The Business of Music: A Musician's Guide to Copyright, Licensing, and Royalties
Introduction
Purpose: To demystify the business side of music for independent artists, turning creative passion into a sustainable career.
Core Thesis: Understanding how your music generates revenue is as crucial as creating it. This guide breaks down the essential pillars of music monetization: copyright, licensing, and royalties.
What You'll Learn: This comprehensive roadmap covers how to protect your work through copyright, understand how it earns money through various licenses, navigate the different types of royalties, work with key organizations that collect your money, and monetize your content on platforms like YouTube.
Understanding Music Copyright: The Foundation of Your Career
What is Music Copyright and Why Does It Matter?
Simple Definition: Copyright gives you, as a creator, exclusive rights to control how your original musical work is used, and no one can use another's copyrighted works without a license. In the music industry, the licensing of copyrights are the basis on which royalty payments are made.
Automatic Protection: Music created today is protected by copyright laws when the work is "fixed in a tangible medium of expression." This means copyright protection begins the moment your music is recorded as an audio file or written down as sheet music. Any work produced after January 1, 1978 is protected for the lifetime of the last surviving author plus an additional 70 years.
The Two Copyrights Hidden in Every Song
A sound recording and the music, lyrics, words, or other content included in the recording are separate copyright-protected works. These works are subject to different rules and are commonly owned and licensed separately.
The Composition (The "Song")
What it covers: A musical work is a song's underlying composition along with any accompanying lyrics. This includes the melody, harmony, chord progressions, and lyrical content.
Who owns it: Musical works are usually created by a songwriter or composer. The songwriter(s) and/or their music publisher own this copyright.
The Sound Recording (The "Master")
What it covers: A sound recording is a series of musical, spoken, or other sounds fixed in a recording medium, such as a CD or digital file, called a "phonorecord."
Who owns it: Sound recordings can be created by the recording's performer, the producer, or other parties. This copyright typically belongs to the artist who performed it, the producer, or the record label that financed the recording.
Your "Bundle of Rights" as a Copyright Owner
Copyright isn't a single right but a collection of exclusive rights you control. Here are the key rights you have as a copyright owner:
• The Right to Reproduce: To make copies of your music (e.g., pressing vinyl, digital duplication)
• The Right to Distribute: To sell or share copies with the public
• The Right to Create Derivative Works: To create new works based on the original (e.g., remixes, samples, translations)
• The Right to Publicly Perform: To have your music played in public (e.g., on the radio, in a concert, on a stream)
• The Right to Publicly Display: To display your lyrics or sheet music
How to Formally Register Your Copyright (And Why You Should)
The Benefit: If your work is a U.S. work, you do need to register your work with the Copyright Office before bringing an infringement lawsuit in federal court. Formal registration serves as a public record of ownership and enables you to pursue certain legal remedies.
The Process (Simplified):
• Navigate to the official U.S. Copyright Office website (copyright.gov)
• Use the Electronic Copyright Office (eCO) portal to file
• Select the correct application: Form PA for the composition (Performing Arts) and Form SR for the sound recording
• Consider group registration options like GRAM (Group of Works on an Album of Music) to save time and money
The World of Music Licensing: How Your Music Earns Money
What is a Music License?
Definition: A formal agreement where you (the copyright owner) grant someone permission to use your music in a specific way for a defined period, typically in exchange for a fee or royalties.
The 5 Major Types of Music Licenses You Need to Know
Mechanical License
Use Case: For reproducing and distributing a song through physical copies like CDs/vinyl, digital downloads, and interactive streams.
Key Fact: A cover song DOES fall under this compulsory license, so all you need to do is pay the license fee and you're automatically accepted. This is the license required to legally release a cover song.
Performance License
Use Case: This license grants the music user the right to play a song in public settings such as concerts, live music venues, bars and restaurants, on television, or digital streaming platforms.
Examples: Radio broadcasts, TV shows, live concerts, background music in restaurants and stores, and streaming services.
Synchronization (Sync) License
Use Case: Sync licenses are necessary when using songs musical works in audiovisual media, such as films, TV shows, commercials, video games, or YouTube videos.
