The Difference Between Licensing And Royalties

Licensing and royalties are both good income opportunities for musicians, but they aren't the same thing, and, more importantly, they each have separate activities that musicians need to do to handle them. There's a lot of misunderstanding about their differences, but a little explanation can help you to organize your music business to get the most out of each...
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Understanding Your Legal Rights, Getting Licensed and Generating Royalties

Licensing and royalties are both good income opportunities for musicians, but they aren't the same thing, and, more importantly, they each have separate activities that musicians need to do to handle them. There's a lot of misunderstanding about their differences, but a little explanation can help you to organize your music business to get the most out of each.

As with most legal issues in music, licensing and royalties are based on copyright law. Specifically,

the two copyrights you always have in music

: the composition copyright (

Form PA at the US Copyright Office

) and the sound recording copyright (

Form SR at the US Copyright Office

). When you create and record an original song, you automatically get both of these copyrights and own it. Because you own the music, if other people want to use it they need to
license
it from you (usually for a fee). Once licensed, your music may also generate
royalties
when it's performed.

Here's what musicians should know about each:

Licensing

Users of your music usually need your permission. Giving them permission is the same as giving them a license to use it. There are two types of licenses: compulsory and discretionary. In the US, once you release your music into the world, you can't stop people from exercising a compulsory license to cover your song. This compulsory right is created by the copyright statute itself. That said, you're entitled to collect royalties if they do because you are still the owner.

With the exception of compulsory license, any other use of your music requires your permission and a license to use (which you are free to refuse). For example, if a director wants to use your song in her video, she would need your permission and a license to do so. In this case, when you permit the use of your music to a visual medium, it's called a synchronization license, or sync license. Considering that a sync license is not compulsory, she'd have to go to you to negotiate a deal (and the price). Typically this is spelled out in a license agreement, or contract. Also, she would need to license both the sound recording and the composition, which results in two separate licenses. And, that can mean you can collect
two
separate fees.

Compulsory licenses, on the other hand, have rates set by the copyright statute. For example, the license that allows someone to cover your song (the mechanical license) is

currently set at 9.1 cents

per copy made, which is different than copy sold. For example, you need to pay 9.1 cents for each copy of a CD run you make when you duplicate it -- whether you sell it or not. By the way, just because the rate is set by statute, that doesn't mean you can't charge less or even waive the statutory fee if you want to let people use the music for free. Also, you also can't stop your song from being played on terrestrial radio or performed live, but you are entitled to
royalties
if that happens.

Royalties

Royalties are income generated when your music is performed or duplicated which you can collect from Performance Rights Organizations (PROs) when you register your music with them. These PROs collect the money from public performances and then disperse them to their copyright owners. For example, composition PROs like

ASCAP

,

BMI

, or

SESAC

collect money from radio stations, TV stations, music venues, and businesses who play music to the public. They then survey these places to determine who should get paid and then distribute the funds.

Of course if you don't sign up at these composition PROs (or Sound Recording PROs like SoundExchange) then you won't get the income they're collecting -- even if your music is performed and is owed a royalty payment. You need to participate to get paid. But once you do, this becomes "mail money".

Copyright gives you a lot of possibilities, so i

t's good to know what money you can and should be making

. The good news is you
can help create both licensing and royalty-generating opportunities for your music.

For example, if your song is used in a TV show, the director needs to get a sync license from you. You should negotiate a fee and get it in writing in a license agreement. The agreement will specify the basic terms such as the fee, the area of distribution, exclusivity, payment method, etc. But it should also specify they're required to submit the

cue sheets.
Cue sheets are needed so when the TV show is played on the air, the Composition PRO can be informed of its use. Receiving the cue sheet then helps it collect royalties from the TV stations that play the show, which is a second money making opportunity that the license enabled.

Of course, the way to succeed at getting licensing and royalty income from your music is to 

get heard as much as possible

. That way other musicians will want to cover your music and music supervisors may discover your music for use in film, TV, and commercials. The more you're known and heard, the more likely you'll generate licensing and royalty opportunities.

Related:

#royalties #licensing #copyright #yourrights #legal #makingmoneywithmusic

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