Related pages: Collecting music license fees • Composers, works and recordings

Music royalties and licenses
blanket and one-off music licenses

How musicians and writers earn royalties

The point of royalties is simply to pay the right people for using their music—but it’s easier said than done. To understand it you need to separate:

1writers2artists3performers4songs5recordings6, 7, 8performances9different uses
Diagram of the basic components of music royalties

That’s how the separate aspects relate to each other for a typical recording and here’s a range of examples based on some of the different uses of Hallelujah by Leonard Cohen from the album Various Positions, © Bad Monk Publishing (BMI) 1985.

Music royalties and earnings, with examples
Who earns royaltiesWho they areExamples
1WritersThe composer and lyricistLeonard Cohen
2ArtistsThe person or group signed to a labelAlexandra Burke (Sony BMG X Factor single)
3PerformersThe musicians and vocalistsk d lang’s cover of Hallelujah
What earns royaltiesWhat it isExamples
4SongThe words and music (not beats or arrangements)Hallelujah
5RecordingA sound recording of a songAlexandra Burke Hallelujah single
6Recorded performanceA recorded performance by a musicianJeff Buckley and his band* Hallelujah on Grace
Performances (publishing)What they areExamples
7Performance of a song liveA song performed live (by any artist)Alexandra Burke Hallelujah on TV
8Performance of a recorded songA song performed using a recordingLeonard Cohen Hallelujah played on a jukebox
Performances (phonographic)What they areExample
9Use of a sound recordingA sound recording exploitation licenseA documentary soundtrack using Hallelujah
Non-royalty incomeExample
Live appearancesArtist performanceX Factor Live appearance, Wembley Arena

Alexandra Burke (artist), Leonard Cohen (writer), Sony BMG (recording owners), Bad Monk Sony/ATV (publishing owners) and Jeff Buckley, k d lang, Leonard Cohen and others (performers) would be paid in different ways. Each role has its own way of collecting the royalties.

The payment for each rights-owner depends on what their work is used for. There are different rates for different uses (ringtone mechanicals are different to CD mechanicals for example). Some media pay and others don’t.

Music rights and earnings for this example
Examplerights-ownersExample earnings
1Leonard CohenBad Monk Publishing Sony/ATV MusicMechanicals from all CDs containing Hallelujah
2Alexandra BurkeAlexandra Burke through Modest ManagementRoyalty from Sony BMG single sales
3k d langk d lang and musiciansPPL from Hymns Of The 49th Parallel
4Hallelujah (song)Bad Monk Publishing Sony/ATV MusicPRS from Apple iTunes Store JOL
5Hallelujah (recording)Sony BMGPPL from BBC Radio One
6HallelujahJeff Buckley and his band*PPL from BBC Radio Two
7HallelujahSony/ATV MusicPRS from ITV broadcast**
8Hallelujah on a jukeboxSony BMGPPL from pub venue license
9Documentary soundtrackSony BMG, Sony/ATV Musicmaster and sync licenses

In this example the song publisher Bad Monk is adminstered by Sony/ATV and assigned to BMI in the USA for performance licensing.

* Jeff Buckley died in 1997 but his performances still earn money. His band on this recording included Gary Lucas (guitar), Mick Grondahl (bass), Matt Johnson (drums) and their earnings depend on their contract for the session.

(** Television rights are also complex. The show licensing credit reads: The X Factor is a registered trademark of FremantleMedia Ltd. and Simco Ltd. Based on the television programme 'The X Factor' devised and owned by Simco and produced by talkbackTHAMES (part of the FremantleMedia group) and SyCo TV.)

Summary for this example
These royaltiesGo to
All MCPSLeonard Cohen, Bad Monk Sony/ATV
All PRSLeonard Cohen, Bad Monk Sony/ATV
PPL label shareEach record label (see below)
PPL performers’ shareThe featured artist and musicians

PPL earnings not shown would include: Leonard Cohen (Sony), Jeff Buckley (Sony Columbia) and k d lang (WMG Nonesuch). The other named performers on those tracks would also qualify for PPL royalties.

