Mechanical vs. Performance Royalties: Understanding Your Revenue Streams

Introduction

You've released your music, and you're thrilled to see the stream counts climbing on Spotify. Your song is getting radio play in your hometown, and you've even discovered that a cover band performed it at a local venue. But when you check your bank account, you're left wondering: where is all the money from these plays actually coming from, and more importantly, are you collecting it all?

Core Thesis: For songwriters, two of the most important and misunderstood revenue streams are mechanical royalties and performance royalties. These represent the majority of income that flows from your compositions, yet most independent artists aren't properly set up to collect them.

What You'll Learn: This comprehensive guide will clearly define each royalty type, explain exactly where they originate (including the often-overlooked income from cover songs and radio play), and detail the specific organizations responsible for getting that money into your pocket. By the end, you'll understand why missing even one piece of this collection puzzle could cost you thousands of dollars in unclaimed royalties.

What Are Mechanical Royalties?

The "Reproduction" Royalty: A Simple Definition

A mechanical royalty is earned whenever your composition—the song's melody, harmony, and lyrics—is reproduced in any format. Think of it as the payment for making a "copy" of your musical work, whether that copy exists as a digital file, a vinyl record, or a CD.

The term "mechanical" has historical roots dating back to player pianos in the early 1900s, which "mechanically" reproduced songs using perforated paper rolls. While the technology has evolved dramatically, the core concept remains the same: you get paid whenever someone makes a reproduction of your composition.

Where Do Mechanical Royalties Come From in the Modern Era?

Primary Sources of Mechanical Royalties:
• Interactive Streaming: Every single stream on platforms like Spotify, Apple Music, Amazon Music, and Tidal generates a mechanical royalty for the songwriter
• Digital Downloads: Each time your song is purchased and downloaded from stores like iTunes, Amazon Music, or Bandcamp
• Physical Sales: The manufacturing and sale of physical products like vinyl records, CDs, and cassettes
• Cover Songs: When another artist records and releases their version of your song, they must obtain a mechanical license and pay you royalties on every copy they sell or stream

This last point is particularly important for successful songwriters. Cover song royalties can become a significant revenue stream as your catalog gains recognition and other artists choose to record their own versions of your compositions.

Who Gets Paid Mechanical Royalties?

Mechanical royalties are paid exclusively to the songwriter(s) and their music publisher. This income is tied directly to the composition copyright, not the sound recording. If you wrote the song, you're entitled to these royalties regardless of who performs or records it.

What Are Performance Royalties?

The "Public Play" Royalty: A Simple Definition

A performance royalty is earned whenever your composition is performed, broadcast, or streamed in a public setting. The key word here is "public"—this includes any performance outside of a private, domestic environment.

"Public performance" is defined much more broadly than you might expect, encompassing everything from a major radio station playing your song to background music in a retail store.

Where Do Performance Royalties Come From?

Primary Sources of Performance Royalties:
• Radio and TV Broadcasts: Terrestrial radio (FM/AM), satellite radio (SiriusXM), internet radio stations, and songs used in television shows, commercials, and films
• Live Performances: When your song is performed at concerts, festivals, clubs, or even by cover bands in bars and restaurants
• Streaming Services: Every stream on Spotify, Apple Music, Pandora, and other platforms generates both a mechanical and a performance royalty
• Public Spaces: Background music played in businesses like restaurants, retail stores, gyms, hotels, and waiting rooms

Businesses that play music publicly are required to obtain a "public performance license" and pay fees that are distributed to songwriters and publishers as performance royalties.

Who Gets Paid Performance Royalties?

Performance royalties are paid to the songwriter(s) and their publisher, typically split 50/50:
• Writer's Share (50%): Paid directly to the songwriter
• Publisher's Share (50%): Paid to the music publisher

If you don't have a publisher, you can collect your own publisher's share, effectively receiving 100% of the performance royalties from your compositions.

How Are They Collected and Paid?

The collection and distribution of these royalties involves a complex ecosystem of organizations. As a songwriter, you don't collect these payments directly from Spotify, radio stations, or venues—specialized organizations handle this process for you.

Collecting Mechanical Royalties: The MLC and Publishing Administrators

For U.S. Digital Streams: The Mechanical Licensing Collective (The MLC) is your primary collection source. Created by the Music Modernization Act of 2018, The MLC issues blanket licenses to digital streaming services like Spotify, Apple Music, and Amazon Music. These services pay The MLC, which then distributes the mechanical royalties to registered songwriters and publishers.

