What are Mechanical Royalties?
By Jessica Klausing
Mechanical royalties are owed to a songwriter whenever a copy of one of their songs is made. For example, when your song or composition is manufactured on a CD, downloaded from an online music store (i.e., iTunes, Amazon, or Google Play), or streamed with an online music service (i.e., Apple Music, Spotify, or TIDAL), you are due a mechanical royalty.
According to the United States Copyright Act, “mechanical royalties are mandatory by law and should not be (unless you agree to it) subject to recoupment of recording costs by the record company.”
When an audio streaming service wants to use music on their site, they must first obtain the master license from a record label or digital distributor to use the sound recording, or ‘track’. Once the service has secured the master license, they must also issue a separate license for the type of use the composition, or ‘song’ will be used in.
In the case of an audio subscription streaming service, a mechanical license will have to be administered to use the composition. The publisher of that song will be the recipient of the mechanical royalties that may accrue.
Here is a breakdown how mechanical royalties work:
Online Audio Streaming: mechanical royalties are owed to the Publisher (owner of song or composition) every time a user streams the sound recording through a streaming subscription audio service.
Streaming audio triggers a mechanical royalty because the song is mechanically reproduced in the form of data on a computer server. In this case, the mechanical revenue is calculated as a per-play rate which is determined by the publisher’s percentage of usage on a particular streaming service, in relation to that subscription service’s entire catalogue of music.
Digital Downloads: mechanical royalties are owed to the Publisher when a user downloads the sound recording.
Publishers should still get paid even when the owner of the sound recording decides to give away the track for free. This method triggers a mechanical reproduction of the composition.
You should not do a cover song and post it online for people to download for free! You will owe a mechanical royalty to the Publisher of the original song for each download, even if it is free to the user.
Once a user receives or purchases a digital download, the user can play the music for personal use as many times as he or she wants without triggering any more mechanical royalties to be owed to the Publisher.
Physical CDs : mechanical royalties are owed to the Publisher when each CD is manufactured.
If someone presses 50 CDs of your song, they owe you mechanical royalties for 50 copies of the CD, even though they haven’t been sold yet.
Once a CD is created and the mechanical royalty is paid, and a user receives or purchases the CD, the user may play the music from his or her CD player for personal use. No more mechanical royalties are due to the Publisher at this point.
Aside from mechanical licenses, there are many more ways to accrue money with other music royalties.
SOURCES:
Baskerville, David, Ph.D. Music Business Handbook And Career Guide. Eighth edition. Thousand Oaks, California: Sage Publications, Inc., 2006.
Baskerville, David, and Baskerville Tim. Music Business Handbook And Career Guide. Tenth edition. Thousand Oaks, California: Sage Publications, Inc., 2013.
Borg, Bobby. The Musician’s Handbook: A Practical Guide To Understanding The Music Business. New York: Billboard Books, 2008.
McDonald, Heather. “Mechanical Royalties: How are they collected?” The Balance Careers. 08 Sept 2018. 16 Jan 2019. https://www.thebalancecareers.com/mechanical-royalties-2460503
Shepard, Issac. “What are mechanical royalties and how do I earn them?” The Music Maze. 23 Feb 2017. 16 Jan 2019. https://www.themusicmaze.com/mechanical-royalties-earn/