A note about the meaning of royalties
A royalty is the rights-owners’ share in a transaction, there are many different kinds of royalties.

In the context of the music business it normally means a share of…
  • income from record label sales (e.g. downloads)
  • license fees charged for playing masters (PPL)
  • license fees charged for performing songs (PRS)
  • license fees charged for copying music (MCPS)
  • third party merchandise sales
You may also hear royalties mentioned for the use of technology patents e.g. CD media or Blu-ray players. Most commercial IP owners expect some kind of royalty income.

There may also be earnings from other licenses.

Live music income and rights

Payment for live performance is straightforward—no new rights are created. The venue pays performers or their agent directly, and the song owners are paid through the PRS venue license.

If recordings are used in a live performance the recording owner and performers are paid through the PPL venue license.

See also Collecting royalties for public performances.

A note about the meaning of performance
In the context of copyright “performing” can be any of these…
  • a performance of a song or composition—live, recorded or broadcast
  • a performance by any musician (including vocalists) live
  • a performance by any musician that is recorded
  • a performance using (playing) recorded musical material
  • sending ringtones to mobiles and music downloads over the web*
Musical performances are sometimes called non-dramatic performances to distinguish them from video, dancing or acting performances. (Information on dramatic performances can be found at British Actors Equity and BECTU which includes the Film Artistes’ Association)

*UK adopted the European Copyright Directive (EUCD) in 2003 and the meaning of broadcast performance was broadened to cover “communicating to the public”. This includes transmitting ringtones to mobiles and Internet distribution of music downloads.

Recorded music income and rights

Payment for recordings is more complicated. Recordings are stored performances by the original performers, and there are at least three rights-owners on every recording.

Recording rights-owners
Writers and/or publishers of the words and musicSong
Artists or their record labelRecording
Artists and/or session musiciansPerformances

Publishers and writers are paid by MCPS, PRS, and licensees. Record labels are paid by PPL, retailers and licensees. Performers are paid by the label or through PPL.

Any existing copyright or phonographic copyright can be licensed by MCPS, PRS and PPL if the owners choose.

Music business diagram showing the main UK retail, licensing, royalty collection societies and distribution transactions for labels, publishers and artists

Where music royalties come from

Royalties are paid to artists, writers, recording owners and performers for use of their work (this is often commercial use but not only commercial).

Royalties paid to an independent artist, performer and writer
Collected from…Royalties for artistsRoyalties for performersRoyalties for writers
Record labelThe artist royalty from record label earnings e.g. record sales and licensingA possible share in the artist royalty as wagesSong recording royalties (via MCPS and publisher)
Pubs, clubs, Internet, media…Performance royalties via PPLA possible share in performance royalties via PPLSong performance royalties (via PRS and publisher)
Other PPL royalties for performances of recordings are paid to recording owners, normally labels
PublisherNone (unless the artist is also a writer)None (unless the performer is also a writer)Part of the publisher’s share of MCPS and PRS royalties for the songs
A note about royalty payments to writers and performers
MCPS and PRS will pay 100% direct to writers without publishers (self-publishers) or 50% direct to writers who have a publisher (in this case the publisher will also pay part of their 50% to the writer).

(Opting out: MCPS allow a member to opt out particular tracks for, say, a DIY release. PRS don’t allow any part of a member’s repertoire to be opted out.)

PPL pays 50% to the recording owner and 50% to performers: featured performers (65%) and other performers (35%).

PPL pays royalties direct to UK featured artists and others previously paid by P@MRA or AURA.

The performers share of the phonographic royalty is only paid for commercial recordings made since 1946 and played or broadcast in public since 1 December 1996 in the UK or overseas.

Performers use a Performer Identification Number (PID) from the PPL Performer Registration Centre (PRC) to claim their royalties.

