Music rights and royalties are structured different than many other types of creative licensing. Music royalties, licenses and copyrights work to assure creative profits get distributed to the correct persons, but royalties are not all the same. Generally, copyright royalties for music are generated by the sales, distribution or performance of compositions or collections.

The legal enforcement of payment for artists, singers, performers, songwriters and producers varies, depending on the type of copyrights or royalties being licensed. Typically musical rights and royalties fall into one of the following categories.

Mechanical Licensing and Royalties

Money earned by mechanical licensing by record companies and recording artists is a controversial subject. Everyone involved in the process makes money on the recordings, including publishers or writers, but the money is calculated based on the negotiated contract individually. Usually the company has control of the royalty monies and issues payment to artists based on a 50/50 split, half to the songwriter and half to the publisher. Sometimes advances are given to artists, but no guarantee of future royalties until a certain threshold of albums has sold. There are other methods that have artistic control in mind, or predictive futures based on digital marketing and copyright exposition.

Historically, mechanical licensing and music royalties have not served the artists well, often bad contract negotiations have left composers penniless, despite high volume record sales.

Musical Performance Rights and Royalties

Multiple agencies oversee the performance rights and royalties for artists. These organizations keep track of the royalty trail from song registration to usage in the wide world of performance media. Performance rights organizations include ASCAP, SESAC and BMI. Users can purchase per song or per program rights, but the majority purchase blanket rights licensing, especially for broadcast editing purposes. Professional music rights users pay for performance rights in public, network, television, radio, online and even background services. One of the biggest licensing companies is MUZAK, who pays large sums for telephony hold music rights and other performance royalties.

Synchronization Media and Royalties

This is a specific type of licensing deemed necessary to use a song for reproduction on TV, film, radio, videos, commercials, phone messaging services or other various synchronized media. More specifically, this is media royalties for performances that overlay on another media like voice overs or news broadcast editing. Permission is granted for either singular usage rights or for a master usage license. Synchronized royalties are paid to songwriters and artists for use of their songs on soundtracks, background music or other edited sound palettes. Commercials are the highest paying group for these royalties every year, and probably represent the most honest form that actually does pay writers and artists fairly.

Printed Music Copyright Royalties

This category is a consistent source of royalties for songwriters and artists, since the medium has not changed much in the history of musical composition. Printed sheet music copyrights exist, so that all other mediums have an accurate translation of any musical piece and it is reproduced accurately when used by the purchaser. In fact, this category of music royalties is the most strictly enforced, as a mainstay of residual income for recording companies, publishing houses and even for independent music composers. Printed sheet music has even advanced into software and downloadable versions for the digital age, cashing in on the modern innovations easily.

Home Audio Recording Royalties

In addition to these traditional royalty payouts, recent decades of copyright legislation have broadened royalty definitions. Home recording devices have changed the music industry, because the general public now has access to high quality sound recording equipment in the home. Manufacturers of digital audio recording machines, blank recording media and related home recording equipment payout percentages from their yearly sales. This money is paid to the Register of Copyrights to recoup losses to artists, songwriters record companies and music publishers due to illegal piracy and unauthorized reproduction of music. This is a fairly complex form of music royalty distribution rights based on the Audio Home Recording Act of 1992.

Internet Distribution Rights and Royalties

Distribution rights and royalties for digital performances, webcasts and online downloading is an evolving landscape. Organizations like SoundExchange exist to collect royalties for online musical performances and distribute these to the appropriate individuals. Just like traditional mediums, digital broadcasters are obligated to pay royalties based on songwriter copyrights and publishing contracts. Since the Digital Performance Right In Sound Recordings Act of 1995, royalties are required in payment to recording artists and record labels.

Foreign Recording Royalties

All the above mentioned types of licensing have their equivalent in foreign countries. Foreign sub-publishers are held to the same standards for copyrighted materials and must pay royalties to songwriters or publishers in the United States, or any other global marketplace. Although, as with other types of musical rights and royalties, much is determined by the negotiated contract with the individual recording company.