For Physical Sales & International: The MLC only handles U.S. digital mechanical royalties. For income from physical product sales (CDs, vinyl) and all mechanical royalties generated outside the United States, you need either a music publisher or a publishing administration company. Companies like Songtrust, Sentric Music, and the publishing divisions of distributors like TuneCore Publishing and CD Baby Pro handle this global collection for a commission.

Collecting Performance Royalties: The Role of PROs

What is a PRO?: A Performing Rights Organization (PRO) serves as the crucial intermediary that collects performance royalties. PROs issue licenses to businesses that play music publicly, monitor and track those performances, and distribute the collected fees to their affiliated songwriters and publishers.

The Main U.S. PROs:
• ASCAP (American Society of Composers, Authors, and Publishers): The oldest PRO in the United States
• BMI (Broadcast Music, Inc.): The largest PRO by membership
• SESAC (Society of European Stage Authors and Composers): An invitation-only PRO

The Process: Songwriters must join one PRO to receive their writer's share of performance royalties. You cannot be affiliated with multiple PROs simultaneously in the United States.

Summary Chart: Who Collects What?

Collection Pipeline Overview:
• Mechanical Royalties (from U.S. Streaming) → Collected By: The MLC
• Mechanical Royalties (from Physical Sales/International) → Collected By: Your Publisher or Publishing Administrator
• Performance Royalties (from all sources) → Collected By: Your PRO (ASCAP, BMI, or SESAC)

Frequently Asked Questions

Do I get both mechanical and performance royalties from a single Spotify stream?

Yes, absolutely. Every interactive stream on platforms like Spotify generates both royalty types for the songwriter. The streaming service pays a mechanical royalty for the reproduction of your composition and a performance royalty for the public performance of your song. This is why it's crucial to be properly registered with both The MLC and a PRO—missing either registration means you're only collecting half of your streaming royalties.

Does my distributor (like DistroKid) collect these for me?

Your distributor primarily collects royalties for the sound recording (the master recording), which go to the performing artist. To collect your songwriting royalties (both mechanical and performance), you must separately register with a PRO and The MLC. Some distributors offer publishing administration services as add-on features to help you collect songwriting royalties for a commission, but this is typically a separate service from their basic distribution offering.

Can I join both ASCAP and BMI?

No, you cannot. As a songwriter in the United States, you can only be affiliated with one PRO at a time. You must choose between ASCAP, BMI, or SESAC to collect your performance royalties. However, if you also own a publishing company, that entity could potentially affiliate with a different PRO than your songwriter affiliation.

What's the difference between a PRO and The MLC? I'm confused.

This is a common source of confusion, but the distinction is straightforward: PROs (like ASCAP and BMI) collect money from "public performances" of your songs—radio play, streaming, live performances, and background music in businesses. The MLC collects money specifically from digital "reproductions" of your songs in the United States—the mechanical royalties from streaming and downloads. They handle completely different revenue streams, and you need both to collect all the money you're owed as a songwriter.

Do I need a publisher to collect these royalties?

While you can register directly with a PRO and The MLC to collect some of your royalties, a publishing administrator becomes essential for comprehensive collection. Publishers and publishing administrators collect mechanical royalties from physical sales, international sources, and numerous smaller revenue streams that individual songwriters often miss. They also handle the complex administrative work of tracking your songs worldwide, ensuring you receive all royalties across different territories and platforms. For most active songwriters, the commission paid to a good publishing administrator (typically 10-20%) is worth the significant additional income they recover.

How long does it take to receive these royalties?

Timing varies by source and collection organization. The MLC typically pays quarterly, with a lag time of about 6-9 months from when the stream occurred. PRO payments also occur quarterly but can have varying delay periods depending on the performance source—radio royalties might come through faster than international performance royalties. This delay is why consistent registration and proper setup are so important; you're building a pipeline of future income that will flow for years to come.

What happens to unclaimed royalties?

Unfortunately, billions of dollars in royalties go unclaimed every year because songwriters aren't properly registered or aren't aware of all available revenue streams. The MLC holds unclaimed mechanical royalties for a period before they're distributed to other rights holders proportionally. PROs have similar policies for unclaimed performance royalties. This represents one of the biggest missed opportunities in the music industry—money that rightfully belongs to songwriters but never reaches them due to lack of proper registration and education.