(Royalty splits are sometimes expressed as twelfths for historical reasons. 6/12 is the same as 50%.)

How music royalties work

This is how royalties are paid from music licensees through collection societies to the rights-owners.

How different royalties are collected and distributed
RoyaltyOn…Paid by…Collected by…Distributed to…
MechanicalCopies of recordings:
CDs, downloads, games, ringtones, etc.
Record label, manufacturer, etc.MCPSPublisher and writer
Songs performedCommercial music usersPRSPublisher and writer
Records playedCommercial recording usersPPLRecording rights-owner
(e.g. record label)
Performances on records playedCommercial recording usersPPLPerformers
ArtistSales of CDs, downloads, etc.Record labelManagerArtist

There are other licenses that earn royalties for rights-owners.

For library music MCPS runs a joint scheme which arranges licenses from the main three societies (MCPS, PRS and PPL).

For commercial music web sites MCPS-PRS Alliance offer a joint online license (JOL) to cover copying and performances for publishers. These sites also need a PPL license.

A note about the meaning of mechanicals
Although it normally means CD copies it includes…
  • music videos
  • ringtones
  • MIDI files
  • downloaded tracks
  • computer games
  • musical toys etc.
It covers any copyright audio composition that is rendered mechanically, i.e. without a new live performance.

Note: mechanicals are often confused with master rights (PPL) even by pros. Remember mechanicals are publishing.
Some common royalty exclusions
RoyaltyNot paid…
PPLPerformers’ share for some library music
PPLPerformers’ share on music video soundtracks (VPL)
USAPerformers’ share (except “digital”, SoundExchange)
USAPublishing for all cinema performance (BMI, ASCAP, SESAC)

A more comprehensive description of American royalty exclusions can be found in All You Need To Know About The Music Business by Donald Passman (7th Edition). The application of American master and publishing rights is somewhat superficial compared to the EU. For example, Bill Silva mentioned in the Lefsetz newsletter recently (2010): SoundExchange does not collect from YouTube. SoundExchange was established to administer the collection and distribution of royalties from such compulsory licenses taken by non-interactive streaming services that use satellite, cable or Internet methods of distribution. YouTube would be considered an interactive service. SoundExchange collects performing rights for the recording master (the equivalent of PPL) but in a very limited way.

© Economist 2010

This Economist chart (October 2010) shows societies in the EU collect about four times the royalties collected in America overall. (2010 population figures: EU 500 million, USA 300 million). Note also that Asia/Pacific in this diagram consists almost entirely of Japan and Australia.

Some other music licenses

MCPS, PRS and PPL operate many different licenses. Even people who work there don’t know them all. You could take a degree in publishing and still not know every license.

Blanket licenses for traditional duplication and performance are assigned to collection societies. A music user who buys a license can perform or duplicate relevant works under a standard set of limited conditions. Other music applications have separate licenses and some music users may need several.

The best place to find complete up-to-date lists of these licenses is on the collection society sites. There is a longer list of performance licenses below.

Music business diagram of the main licenses and royalty collection societies for recordings, songs and compositions, and performances

Other blanket licenses

Joint Online License

The JOL is a combined blanket mechanical and performance license for web sites distributing MCPS and PRS copyrights. This license allows the site to play music and make copies (downloads).

There is no formal PRS opt out for sites run by writers (MCPS do have a formal opt out) but PRS say they won’t unreasonably charge not-for-profit or self-distribution sites. The JOL costs a minimum of £5,000 per quarter and a percentage (the intended rate is 12%) of site revenue.

If a site isn’t using any MCPS or PRS copyrights they wouldn’t need a JOL but they should license the music from the labels and publishers.

Library Music License

PPL, MCPS and PRS operate a joint blanket licensing scheme for library music.

Sampled Music License

MCPS and PRS operate a joint blanket licensing scheme for sampled music but it doesn’t cover PPL, so sample users need to go back to the labels too.

