The Unsung Royalty: The Mechanical Royalty
By: Karl Fowlkes
Tags: Business, Music, Technology, Music Business, Entertainment

Photo by Heidi Fin on Unsplash

I refer to the Mechanical Royalty as the lost royalty because when most people think of publishing they almost always think of ASCAP or BMI. These performance rights organizations collect the so-called “public performance royalty”. Public performances can include play on television or radio, in clubs and restaurants, on websites, or on other broadcasting systems. When your song is publicly broadcasted in one of the aforementioned mediums, a royalty is generated for which your PRO collects and pays out. Public Performance royalties could make up a large chunk of your publishing income. Another large chunk of your publishing should be coming from your mechanical royalty. The problem is a lot of producers and songwriters are not collecting them.

Mechanical royalties are generated when a copyrighted work is reproduced in digital and physical formats. Songwriters and producers are paid mechanical royalties per song purchased, downloaded and/or streamed on digital platforms. The current statutory mechanical royalty rate for physical recordings (such as CDs, Vinyls, etc) and permanent digital downloads is 9.1¢ for recordings of a song 5 minutes or less, and 1.75¢ per minute or fraction thereof for those over 5 minutes. Although vinyls and physical reproductions of music are still alive today, majority of your mechanical income will likely derive from streaming as we enter a new decade. The streaming calculation is a bit more complicated nonetheless. The mechanical streaming rate is about $0.06 per 100 streams, or $0.0006 per stream, according to Royalty Exchange. Audiam actually lets you calculate your mechanical royalty revenue here. Another quick note, Mechanical Royalties are collected by different societies in each country.

Quick math showcases how lucrative mechanical royalties used to be. When an album was purchased via a CD or Cassette, 9.1¢ were generated. To generate $1,000 in mechanical royalties, you would only need approximately 11,000 downloads or physical albums sold via Royalty Exchange. In the days when physicals and downloads reigned supreme, mechanical royalties were rather large.

There is some hope for larger mechanical royalty payouts in the new streaming era. The new mechanical royalty rates as established by the Copyright Royalty Board will increase from 11.2% of streaming revenue in 2018, to 15.1% of streaming revenue by 2022, marking a 44% increase over the next few years. It is clear that the mechanical royalty will play a major part in publishing revenue over the course of the next generation. Still many songwriters and producers have let this royalty sit in space instead of cashing in.

A major reason why independent songwriters and producers don't collect their mechanical royalty is because the Harry Fox Agency (the lead mechanical collection society), while great at what they do, is notoriously difficult to deal with independently. This alone is one of the biggest reasons why a lot of mechanical royalties are left unpaid. Others who pay out US mechanical royalties are Music Reports, Inc. and Audiam. Audiam is an interesting player in the mechanical royalty space as well. While they only pay out streaming mechanical royalties in the US (not digital downloads), they look to be filling the gap of providing mechanical royalty collection for the independent composer.

Audiam is an interactive streaming mechanical royalty collection agency. It gets its music publishing members accurately paid from YouTube, Spotify, Apple Music, Google Play, Rhapsody, Beats, Amazon Prime, Mood Music, TouchTunes and other interactive streaming services. We license, police, research, audit, collect and distribute “interactive” streaming mechanical royalties. Any publishing administrator (either self published or a larger publishing entity) can join Audiam as long as they represent the administrative rights to their songs/compositions.

via Audiam.

Another way to collect your mechanical royalties is though a publishing administration partnership. A company like Songtrust will register and collect your publishing royalties across the board including the elusive mechanical royalty. These companies serve as a one stop shop for a majority of your publishing revenue for a rather small administration fee. This could save you a lot of time and hassle.

Many songwriters and producers make the monumental mistake of thinking that because they registered with BMI, ASCAP, or SESAC they will be paid mechanical royalties or that they are collecting all of their publishing income. To be clear again, performing rights organizations do not collect your mechanical royalty. To get paid your mechanical royalties, you must be registered with a separate collection agency such as the Harry Fox Agency (HFA), Music Reports (MRI) or Audiam. But remember, companies such as the Harry Fox Agency (HFA) or Music Reports (MRI) only really deal with music publishing companies or administrators thus for the individual it is hard to collect without a large publisher or administrator in the picture.

Unlike, performance royalties which can be extremely unpredictable and impossible to calculate, mechanical royalties are a steady and calculable source of publishing revenue. As stated earlier, with mechanical royalty rates on the rise the next couple years, for many, mechanical royalties can and will be a significant chunk of income. It is imperative to know whether you are collecting your mechanical royalty and if not, devise a plan to start collecting.

If you are not signed to a big publishing company or that route is not attractive to you, I strongly suggest you look into a publishing administration company such as Songtrust or TuneCore Music Publishing because of their global collection capacity and convenient portal. For a small one time fee and 15% commission on the ‘publisher’s share’ of royalties a company like Songtrust can collect on your behalf and you can confidently know that you are reaping a great majority of your publishing income.

The reality is, if you are not with an admin company or a large music publishing company, more than likely you are not collecting your mechanical royalty. If this is you, it’s time to do something about it.

Still, with everything that has been said, it will be interesting to see how companies like the Harry Fox Agency, Audiam and Music Reports co-exist with the government mandated Mechanical Licensing Collective. The Mechanical Licensing Collective (MLC), was derived from the newly passed Music Modernization Act and will be tasked with tracking, collecting, and distributing mechanical licenses from streaming services in the U.S. The new collective will be game changing to say the least and will institute a new public database that will house information relating to the ownership of publishing shares of all musical works. See Below.

Mechanical Licensing Collective The legislation establishes a “mechanical licensing collective” (“MLC”) to administer the blanket license, and a “digital licensee coordinator” (“DLC”) to coordinate the activities of the licensees and designate a representative to serve as a non-voting member on the board of the MLC. The MLC will receive notices and reports from digital music providers, collect and distribute royalties, and identify musical works and their owners for payment. The MLC will establish and maintain a publicly accessible database containing information relating to musical works (and shares of such works) and, to the extent known, the identity and location of the copyright owners of such works and the sound recordings in which the musical works are embodied. In cases where the MLC is not able to match musical works to copyright owners, the MLC is authorized to distribute the unclaimed royalties to copyright owners identified in the MLC records, based on the relative market shares of such copyright owners as reflected in reports of usage provided by digital music providers for the periods in question.

via Copyright.Gov

Just know, publishing is on the upswing and a big reason for that is the future of the mechanical royalty. Collect yours!