Examples: Synchronization royalties are payments made to music rightsholders when their songs are used alongside visual media. Someone needs to get a sync license from the copyright owner to use a song in a movie, TV show, or ad.
Master Use License
Use Case: For using a specific sound recording in another project.
Key Fact: If you wanted to use a composition AND a recording that you didn't write or create, you'd need TWO licenses. One for the song, and one for the recording. Often required alongside a sync license - the sync license pays the songwriter, while the master use license pays the owner of the recording.
Print License
Use Case: For reproducing and distributing sheet music or lyrics.
Decoding Royalties: Mechanical vs. Performance
What Are Music Royalties? A Simple Definition
Explanation: Royalties are the payments generated whenever your music is used under one of the licenses mentioned above. The music business generates multiple types of royalties, and each royalty stream is dependent on the kind of copyright it is associated with. They are your primary music revenue streams.
Mechanical Royalties: The "Reproduction" Royalty
How they're earned: These are called "reproduction" royalties for sound recording, and "mechanical" royalties for the composition. In either case, any time a song is sold in any format, or streamed, a royalty is due.
Sources:
• Interactive streams on platforms like Spotify and Apple Music
• Sales of CDs, vinyl records, and digital downloads
• Cover versions of your song recorded by other artists
Who gets paid: The songwriter(s) and their publisher.
Performance Royalties: The "Public Play" Royalty
How they're earned: Whenever music is played publicly, someone is likely paying a performance royalty. This includes over the radio, in restaurants/bars, live performances, and even through streaming services like Spotify.
Sources:
• Radio (terrestrial, satellite, internet) and TV broadcasts
• Live performances at venues
• Streams on services like Spotify, Apple Music, and Pandora
• Background music in businesses like bars, gyms, and retail stores
Who gets paid: The songwriter(s) and their publisher.
How Royalties Are Collected
Mechanical Royalties: Mechanical royalties that flow from digital streaming are collected and distributed by the Mechanical Licensing Collective (MLC) and require the songwriter and/or music publishers to sign up for membership. For non-digital uses, they're collected by music publishers or administrators globally.
Performance Royalties: These royalties are collected and distributed by Performing Rights Organizations (PROs) such as like ASCAP, BMI, SESAC, and GMR. In order to collect these royalties from a PRO, songwriters have to sign up for PRO membership.
The Key Players: PROs, The MLC, and SoundExchange
Performing Rights Organizations (PROs)
What is a PRO?
Role: To collect performance royalties from thousands of music users (radio stations, venues, etc.) and distribute them to their affiliated songwriters and publishers.
Read our guide to PROs here.
A Comparison of the U.S. PROs: ASCAP vs. BMI vs. SESAC
• ASCAP (American Society of Composers, Authors, and Publishers): Non-profit, open to all (with a small fee), and governed by its members
• BMI (Broadcast Music, Inc.): Non-profit, free for songwriters to join, and the largest PRO by membership size
• SESAC: For-profit and invite-only, offering a more curated and hands-on approach for its members
The Mechanical Licensing Collective (The MLC)
What is The MLC and Why Does It Exist?
Origin: The Mechanical Licensing Collective (MLC) is a nonprofit organization established under the Music Modernization Act of 2018. The Music Modernization Act (MMA), signed into law in 2018, is a big update to copyright law, mainly focused on how music licensing works in the digital world. It tackles long-standing problems, like how musicians and songwriters get paid from streaming services.
Function: It was created to issue blanket mechanical licences for qualified streaming services in the United States, such as Spotify, Apple Music, Amazon Music, and Tidal. On January 1, 2021, The MLC began issuing blanket mechanical licenses for interactive streaming and download services (digital service providers or DSPs) in the United States.
SoundExchange
What is SoundExchange and How is it Different?
Unique Role: It collects digital performance royalties for the sound recording (the master), not the composition, from non-interactive streaming services (like Pandora, SiriusXM) and internet radio.
Who SoundExchange Pays:
• Master Rights Owner (Label/Independent Artist): Receives 50% of the royalty
• Featured Artist(s): Receives 45%
• Non-Featured Musicians (e.g., session players): Receives 5% via a fund managed by AFM & SAG-AFTRA
Monetizing on YouTube: A Guide to Content ID
What is YouTube Content ID?
