How Songwriting Royalties are Shared

How Songwriting Royalties are Shared

The Tunedly Team

Getting your songwriting work published is a big achievement. But before applying your signature to any publishing contract, it is important to find out what you are getting yourself into. One of the main things you will likely be concerned about is the issue of compensation or, more specifically, how much share of the royalties you will receive.

As you have probably realized, determining royalty shares is not a straightforward topic. Figuring out who gets what and for which royalty instrument can often seem like a course in rocket science. That’s why we have shared information in the past about how songwriters paid, as well as the different ways you can earn royalties as a music creator. Now it’s time to break down how royalties are collected and paid. Let’s start with the definition of music royalties.

What are royalties?

In the music industry, royalties are generally defined as monetary payments made to copyright holders for the right to use their work. These royalties are collected in relation to the two copyrightable parts of a song: the master recording and the composition. Since we are discussing songwriter royalty shares, we will focus on the latter in this article.

Songwriters who create material for other artists, and are not the final performers of their songs, earn royalties on the composition aspect of their works. They can only earn royalties when these works get published, and can earn both performance royalties and mechanical royalties. As such, the collection of royalties for songwriters are handled by two corresponding bodies, namely Performance Rights Organizations (PROs) and Collection Management Organizations (CMOs).

Performance royalties

Whenever there is a public performance of a copyrighted composition, it generates performance royalties. Public performances include airplay on terrestrial radio or TV, live performances on stage such as by an artist at a concert, and on-demand streams on platforms such as Apple Music, etc.

Mechanical royalties

A composition generates mechanical royalties when it is “reproduced.” This includes when physical reproductions of (as in the case of CDs, vinyl records, and cassettes), when a song is downloaded, and the comparative numbers of streams of a song in relation to copies sold.

Now that you know how the two types of royalties are generated, how do collection agencies determine who gets what, and how much? When a music composition gets published, the royalties earned are split into two halves, the “writer’s share” and the “publisher’s share.”

Royalty payout for songwriters

The writer’s share is collected from every public performance of an original composition, and totals 50% of the total amount. For example, if total performance royalties in a review period amounts to 500 units, the writer’s share would be 250 units. Those 250 units would then be shared up among all the songwriters who contributed to the work. Obviously, if there is only one songwriter, they would receive 100% of the writer’s share for the 250 units. How the royalties are shared when there is more than one depends on the splits agreed to by all the co-creators. In many cases, the splits are equal, so if there are two writers, the split would be 50:50. If there are three, the split would be 33:33:33. It would be 25:25:25:25 for four co-creators; and so on and so forth.

It is important to note that PROs allocates royalties to each writer based on how the composition was registered. So, if you registered as a co-creator with one other person on a song, the collecting body will collect your share and pay it out to you separately from the other creator of the project.

Royalty payout for publishers

It should be noted that in the music industry, the term “publisher” can take on different scenarios. As a songwriter, you and the co-creators of a composition assume the role of publisher automatically. And you can collect performance royalties as a “publisher.” Publishers are entitled to 100% of mechanical royalties.

As mentioned, publishers receive a share of 50% of all performance royalties. When a songwriter also collects publishing royalties, the splits would be the same as signing up with a separate publishing company. If you are entitled to 50% of the writer’s share, for instance (in a case where there are two co-creators), you would collect 50% of the publisher’s share as well. If there are five co-creators, which would likely mean a 20% share of performance royalties, you would be entitled to 20% of publisher’s share of performance royalties.

Collecting the publisher’s share as a songwriter is a bit more complex than collecting performance royalties on the writer’s share. You can only benefit from this royalty in one of three ways:

  • Acting as an independent songwriter: This entails carrying out the act of publishing on independent terms. To collect these performance royalties as an independent, you usually have to register your work with a CMO, separately from your PRO.
  • Signing a deal with a publishing company: Since publishing companies have the leeway to affiliate themselves with both PROs and CMOs, they can strike deals with songwriters to collect publishing royalties from global territories on behalf of songwriters.
  • Setting up a publishing company: Songwriters also have the option to create their own publishing entity and then join it with their respective PRO to collect performance royalties on their behalf. This, however, can be a difficult task, especially for songwriters who are just starting out. You would need to register your publishing company with numerous collecting bodies, and some territories have several of them.

How to collect your royalties

As a songwriter, royalties can contribute significantly to your earnings. That is why it is important to register your copyright, as well as sign up with one of the known Performance Rights Organizations (PROs) such as ASCAP or BMI. If you are handling publishing as an independent songwriter or by creating your own publishing entity, you would need to sign up with an organization that also collects mechanical royalties. A few of the well-known ones include the Mechanical Licensing Collective (MLC) and the Harry Fox Agency. Some CMOs in certain territories are authorized to collect both mechanical and performance royalties.

Most publishing deals will clarify your share as a songwriter, as well as any amount you will earn from the publisher’s share. But if there are any doubts, it is always advised to have your lawyer go over the finer details.