How are mechanical royalties and performance royalties different?

Mechanical royalties and performance royalties might seem similar at first glance. However, they are not the same thing, and sometimes the details can be confusing.

Understanding these differences is crucial for songwriters, composers, and music publishers to maximize their earnings and ensure they receive the income they’re entitled to.

Key Takeaway:

• Mechanical royalties are paid for the reproduction and distribution of a song.
• Performance royalties are paid when a song is played publicly, such as on radio, TV, live performances, or streaming services.

However, who gets paid and how royalties are collected also differs. Let’s break it down.

What are performance royalties?

Performance royalties are payments made to songwriters, composers, and publishers for when their musical work is publicly performed or broadcasted. Royalties are generated whenever a work is: 

• • Played on radio, TV, or streaming services (e.g., Spotify, Apple Music, YouTube Music)
  • Performed live at concerts, festivals, or public venues (bars, restaurants, retail stores)

• Broadcast in movies, commercials, or video games 

Who collects performance royalties?

Performance royalties are typically collected by Performing Rights Organizations (PROs) like ASCAP, BMI and SESAC in the United States, and SOCAN in Canada. These organizations monitor public performances and distribute royalties to the respective songwriters and rights holders.

Who gets paid performance royalties? 

Songwriters, composers, and publishers are the ones that can collect performance royalties. They are not paid to performers, session musicians, or producers. If a song you wrote is played on the radio, you (as the songwriter) and your publisher get paid performance royalties—but the artist who performed the song does not receive them (unless they also wrote the song).

How are performance royalties calculated?

Unlike mechanical royalties, which have a set statutory rate in many countries, performance royalties are calculated based on several factors, including how the music is used, the revenue generated by the platform or venue, and the licensing agreements in place between businesses and Performing Rights Organizations (PROs). Each country and PRO has its own system for determining how royalties are collected and distributed, but the general principles remain the same.

• Radio & TV: PROs collect licensing fees from radio stations and TV networks. Larger stations (with more listeners) pay higher fees than smaller, local stations. These fees are distributed proportionally based on how often your song is played. 
  • Example: If a song is played on a national radio station, it earns more than if it’s played on a small college radio station.

• Streaming services: Streaming services pay performance royalties based on a percentage of their revenue. PROs distribute these royalties based on how often a song is streamed. Subscription-based streams pay more than ad-supported streams.
  • Example: If your song gets 1 million Spotify streams, you will receive both mechanical and performance royalties, but the exact amount depends on the service’s revenue and licensing deals.
• Live performances & public venues: Concert venues, bars, and festivals pay a blanket license to PROs. Some PROs track setlists and directly allocate royalties to songwriters whose music was performed. Others estimate payouts based on popular charts and surveys.
  • Tip: If you’re a performing songwriter, submit your setlists to your PRO to get paid for your own live performances!

Don’t confuse performance royalties with other types of royalties 

Performance royalties are triggered by public performances of music, but there are other types of royalties as well. Many songwriters miss out on earnings because they don’t fully understand all the types of royalties available. In addition to performance royalties, you may also be entitled to:

• Mechanical royalties (for reproductions and sales, which we will get into below)
• Digital performance royalties (on the sound recording for non-interactive streams, like Pandora)
• Neighboring rights royalties (for sound recordings, paid to performers and producers)

At MusicTeam®, we provide the music catalog management services you need to manage your music metadata, register your music and claim the royalties you are owed.

What are mechanical royalties?

Mechanical royalties are payments made to songwriters (sometimes called songwriter royalties in a non-legal context), composers and music publishers for the reproduction and distribution of their musical compositions.

The right to collect mechanical royalties exists as soon as a composition is fixed in a tangible form (e.g., written down or recorded), regardless of whether it has been registered with a copyright office.

Mechanical royalties are generated whenever a musical work is reproduced or distributed:

• Recorded compositions: Any work that is recorded and distributed, whether through physical media (CDs, vinyl records, cassettes) or digital formats (downloads, streaming);
• Sheet music: Printed versions of compositions, when reproduced and sold;
• Cover versions: When another artist records and releases a cover of a composition;
• Samples: If a portion of a composition is sampled in another song (though not always).

Who collects mechanical royalties?

Mechanical royalties are collected by mechanical rights organizations or CMOs. Some of the major ones include:

• USA: The Mechanical Licensing Collective (MLC), Harry Fox Agency (HFA)
• UK: MCPS
• Canada: CMRRA
• Germany: GEMA

Fun fact: You earn both mechanical and performance royalties from streaming services. The mechanical royalty is generated when a song is played on-demand, while the performance royalty is earned from the public broadcast of the song.

Who gets paid mechanical royalties?

Mechanical royalties go to the creators of the musical composition. If a songwriter has a publishing deal, mechanical royalties are split between the songwriter and the publisher, typically 50/50. If the songwriter self-publishes, they keep 100% of the royalties. Unless they wrote the song or have been credited as songwriters, recording artists, musicians and producers do not receive the mechanical royalties from the musical work. 

How to calculate mechanical royalties

Mechanical royalties are calculated and collected differently in different parts of the world depending on the CMO. For physical sales and digital downloads , they are collected by mechanical rights organizations or societies in each country. They are calculated according to rates established by national copyright boards, often called the statutory rate.

For streaming, the rate is more complex and is based on a percentage of revenues.

The calculation for streaming services takes into account factors such as:

• The streaming service’s revenue and number of subscribers
• The territories where your music was streamed
• The type of streaming offered (e.g., ad-supported or subscription-based)

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