Mechanical royalties, performance royalties and sync licensing: How artists earn

The foundation: two sides of a song

Behind every song, there are two parts. Firstly, there's the musical composition: the lyrics, notes and melody that form the base of the song. Secondly, there's the sound recording (also known as the master recording): the specific performance of the song that is recorded and distributed to streaming platforms, physical media and so on.

Although these two elements come together to form one cohesive song, they are owned by distinctive parties. On one hand, the composition belongs to the songwriters who wrote the song and the publishers who manage it; while on the other, any recordings of the song belong to the musical artist who performed the song and the record label that distributed the unique song recording. Each party brings its own unique rights to the table and receives payments – or music royalties – separately. In an industry full of different types of music royalties, it can be challenging as an entrepreneur to license music for business and ensure that the rights of all the players involved in a song are respected. That's where Soundtrack steps in: to simplify the complex world of legal music into a single, streamlined solution.

Performance royalties: music in the air

Songwriters, music publishers and recording artists earn performance royalties when their song is played in a public setting or a commercial establishment, be it through a live performance, a broadcast or a digital stream. This could include playing music in your bar, hotel, café, restaurant, gym, retail store or office, to name a few. Before you can play music in your business legally, you'll need a public performance license first. This is a legal agreement to allow companies to play music that they don't own the copyright of.

While your public performance license enables you to enhance your business with the right soundscape, the songwriters and publishers receive performance royalties based on how much their song is played. However, they don't immediately get fees in their pockets once you hit play on their song. Their compensation is handled by performance rights organizations (PROs) who collect and distribute the royalties to the artist and publisher of the song. With so much music in the world, it's no surprise that there is no singular PRO collecting all the royalties, but rather multiple companies keeping track of song plays and paying creatives the fees they are due. The biggest American PROs include ASCAP, BMI, GMR and SESAC, who all play a pivotal role in reimbursing artists for their work.

Playing music in your business isn't as simple as hooking up your personal music streaming account to your business' sound system. Personal accounts are approved for private use only. Business music streaming platforms like Soundtrack help you stay compliant with the specific requirements of playing music in the workplace.

Mechanical royalties: the right to reproduce

What are mechanical royalties? Mechanical royalties are the fees that artists and publishers receive when their song is copied. This can be a physical reproduction of the song (like when a song is included on CDs or records) or a digital copy (including streaming on musical platforms or digital downloads). Every stream in a digital environment counts as a unit which, when played, generates royalties for the songwriter and publisher. In the United States, the mechanical royalty rate of each song streamed is determined by a calculation of the streaming service's revenue (15% in 2026), which goes to both the songwriter and the publisher.

With both songwriter and publishers receiving mechanical royalties and performance royalties, it can be easy to mix them up. The main difference is that performance royalties are concerned with the performance of the song, while mechanical royalties focus on the copying of the song. Think of it this way: when you stream a song in the privacy of your home, the people who created and distributed the song receive mechanical royalties for each play. Whereas if you play that same song for customers in your business, creatives receive performance royalties because the song is being played in a public setting.

Master royalties: rewarding the recording

You may have heard of master royalties, or the idea of an artist owning their masters. But what does that mean?

Master royalties are the fees that recording artists and their record labels receive for the sound recording of a song. At this point, you may be wondering what sets master royalties and publishing royalties apart. After all, don't both royalties compensate creatives for the direct use of their songs? This may be the case, but the difference lies in the way that master recordings and composition recordings are set up.

Publishing royalties target the composition of the song and are paid to songwriters and the publishers of the song. Publishers and artists can sign up with a PRO, which receives performance royalties from selling licenses and pays songwriters for the use of the song in various physical and digital forms. Whereas master royalties target the sound recording of the song and are paid to both recording artists (the people performing on the sound recording) and the record labels they are signed to. These record labels focus on the production, distribution and marketing of the song and artist, and ultimately distribute the royalties to the artist.

