Music Licensing: Mechanical Royalties Explained | Summary and Q&A

TL;DR

Mechanical royalties are paid to songwriters whenever their song is reproduced or distributed in various formats, and it is important for songwriters to register with a separate collection agency to handle these royalties.

Key Insights

• 💰 Mechanical royalties are paid to songwriters whenever copies of their songs are made, whether in physical or digital formats, and also include interactive streaming platforms.
• 💿 Mechanical royalties are paid by whoever obtains a mechanical license to reproduce and distribute the music, which can include record labels, record companies, and anyone recording a cover of the song.
• 📝 Performance rights organizations handle performance royalties, not mechanical royalties. Songwriters need to register with a separate collection agency that handles mechanical royalties.
• 💻 Agencies like Harry Fox Agency, EasySongLicensing, and Loudr can issue, collect, and distribute mechanical licenses and royalties to songwriters for a small fee.
• 💵 The current mechanical royalty rate for physical recordings and permanent digital downloads is 9.1 cents for songs under 5 minutes and 1.75 cents for every additional minute. Streaming platforms have varying mechanical rates.
• 📀 When a record label prints 5000 CDs with 15 songs under 5 minutes each, they must get a mechanical license and pay $1.365 per CD, even if not all copies are sold. The royalties for the songwriter in this case would be $6825.
• ❌ Songwriters cannot deny giving a mechanical license, and all mechanical royalties typically go to the songwriter, unless a share is agreed upon with co-writers or band members who contributed.
• 🎶 Registering with a collection agency that handles mechanical royalties is essential for songwriters to ensure they receive proper compensation for copies of their songs being made.

Transcript

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Questions & Answers

Q: What are mechanical royalties and how are they generated?

Mechanical royalties are payments made to songwriters whenever their songs are reproduced or distributed in various formats, such as CDs, vinyl, digital downloads, streaming platforms, or ringtones. These royalties are generated whenever a copy of the song is made, and interactive streaming platforms where users can choose what to listen to also generate mechanical royalties.

Q: Who pays mechanical royalties?

Mechanical royalties are paid by whoever obtains the mechanical license to reproduce or distribute the music, which can be a record label, record company, or anyone who wants to record a cover of the song. Performance rights organizations do not handle mechanical royalties, so songwriters need to register with a separate collection agency to handle these royalties.

Q: What is the current mechanical royalty rate?

The current mechanical royalty rate for physical recordings and permanent digital downloads is 9.1 cents for songs not longer than 5 minutes, and an additional 1.75 cents for every additional minute. Streaming platforms have a mechanical rate that varies, typically ranging from 4% to 6.75% of revenue.

Q: How can songwriters acquire mechanical licenses?

Songwriters can acquire mechanical licenses through agencies like Harry Fox Agency, EasySongLicensing, or Loudr. These agencies issue mechanical licenses, collect mechanical royalties, and distribute them to songwriters. The songwriter cannot deny giving a mechanical license, and it is usually the publishers who handle the registrations.

Summary & Key Takeaways

• Mechanical royalties are royalties paid to songwriters whenever their songs are reproduced or distributed in physical or digital formats.

• Performance royalties are different from mechanical royalties, as performance royalties are paid for licensing music to be played, while mechanical royalties are paid for licensing music to be sold.

• Mechanical royalties are paid by whoever obtains the mechanical license to reproduce or distribute the music, and songwriters need to register with a separate collection agency to handle these royalties.