There are four main revenue streams for songwriters in the Music Industry. Here they are, explained. Keep in mind: this is not an end-all-be-all list, but rather an introduction to the world of music publishing revenue.
Mechanical Royalties
These are generated when a song is sold physically (CD, Vinyl), digitally (iTunes, Google Play, etc.) or streamed (Spotify, Rdio, etc.).
The royalty rate for sales is known as the statutory rate and is currently $0.091 per song sold (for songs five minutes and under; $0.0175 per minute for songs over 5 minutes long, rounded to the next minute.)
Example: a song timing of 5:01 would round up to 6 minutes, resulting in a rate of $0.105 per song sold (6 x $0.0175)
NOTE: labels will often try to negotiate a lower rate in exchange for an advance against future royalties.
The royalty rate for streams is a bit more complicated and is based on the streaming service’s revenue and the market share of the songs played. Future of Music Coalition put together an awesome group of infographics here that show the flow of royalties for digital uses.
Synchronization Royalties
A Synchronization License is required when a song is placed onto an audiovisual use (in a TV show, music video, movie, etc.). This is licensed and paid by the production company of the audiovisual use, usually in a lump sum. This payment is negotiable, depending on the songwriter’s bargaining power.
Both the master copyright (sound recording) & the publishing copyright (underlying composition) must be licensed in a synch use, which means more money for those who self-publish & own their own masters.
Performance Royalties
These are generated when a song is broadcast in a public medium for public consumption (on the radio, in a commercial, at a concert, in a restaurant, etc.) These royalties are licensed & paid to Performance Rights Organizations (PROs), who then pay the writers and the publishers.
The PROs in the US are ASCAP, BMI, and SESAC. You can only be affiliated with one of them at a time, so do your research before joining one.
Print Royalties
These are generated whenever your song is sold as in print form (i.e. lyrics, sheet music). They aren’t as common as the other categories, but they do exist.