Ringtone License

Ringtone publishing is licensed by MCPS (10% of retail) and PRS (5% of retail) but a master use license is also required.

Digital DJ License

This PPL license allows you to make a DJ Database and one Back-up Database. It’s a phonographic copying license not a performance license.

The DJ Database is simply a copy of one or more sound recordings in digital form which are stored solely on a single computer or hard disk unit up to 20,000 copies. The license doesn’t mention DJs specifically.

Note: the Digital DJ license has now been superseded by a new joint MCPS/PPL Produb license with tariffs for DJs, exercise classes and other users.

Dubbing license

This is a PPL license for businesses that make intermediate copies of members’ copyright recordings, such as broadcasters.

Blank media and file player levies

There is no blank media or file player levy in the UK.

A note about the meaning of blanket license
Individual rights-owners can collect royalties from music users but it would be impractical for each of them to license every music user in the territory separately. This is why royalty collection societies exist—to act as a one-stop-shop for music users. Equally, it would be impractical for societies to agree individual licenses with each of their rights-owners and each of their licensees.

The solution is blanket licenses. Royalty collection societies offer a limited number of blanket licenses to both rights-owners and music users.

This means a rights-owner cannot normally contract PRS to collect performance income from, say, hairdressers in Venezuela, and a music user will not find a license to use only Def Leppard and Celine Dion tracks in a computer repair shop.

Blanket licenses are a compromise but there is normally a suitable version for most practical purposes. The alternative to a blanket license is a one-off license and there are some examples below.

Some one-off licenses

Master Use License

A master use license is a phonographic copyright license. Unless a work is included in a blanket license for film soundtracks, television, advertising or sampling (among other things) it will need a one-off master use license. There is no fixed rate for master use licenses, so commercial users must negotiate a fee with the label or the recording rights-owner.

Phonographic performance royalties will normally be paid through PPL but music library tracks (unless licensed under the joint PPL, MCPS, PRS blanket license described above) don’t qualify.

Sync License

A sync license is a publishing license. Unless a work is included in a blanket license for film soundtracks, television or advertising (among other things) it will need a one-off sync license. There is no fixed rate for sync licenses, so commercial users must negotiate a fee with the publisher or the publishing rights-owner.

Performance royalties will also be paid through PRS when the work is played in public.

Grand Rights license

Grand Rights licenses are agreed between publishers and theatres for music written specifically for the stage. The fee is normally a percentage of the box office. Other music for the stage may be licensed through PRS.

Buy-out license

Soundtrack rights are often bought out in full, or up to some limit on the intended use(s) or volume by commercial users. Each buy-out license is agreed between the previous rights-owners and the new owners.

Competition among project studio composers has led to a very tight market in instrumental music. Labels providing instrumental soundtracks, music libraries and catalogues now tend to buy their material outright, and their publishers may offer 50% or less.

Who buys music licenses?

Commercial licensees and royalty payments

These are the main commercial music licensees and the people who get the royalties. The left hand column shows commercial users of music, and money moves from left to right.

Here’s a good PRS poster showing additional pro bodies The Music Universe (if the link is broken search for PRS Music Universe).

