You’ll be glad to know that you also get a performance royalty AND a mechanical royalty when your music is streamed on Spotify, Apple Music, YouTube etc. It also generates a royalty for your master rights as well (which would be collected by your record label or digital distributor).
For the ease of understanding, throughout this section we’re going to assume that 1,000,000 streams on Spotify generates a total of £5,000 in royalties, which is approximately right at the time of writing this (taken as an average of the years of distributions we’ve had at Sentric). There are obviously loads of ‘what ifs and maybes’ here including the territory it was streamed in, if the streams came from free or premium accounts and other voodoo and witchcraft that’s forever to be kept hidden thanks to NDAs.
You would generally expect around 80% of the income generated to go to the master rights owner to be distributed to you by your record label or digital distributor. I’m not going to go into the reason why the master rights gets so much more than the publishing rights here as it’s a bit of a minefield, but it’s essentially a hangover from the music industry’s previous practices where, in theory, the record labels had a much bigger overhead in breaking artists than publishers did.
Now, the remaining 20% which is the publishing income is then split again into a performance royalty and a mechanical royalty. Usually this is split 50/50 so it’d look like this for 1,000,000 streams:
£4,000 – Master Rights Income
£500 – Publishing Digital Performance Income
£500 – Publishing Digital Mechanical Income
I say ‘usually’ because of another wonderful quirk of the music publishing industry. Depending on the territory those streams happened and the local PRO, they might be split 65/35 rather than 50/50. BUT, as this is all about simplifying things let’s stick with the 50/50 split because that’s what PROs in the UK, US and Canada do.
So, let’s say those million streams happened in ten different European countries, miraculously as a dead even split (so therefore 100k streams per country). That means each country’s publishing income breakdown would be:
£50 – Publishing Digital Performance Income
£50 – Publishing Digital Mechanical Income
So now we’re essentially talking about a micropayment (a stream) broken down into a further micropayment (20% for the publishing income) which is then split in half (one for performance, one for mechanical) and then that’s split into ten further micropayments as it’s spread across ten different territories.
That sentence alone should hopefully show you just how many gaps there are for this income to get lost in. Mind bending at times, isn’t it?
Several years ago at Sentric we realised that the distribution of these royalties from PROs around the world were, frankly, not great and we identified that our songwriters were missing out on income they deserved for their hard work. Therefore we decided to take away the rights from the local PROs to collect the digital income on our behalf, and instead put them with a rather forward thinking company called AMRA.
AMRA directly licenses our songwriters’ digital mechanical rights, (and in some territories, the performance rights as well), to all the major online stores in well over 100 territories worldwide (excluding the US where Sentric collects directly via the local socieites including ASCAP, BMI, SESAC and Harry Fox) Therefore that means Sentric now collects that income like so:
10 x £50 – Publishing Digital Performance Income from each individual PRO that Sentric are members of and have directly registered your copyrights with.
£500 – Publishing Digital Mechanical Income via AMRA.
Now, the great thing here is that the income we receive from the PROs and from AMRA should match up with it being a 50/50 split. So say if from AMRA we receive £50 in digital mechanical royalties from your music being streamed in the UK, but we only receive £36 in digital performance royalties from the PRS, it allows us to go to the PRS and say; “Oi, now then, you clearly have underpaid our songwriter £14 and we have the data from AMRA to prove it”.
Simply put, since we started collecting digital royalties via this model, we’ve seen a 400% increase in digital publishing royalties paid out to our artists in just three years.