Royalties are the most basic passive income of any composer or performer. However, different royalties depend on factors such as the right exploited or the medium through which it is produced. Royalties could be defined, strictly speaking, as a sum of money given to the owner, original or derivative, of the intellectual rights of creation to exploit one or several rights. Thus, this sum of money will be given to the composer or performer of the work as long as they have not assigned their rights to entities such as publishers or record labels, since, if so, it will be these companies that will receive those payments. Thus, the most critical royalties in the music industry are:
- Mechanical Royalties: This type of royalties is given to exploit a composer’s right to reproduction over his work. That is the possibility of making copies of his career in a phonorecord recording. The newly created Music Modernization Act sought, among other things, to further regulate reproduction licenses and mechanical royalties in the digital environment, so we will see substantial changes in this area in the coming years.
- Public Communication Royalties: This type of royalties are given for the exploitation of music in establishments open to the public, concerts, traditional radio, or any other source that may communicate a work. Every time the music is played in public establishments, these companies must recognize a value to entities known as Collective Management Societies, whose mission is to grant licenses, monitor the uses, collect the money, and deliver it to affiliated composers and performers executors, and phonographic producers.
- Synchronization Royalties: Royalties of this type refer to the possibility of a song or musical work becoming part of audiovisual production. These royalties are paid for a synchronization license, which can be a great way to generate money. These royalties will be granted directly to the composer or performer if they are independent or to their publisher or record label if it is the case of a signed artist. These types of licenses are granted by the holder of the economic rights or the entity that has been entrusted with this task. Likewise, digital aggregators enshrine in their services the option to grant this type of license.
- Digital Royalties: This type of royalties is paid to the phonographic producers, an independent artist, or a record label for the streaming or reproducing work in a digital platform or On-Demand. At present, these platforms account for more than 75% of the world’s musical exploitation, necessarily becoming an essential source of income for artists. An artist must be linked to a digital aggregator who distributes his music in the thousands of digital platforms to obtain these monies.
Likewise, an entity is responsible for recognizing royalties to performers, secondary artists, and phonographic producers for the money generated in non-interactive digital platforms, satellite television, and cable television.
Royalty Free Music is a type of music license that allows the purchaser of the music to pay only for the music license, after which the purchaser can use the theme for as long as they wish without having to pay any additional cost. Essentially, when you use royalty free music, you only have to pay a one-time fee to obtain the legal right to use a composer’s music; this does not mean that it is cost-free. It just means that once you acquire the music, you are not obligated to pay royalties for using it.