How Do Music Royalties Work? Two Copyrights in Every Recording
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Every recorded song contains two separate copyrighted works: the composition, meaning the notes and words, and the sound recording, meaning that particular performance captured on tape. They are owned by different people, licensed through different channels and paid at different rates, and almost every argument about who gets paid what in music comes back to that division.
The two rights
The composition is created by the songwriter and is typically administered by a publisher, who takes a share in exchange for registering it, licensing it and collecting. The sound recording is created when a performance is fixed, and is typically owned by the record label that paid for it, with the recording artist receiving a royalty from the label under their contract rather than owning the right outright. A cover version involves the same composition and a different recording. Using a track in a film requires permission from both owners, which is why licensing a well-known song is expensive and slow: two negotiations must succeed, and either party can refuse. Sampling requires the same two permissions, since the sample reproduces both the recording and the underlying composition. The split explains the recurring situation in which a songwriter earns from a song that made a performer famous, or a performer earns nothing from a hit they did not write.
The streams of income
Money reaches rights holders through several distinct channels, and each pays a different party:
- •Mechanical royalties, paid for reproducing a composition, historically for pressing records and now for streams and downloads, going to the songwriter and publisher
- •Performance royalties, paid whenever a composition is played publicly, including radio, television, venues, shops and streaming, collected by performing rights organisations and split between writer and publisher
- •Master use and synchronisation licences, negotiated individually for using a recording and a composition in film, advertising or games, which are frequently the largest single payments in the business
- •Neighbouring rights, paid to performers and recording owners for broadcast and public performance of the recording itself, which exist in most countries and not uniformly, with the United States notably not paying them for terrestrial radio
- •Streaming revenue, divided between the recording owner and the composition owners, with the recording side receiving substantially the larger share
- •Print, merchandise and direct sales, which have become relatively more important as recorded income per listen fell
How streaming divides the money
The dominant model is pro rata: a service takes its total subscription and advertising revenue for a period, keeps its share, and divides the remainder among rights holders in proportion to each track's share of total streams on the platform. That sounds neutral and has a consequence people find unintuitive, since an individual subscriber's payment does not go to the artists that subscriber listened to but into a pool distributed by overall popularity, so a listener who plays only one obscure artist all month is mostly funding the biggest acts on the service. The proposed alternative, usually called user-centric, divides each subscriber's payment among only the artists they actually played, and modelling suggests it would shift money towards artists with dedicated niche audiences and away from the highest-streaming acts. Some services have begun experimenting with variants, along with thresholds below which tracks earn nothing and adjustments intended to reduce fraudulent streaming, which is a substantial and growing problem.
Why artists earn so little from it
Per-stream figures circulate widely and are misleading, since there is no fixed rate and the amount depends on the pool, the country, the subscription type and the deal. The more useful explanation is structural. The recording share is paid to whoever owns the master, which under a traditional deal is the label, and the artist receives their contractual percentage of that only after recording costs, advances and marketing have been recouped, which many never achieve. Featured and session performers are paid differently or not at all. The composition share is smaller than the recording share in most territories. And the volume required is simply large, since replacing the income from an album sale requires a great many streams. The responses have included artists retaining their masters or licensing rather than assigning them, direct platforms and subscriptions, distribution services that keep a flat fee rather than a share, and campaigns for legislative change including proposals to guarantee performers a share of streaming income regardless of contract.
The takeaway
Every track contains a composition and a sound recording, owned separately, which is why using a song requires two permissions and why writers and performers are paid differently. Income arrives as mechanical and performance royalties on the composition, master and synchronisation licences, neighbouring rights and streaming. Streaming divides revenue pro rata across all plays on a service, so a subscriber's money funds the most popular artists rather than the ones they played.