Publishing Royalties From Streaming

You’ll also be glad to hear that mechanical royalties are generated when your music is streamed. Basically, if you’re getting decent streaming numbers across any of the big platforms (Spotify, Apple Music, YouTube, Amazon Prime etc) then being on top of your digital publishing income is key, because if you don’t collect it efficiently and properly then you could be missing out on rather good money.

So…when a stream happens it generates a royalty for your master rights and a royalty for your publishing rights.

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:

• 10 x £50 – Publishing Digital Performance Income
• 10 x £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 digital income on our behalf and centralise our digital collection via one specific specialist PRO.

So now, instead of going to hundreds of territories worldwide to collect micropayments of micropayments, we have one specific PRO collect all of our digital income for us. Therefore it looks like this:

• 1 x £500 – Publishing Digital Performance Income via centralised digital collection
• 1 x £500 – Publishing Digital Mechanical Income via centralised digital collection.

Simply put, since we started collecting digital royalties via this model, we saw a 400% increase in digital publishing royalties paid out to our artists in just three years.

In the example above, if you weren’t using Sentric and, say, were just a member of your local PRO (ergo the PRS if you’re reading this in the UK), then you’d be relying on nine other PROs around Europe (who your copyrights aren’t registered with) figuring out who you are and with what PRO you are affiliated with. Then all of them would have to pay the PRS your performance income share (after taking a cut) who would then distribute it to you (after taking a cut themselves too). A process that *can* happen, in theory, and if it did, could take years for the money to find its way into your bank account. And also, if you’re not a member of the MCPS then you can essentially kiss goodbye to that mechanical income share.

See. I told you it was confusing.

Sync