U.S. copyright law provides two separate copyrights for any recorded song: one for the music and lyrics of the song, the other for the recorded performance. Since copyright owners have exclusive rights to their music, anyone who wants to use it must first get permission through a license and pay royalties. If you've written or produced a piece of music, how you collect royalties varies, depending on the purpose of the license.
Record Sales and Master Use Licenses
Record labels enter contracts with musicians to produce recordings of their music. In return, the recorded artist earns royalties based on a percentage of the retail price of each album or song sold. Often a label advances money to the artist that represents the royalties to be earned from future sales of the music recorded. Artists begin to receive royalty checks from the label for sales of their music once the money advanced is paid back. Since the record label typically owns the sound recording copyright, anyone wishing to use that particular recording, such as for background music in a television show, must contact the label to negotiate a master use license, which also generates royalties for the artist.
Mechanical and Digital Royalties
The Copyright Act directly governs two royalty streams for owners of composition and sound recording copyrights. The first, known as the mechanical license, governs cover songs. Once a songwriter's song becomes commercially available, any other artist can create his own cover version of the song as long as he pays the minimum royalty required by law. The Harry Fox Agency administers mechanical licenses and distributes royalties to songwriters, although some artists may choose to negotiate with the publisher or songwriter directly. In contrast, both the sound recording and composition copyright owners earn digital royalties whenever Internet or digital music services or webcasters play a song. Sections 112 and 114 of the Copyright Act describe digital licenses, which are administered exclusively by SoundExchange.
Performance and Synchronization Royalties
Any time a song is played in public, such as on the radio, in a store or in a restaurant, songwriters earn performance royalties because a musical composition copyright includes the exclusive right to perform the song publicly. Three performance rights societies in the United States -- ASCAP, BMI and SESAC -- collect these royalties on behalf of songwriters and distribute them accordingly. If you're a songwriter and your music is commercially available, you can register with one or all of these societies to obtain performance royalties. Additionally, if a filmmaker or other producer wants to use your song in a movie, commercial, television show or video game, you earn synchronization royalties for that usage.
The sale of sheet music provides another royalty stream for songwriters. Since the composition copyright grants songwriters the exclusive right to reproduce and sell copies of their music and lyrics, anyone else who wants to print their music must first obtain a license and pay royalties to the songwriter. Most songwriters enter into contracts with publishing companies that manage this and other streams of publishing royalties. The publishing company then negotiates a license with whoever wants to print the song, either by itself or in a collection of other music. Songwriters typically earn a few cents in royalties for every piece of music printed.