Mechanical Royalties

In-Depth Explanation

What Are Mechanical Royalties?

In the music industry, Mechanical Royalties are payments made to the owner of a musical Composition (the songwriter and their publisher) whenever that specific song is reproduced or distributed in either physical or digital form.

The term "mechanical" dates back to the era of piano rolls and the first vinyl phonographs, when songs were literally "mechanically reproduced" through a stamping or cutting process. The term survived the transition to CDs, MP3s, and now interactive streaming.

Crucial Distinction: Mechanical royalties are paid only to songwriters and publishers. They are completely separate from the money paid to recording artists and labels for the use of the Master Recording.

How Mechanical Royalties Are Generated

There are three primary ways a mechanical royalty is generated today:

1. Physical Sales (CDs, Vinyl, Cassettes)

When a record label wants to manufacture a vinyl record, they must obtain a Mechanical License from the publisher. For every single copy of the record manufactured, the label must pay the publisher a set fee, regardless of whether that record actually sells in a store.

2. Permanent Digital Downloads

When a consumer buys an MP3 track on iTunes or Bandcamp, they are creating a permanent digital copy of the song on their hard drive. This generates a mechanical royalty.

3. Interactive Streaming (Spotify, Apple Music)

This is currently the largest source of mechanical royalties globally. When a user chooses to play a specific song on an interactive streaming platform (like Spotify or Apple Music), the platform creates a temporary, cached digital copy of the file on the user's device. Legally, this constitutes a mechanical reproduction. Therefore, a portion of the overall Per-Stream Rate that Spotify pays out is allocated specifically for mechanical royalties.

(Note: Non-interactive streaming, like Pandora or terrestrial radio, where the user cannot choose the specific song, generates Performance Royalties, but NOT mechanical royalties).

How Much Do Mechanical Royalties Pay?

In the United States, the rate for physical sales and digital downloads is set by the government (the Copyright Royalty Board). This is known as the Statutory Rate.

• Currently, the rate is $0.124 (12.4 cents) per copy for songs under five minutes long (updated for 2024).

The mechanical rate for streaming is vastly more complicated. It is not a flat per-stream fee. Instead, the Copyright Royalty Board mandates that streaming platforms pay a percentage of their total gross revenue (currently around 15.1% to 15.35%) to a mechanical royalty pool, which is then divided proportionally among publishers based on total streams.

How to Collect Mechanical Royalties

This is the area where independent artists lose the most money, because they assume their digital distributor or their PRO is collecting everything for them.

1. Your Distributor (DistroKid, TuneCore) DOES NOT collect mechanical royalties. They only collect the master recording royalties.
2. Your PRO (ASCAP, BMI, PRS) DOES NOT collect mechanical royalties. They only collect performance royalties.

If you write your own songs and release them on Spotify, you are earning mechanical royalties every time your song is played. But to actually get that money, you must register with a mechanical rights society.

• In the United States: You must register your songs with The Mechanical Licensing Collective (The MLC).
• Internaterally: Every country has its own mechanical collection society (e.g., MCPS in the UK, GEMA in Germany, SACEM in France).

The easiest way for an independent artist to collect global mechanical royalties is to sign up for a Publishing Administration company (like Songtrust, Sentric, or TuneCore Publishing). For a small percentage fee (usually 15%), the admin company will register your songs directly with The MLC and every other mechanical society worldwide, ensuring you collect every penny you are owed.