Sources of artist royalties (licenses and sales)SocietyRecord labelArtist
Public venues where music videos are played: pubs, clubs, discos, shops, exhibitions…VPLRecord
TV and radio broadcasters; web, satellite and cable operators
Video jukebox suppliers
VPL Music Mall clip sourcing, duplication and clearance services
Video and audio distributors and retailers
Licensees for samples, Internet income, recording compilations and overseas exploitation
Public venues where recorded music is played: pubs, clubs, hotels, shops, gyms, exhibitions, discos…PPL
TV and radio broadcasters; web, satellite and cable operators
Jukebox suppliers
County and Borough Councils
 PPL performers’ sharePerformer
Sources of writer royalties (licenses and sales)SocietyPublisherWriter
Public venues where music is played: pubs, clubs, discos, shops, exhibitions, concert halls…PRSPublisherWriter
TV and radio broadcasters; web, satellite and cable companies, Internet service providers
Streaming and downloadable TV and radio
Internet and mobile service providers and music on web sites
USA live, broadcast and synchronisation ASCAP, BMI, SESAC
EU live, broadcast and synchronisation IMRO, GEMA, SACEM, BUMA…
Rest of the world live, broadcast and synchronisation SOCAN, APRA, JASRAC…
 PRS writer’s share
Film and video companies, sync licensesPublisher
Theatres and opera houses, Grand Rights musicals, opera or ballet
Overseas sub-publishing, sync licenses and mechanical royalties
Covermounts of CDs and DVDs on publications
Sheet music sales and hire
Film, video and advertising companies sync licenses
TV and radio broadcasters; web, satellite and cable companiesMCPS
Audio and video jukebox suppliers
Telephone services supplying music-based services
Manufacturers of piano rolls, musical novelties, computer games and ringtones
Users of library and background music
Video companies, DVD producers
Record companies
Overseas mechanical income
 MCPS writer’s share

Some PPL and PRS performance licenses

These are some of the blanket licenses granted by PPL and PRS to users of the copyright performances they administer.

PPL licenses for businesses playing recorded music
Academy • Aerobics Instructor • Airport • Amateur Dramatic Society • Amusement Arcade • Amusement Park • Armed Service Base • Art Gallery • Arts Centre • Bed and Breakfast • Bank/Building Society • Bar • Barber • Barracks • Baths • Beauty Salon • Bingo Hall • Boats and Ships • Boutique • Bus Station • Buses • Cafe • Campus • Canteen • Caravan Park • Carvery • Casino • Cinema • Circus • Clinic • Club • Coaches • College • Community Association • Community Centre • Concert Venue • Country Club • Dance Academy • Dance Centre • Dance Club • Dance Hall • Dance Studio • Dance Teachers • Dentist • Department Store • Depot • Diner • Disco • DJ • Doctor • Exhibition • Factory • Festival • Fire/Police Station • Fitness Centre • Folk Dance Clubs • Football Club • Gallery • Greyhound Track • Guesthouse • Gym • Hairdresser • Hall for Hire • Harbour Docks • Health Club • Holiday Centre • Holiday Homes • Holiday Park • Hospital • Hotel • Ice Skating Rink • Institute • Institute • Instructor • Keep Fit Instructor • Laser Space Game • Leisure Centre • Leisure Club • Library • Lido • Live Music Venue • Lodge • Lounge • Mall • Manicurist • Members’ Club • Mobile DJ • Motel • Motor Race Track • Museum • Naafi • Nail Studio • Nightclub • Nursing Home • Office • Offshore Gas Rig • Offshore Oil Rig • Old Peoples Home • Operatic Society • Organiser • Penny Arcade • Picture House • Police/Fire Station • Political Club • Port • Production Company • Promoter • Public House • Railway Station • Residential Hotel • Resort • Restaurant • Retirement Home • Roller Skating Rink • Rugby Club • Salon • School • Shop • Shopping Centre • Social Club • Spa • Speedway Track • Sports Centre • Sports Club • Sports Ground • Sports Hall • Sports Stadium • Stadium • Surgery • Swimming Pool • Tanning/Solarium • Tea Rooms • Ten Pin Bowling Centre • Theatre • Theme Park • Trade Show • Train Station • University • Village Hall • Warehouse • Wine Bar • Working Mens Club • Youth Centre • Youth Club
PPL also licenses broadcasters and suppliers of music to businesses.
PRS licenses for businesses playing music
Premium Telephone Lines • Cinemas • Pubs and Bars • Hotels and Guesthouses • Shops • Restaurants and Cafés • Offices and Factories • Leisure, Sport and Fitness • Hair and Beauty • Health practices • Clubs • Churches • Local Authorities • Transport • Educational establishments • Music On Hold

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