Definition: YouTube's Content ID system enables music partners to easily identify and manage their music on YouTube. YouTube scans uploaded videos against a database of music that you've submitted. Some copyright owners use Content ID, YouTube's automated content identification system, to easily identify and manage their copyright-protected content on YouTube.
How Content ID Works for Your Music
The Process: Launched in 2007 by Google, YouTube's Content ID system was designed to protect copyright owners from infringements. It automatically identifies copyrighted material in uploaded videos and notifies the content owner. Your distributor submits your music to YouTube, creating a unique "asset." YouTube's system creates unique digital fingerprints from reference files, allowing it to detect even partial matches.
The Claim: If a vlogger uses your song in their video, Content ID will flag it, notify you, and allow you to take control over how that content is used, including monetization.
Your Options: Monetize, Track, or Block
When content in a user-uploaded video matches a work that you own, you get to decide whether to monetize the video, block it, or track it.
• Monetize: Ads can be placed on the video, allowing you to earn revenue from its views. This is the most common choice.
• Track: View analytics for the video without placing ads
• Block: If you don't want your song associated with a particular video, you can block it from appearing on YouTube entirely.
How to Get Access to Content ID
For Most Artists: If you distribute your music with amuse using our Boost or Pro plan, you just upload your music and select YouTube Content ID as a store, then we upload your music to us and then we upload it to the YouTube Content ID system. Access is granted through your music distributor. Most major distributors offer this service, sometimes for an additional fee or commission.
Direct Access: Content ID is available to copyright owners who meet specific criteria. To be approved, they must own exclusive rights to a substantial body of original material that is frequently uploaded to YouTube. This is reserved for major rights holders like large labels and publishers.
Understanding YouTube Royalties from Content ID
How it works: By choosing to monetize these claims, artists earn money through ads placed on the videos. YouTube splits the ad revenue, with a percentage going to the original content owner. You earn a percentage of the advertising revenue generated from any video that uses your music and is claimed via Content ID.
Important Note: YouTube Content ID payouts surpassed $12 billion in December 2024, and rightsholders monetized 90% of claims last year, per the platform. "Over 99% of Content ID claims made in 2024 were made through automated detection," YouTube added. Payouts can be small on a per-view basis but can add up significantly across millions of views on the platform.
Frequently Asked Questions (FAQ)
Do I lose my rights if I register with ASCAP or BMI?
No, you retain full ownership of your copyrights. You are simply granting them the right to administer your performance rights and collect royalties on your behalf.
What's the difference between a music publisher and a PRO?
A PRO (like BMI/ASCAP) only collects performance royalties. A music publisher actively works to exploit your compositions to generate royalties from all sources (mechanical, sync, performance, etc.) and handles the administration of your copyrights.
If my distributor offers YouTube Content ID, do I still get paid for views on my own channel?
Yes. To whitelist means to "exclude". If you do not want TuneCore to collect revenue for your sound recordings on your channel, you can set your Channel Preferences to whitelist (exclude) your YouTube channel. Content ID is for monetizing your music when it's used in other people's videos (user-generated content). You monetize your own channel through the YouTube Partner Program.
Do I need to register with The MLC if I'm already with a PRO?
Yes. The MLC is responsible for the collection of mechanical royalties only. There is no overlap in between the MLC and the collection of performance royalties through Performing Rights Organizations (P.R.O.s). PROs collect performance royalties, while The MLC collects U.S. digital mechanical royalties. They are separate and necessary organizations for collecting all the money you're owed.
Can I register cover songs with The MLC?
Tracks are eligible to be registered with the MLC if they are original content only. Covers, public domain, and tracks that use non-exclusive elements like samples, loops, or leased beats are not eligible.
How long does it take to see YouTube Content ID earnings?
Once you've signed up to send your tracks to YouTube Content ID, it can take up to a month for YouTube's Content ID matching system to find all the videos across the platform that are using your sound recordings. Royalties collected by The MLC within any given quarter are paid out two quarters after they are collected. This means that royalties collected in Q1 of a given year (January, February, March) will appear in your CD Baby Sales & Accounting in Q3 of that year.