Performance Royalties

In-Depth Explanation

What are Performance Royalties?

In the music industry, Performance Royalties are payments made to songwriters and music publishers whenever their musical Composition (the lyrics and melody) is performed, broadcast, or played in public.

This is one of the oldest and most significant revenue streams for songwriters. It is rooted in a fundamental concept of copyright law: if a business uses your music to entertain their customers or attract an audience, you deserve to be compensated for the value your music provides.

Crucial Distinction: Traditional performance royalties are paid only to the songwriters and publishers. They are not paid to the recording artist or the record label (unless those entities also wrote the song). Royalties for the broadcast of the sound recording itself are called Neighboring Rights.

What Constitutes a "Public Performance"?

The legal definition of a public performance is incredibly broad. Performance royalties are generated by:

1. Terrestrial Radio & TV: AM/FM radio stations, network television, and cable broadcasts playing the song.
2. Digital Streaming & Internet Radio: Interactive streaming (Spotify, Apple Music) and non-interactive streaming (Pandora, SiriusXM).
3. Live Venues: Concerts, arenas, stadiums, and music festivals where bands perform the song live (even if they are performing a cover).
4. Public Businesses: Restaurants, bars, nightclubs, retail stores, gyms, and hotels playing background music over a loudspeaker.

How Performance Royalties are Collected

It is impossible for a single songwriter to track every time a coffee shop in Paris or a radio station in Tokyo plays their song. Therefore, songwriters join Performance Rights Organizations (PROs) or Collective Management Organizations (CMOs).

In the US, the major PROs are ASCAP, BMI, SESAC, and GMR. In the UK, it is PRS.

These organizations issue Blanket Licenses to businesses. The businesses pay a flat annual fee to the PRO for the legal right to play any song in the PRO's massive catalog. The PRO then pools all these licensing fees, tracks the usage of the songs (via digital metadata logs and statistical sampling), deducts an administrative fee (usually 10-15%), and distributes the remaining money to their affiliated songwriters and publishers.

The Writer's Share vs. The Publisher's Share

When a PRO collects a performance royalty, they split the money into two equal halves:

1. The Writer's Share (50%): This money is paid directly to the songwriter(s). It bypasses any publishing company entirely. Even if you sign the worst publishing deal in history and give away 100% of your copyright, the PRO will still send the Writer's Share directly to your bank account.
2. The Publisher's Share (50%): This money is paid to the entity that owns or administers the publishing rights.
   • If you are an independent artist without a publisher, you are your own publisher, and you should collect this 50% as well.
   • If you signed a standard co-publishing deal, the publisher takes half of this (25% of the total) and gives you the other half (25% of the total).

Performance vs. Mechanical Royalties in Streaming

When a user streams a song on Spotify, the platform must pay two distinct publishing royalties simultaneously:

1. The Performance Royalty: Paid because the song is being transmitted (performed) digitally to the public. Collected by the PRO (ASCAP/BMI).
2. The Mechanical Royalty: Paid because a temporary digital copy of the audio file is created on the user's device. Collected by a mechanical society (like The MLC in the US).

If you are an independent songwriter, you must ensure you are registered to collect both of these royalties, usually by joining a PRO directly and using a Publishing Administration service to collect the mechanicals globally.