Music Licensing: Mechanical Royalties Explained - YouTube

What are mechanical royalties? The simple understanding is that mechanical

royalties are royalties that are paid to a songwriter whenever a copy of their

song is made. As with many avenues in the music industry it's always a little more

complicated than it seems. We'll try to simplify it in this video.

So, the songwriter is owed mechanical royalty whenever his song is printed on CD or

vinyl, for example, label record prints CDs, download it digitally from iTunes

and other digital stores, used as a ringtone or streamed on interactive

platforms like Spotify, Pandora, Deezer etc. Just to clarify the last one

interactive streaming platforms are allowing the users to interact and

demand what to listen so they generate mechanical royalties. On the other hand

non interactive platforms like AM/FM radios do not allow users to choose what

to listen and they are considered as public performances, so they generate

performance royalties. The basic distinction between performance and

mechanical royalties is that performance royalties are licensing music to play it

and mechanical royalties are licensing music to sell it

Who pays mechanical royalties? Mechanical royalties are paid by whoever attains

the mechanical license to reproduce and/or distribute your music. It can go

from record label or record company to anyone who wants to record a cover of

your song. Songwriters can often make the mistake of thinking that being members

of performance rights organizations will take care of their mechanical royalties

but these organizations only handle performance royalties, you will need to

register with a separate collection agency that handles mechanical royalties

There are agencies like Harry Fox Agency, EasySongLicensing and Loudr where

anyone can acquire mechanical licenses for a small fee for any song.

These agencies can: issue mechanical licenses; collect mechanical royalties

and distribute mechanical royalties to songwriters.

The songwriter cannot deny giving mechanical license so this license is pretty easy to get.

All the registrations are usually done by the publishers. The songwriter also can

decide if a share goes to another co-writer or a band member who

contributed, but the basic rule is that all the mechanical royalties go to the

songwriter. The current mechanical royalty rate for physical recordings and

permanent digital downloads is 9.1 cents for recordings of a song

not longer than 5 minutes, and 1.75 cents for every additional minute.

This rate is determined by law, this means that anyone who gets a mechanical

license is responsible to pay to the songwriter 9.1 cents for

every print or downloaded copy of the song. Streaming platforms on the other

hand have a mechanical rate that varies in the range from roughly 4 %

to 6.75 % of revenue

Here is an example of how the process should work. A record label wants to

print 5000 CDs with 15 of your songs, all under 5 minutes, and sell the CD, he

will need to get a mechanical license from the above-mentioned agencies and

pay $1.365 per CD printed, note that he needs to pay for

all the CDs created regardless if he sells them or not. The agencies will

issue mechanical licenses and collect the royalties which later will be

distributed to the songwriters. So in this case the mechanical royalties for

the songwriter will be 6825 dollars

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