What Are Mechanical Royalties? August 2017
Now onto mechanical royalties which in the UK are collected and administered by the Mechanical Copyright Protection Society (MCPS).
Essentially, an MCPS royalty is generated every time your music is reproduced and that’s across all formats, including downloads and streaming.
For example, if a record label wanted to release your record and pressed a thousand CDs and a hundred vinyl, they’d need to pay a license fee for each unit they pressed in order to do so which would go to the songwriters (and their publishers) of the respective songs on said LP.
As emerging artists, your mechanical income will be notably less than your performance income at the start of your career, but when you start shifting units it’ll become a very noteworthy source of income indeed so it’s best to ensure you’re on top of it from the beginning and have your copyrights registered with the MCPS (which is yet another thing we do for you at Sentric – we’re a busy bunch).
Let’s take a look at the income flow for a mechanical royalty generated from a physical CD sale:
Currently, the MCPS rate in this country is 8.5% of the ‘dealer price’. The ‘dealer price’ is the cost per unit the record label sells the CD to the retailer for, not the cost the consumer pays for it at the till.
– So say Simon Records sells 100 CDs of Pursehouse’s GrimeTime LP to HMV at £5 per unit which generates £500 of revenue
– 8.5% of that £500 is £42.50 and that’s the mechanical royalty from that transaction.
– If there are ten tracks on the LP all running at four minutes each then that is divided between them so each track gets £4.25 each.
– Say track seven on that album was written by two people, that £4.25 is then split between the two songwriters and their respective publishers receiving £2.12 (and a half) each.
– That £2.12 is then split between the publisher and the writer on whatever terms they’ve agreed on (the Sentric service is an 80/20 split, so the artist would get £1.70 and Sentric would get 42p for the registration, administration, collection and distribution of the royalties).
Increasingly so, publishing royalties generated from digital services are becoming more and more important to emerging artists. Say you’ve had a song take off which has received a million streams on Spotify. Hark at you! Now a fifth of the royalties generated from those streams are for the songwriters, but where do you collect that from? Well, if those streams came via 25 different countries then you’re starting to look at micropayments from multiple PROs worldwide. Waiting for that money to trickle its way back to you is timely, cumbersome and fraught with potential nooks and crannies for your well-earned money to go missing or unclaimed for as previously mentioned. Here at Sentric, thanks to the size of our catalogue, we’re members of an initiative called ‘IMPEL’, and in their own words:
“IMPEL offers the benefits of collective rights management to independent publishers: the ability to combine their repertoire and offer it on a multi-territory basis to major digital music service providers through a single rights manager. Enjoy increased transparency, a single commission fee, faster transfer of payments and direct input on licensing terms.”
Which basically means the publishing income generated from streaming services like Spotify and Apple et al from a significant amount of countries comes to us in a single payment once a quarter. Nice and clean! This has resulted in a 479% increase in digital royalties to our artists since 2013, a trend we’re only expecting to continue thanks to the rise of streaming.