Music player over a notebookThere are many ways for musicians to make money through their music, including record deals, tour merchandising, and royalties. The revenue that entices musicians to keep on producing their art, however, are the royalties they get from their work.

Understanding Royalties

Royalty management system providers like define a royalty as a type of payment made to the rightful owner of a copyrighted work, patent, franchise, or property. In the music industry, musicians typically earn two types of royalties: a mechanical royalty and a performance rights royalty.

A mechanical royalty is a type of revenue earned from a digital or physical reproduction of a musical work. By law, the current royalty rate stands at 9.1 cents for a song that’s less than or equal to five minutes. On the other hand, a performance rights royalty is revenue paid to a musician for a live performance of his or her work. Although a live performance can mean concerts, it can also refer to the public playing of recorded music, such as radio plays.

Collecting Royalties

Performance Rights Organizations, such as Broadcast Music Inc. (BMI) and American Society of Composers, Authors and Publishers, are generally the ones responsible for collecting the royalties on behalf of the musicians. To get those royalties, however, musicians must register for a separate collection society that handles royalty collection.

Royalty Issues that the Music Industry Faces

Piracy is a big problem for both emerging and established musicians. A conservative estimate of 10 percent music royalties is lost due to piracy, in fact. If a musician, for instance, is set to make $10,000 for his or her work, a tenth of that is lost due to unauthorized acquisition.

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Low royalty rates and unfair royalty payouts also hurt musicians. YouTube, for instance, pays only $0.0003 per play. On the same note, Apple Music planned not to pay musicians any royalties during the three-month period of its new music streaming service. This led Taylor Swift to write a letter to Apple for planning to play her music without compensating her.

Despite these problems, there have been efforts to make a musician’s life a bit easier. Apple said that it is planning to set its songwriting royalty rate to 9.1 cents per 100 streams. In battling piracy, the music industry can work closely with law enforcement agencies to identify and bring down online pirating services. Solutions like these can give aspiring musicians a fighting chance to earn good money in the industry.