to better understand the allowable royalties for each particular situation. For those starting businesses in the music industry, a startup lawyer is useful for helping create a solid grasp of not just the specifics of the music industry but also the aspects that go into creating and growing a successful business in the first place. 

Another general type of royalties is the performance royalty. Performance royalties arise when a piece of music is performed live or broadcasted. Performances and broadcasts can be music played on television, on radio, in businesses, and on online streaming sites. These performance royalties can be earned from the purchase of a license for the number of individual plays of a recording or they can be bundled in a “blanket license,” giving the entity that obtained a license for the music (the music usually being an artist’s collection) the right to play it for a set fee.

Finally, synchronized royalties are generated from licenses required if a song is reproduced in conjunction with other media such as television and movies. For example, if a television show uses a song as background music, this would constitute a synchronized royalty. Commercials that utilize previously existing and copyrighted songs would also fall into this category.

The process of navigating the music industry in the determination of which party - such as the artist, songwriter, publisher, and others - is owed what royalty is difficult and an intellectual property lawyer or startup lawyer can provide invaluable guidance. If you have any questions or would like to receive a consultation, contact our firm today.

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