In this way, no matter which party the creative falls into, everyone involved in a song is paid royalties. With direct licensing agreements to record labels, Soundtrack ensures a smooth facilitation of masters royalties to artists by providing accurate reporting of playback.

Sync licensing and royalties: music and media

Music plays a massive role in visual media, and that comes down to sync licensing: the matching of a song to social media posts, advertisements, trailers, video games and any other visual medium.

Whenever a song is played in these cases, sync royalties are paid to the songwriter and publisher of the song, while master use license royalties go to the recording artist and record label. On the media side, it's usually the director, producer or music supervisor who decides which song will be synced up to the visual media and, importantly, who pays the licensing fees to the musicians behind the song.

Fees for sync licensing royalties are often much higher than a song casually being streamed on a music streaming platform. These can range from a few hundred to thousands of dollars, depending on the song used and the context. As a result, getting a song placed in a show or film, as well as spread widely across social media, can be a major growth area for recording artists – not only for the money it sends their way, but also because it puts them on more people's radar (think of it as income beyond royalties).

It's worth noting that Soundtrack only provides music streaming for business settings, not for synchronization in marketing materials.

Publishing royalties: protecting the creators

Performance, mechanical and sync royalties all come together under the category of music publishing royalties, the fees that are collected on behalf of songwriters and publishers when their song is used.

These royalties honor the musical composition of the song (the songwriter and publisher of the song), as opposed to the sound recording (which are covered by master royalties). The song creators are paid by different organizations, depending on how and where the song is used. Some examples are music streaming platforms, radio stations, film/TV producers or record labels. The money that these parties pay will be sent to PROs, mechanical agencies or sometimes directly to the music publishers who, in turn, distribute the fees to the creative minds behind the song.

By managing, protecting and reimbursing songwriters, music publishers and PROs play an essential role in providing a steady stream of income to artists and allow them to focus more time on their writing instead of seeking alternative employment. Many publishers also offer pre-paid royalties to songwriters to provide further financial stability.

But music publishers can only get so far. A lot of power lies in the hands of those accessing the music. How audiophiles choose to stream music is key to supporting the creative community, and opting for a service that respects the spectrum of music publishing rights not only ensures that creative minds keep writing great music, but also that they receive the pay that they are entitled to for their hard work. Whether you're playing music in your business or listening to it through your headphones on the bus, supporting a service that properly supports musical creatives goes a long way in making the music industry a more ethical place.

Streaming vs radio: the royalty shift

With music streaming platforms and radio acting as the two most popular ways of listening to music, you'd have figured that both mediums are widely supported around the world. Unfortunately, this hasn't always been the case – at least in the United States.

While traditional radio stations in the US follow the regular flow of tracking music plays and sending these to PROs, radio royalties are only paid to songwriters and not to the recording artists of a song. This is due to a legal loophole with a foundation dating back to the Copyright Act of 1909, which didn't view recordings as copyrightable material. Because the 1909 version of the act pre-dated the onset of commercial radio by about a decade, broadcasters had no need to pay performance royalties on sound recordings. The Sound Recording Act of 1971 ensured recordings were copyrightable materials, but there wasn't any move to require royalty payments for public performances. While there is a push to amend this legislation, recording artists are yet to be compensated for their songs playing on the radio.

This marks a sharp contrast with digital music streaming, which is more considerate of paying musical creators their dues via a digital sound recording performance right — be they a songwriter or a recording artist. Business music streaming platforms provide more transparency than personal streaming accounts, since they have public performance licenses added to the mix (although what a stream actually pays often leaves a lot to be desired). This way, performance royalties are accurately accounted for and paid to creators, while business owners are safeguarded against steep fines and PRO scare tactics.

Why ethical licensing matters for your brand

Setting up correct licensing in your business matters because, for one, it's the law. But equally important is the fact that it helps support music creators for enhancing your soundspace. Soundtrack stands behind correct payments to artists and ensures that everyone involved in the creative process is paid for each play. Soundtrack's interactive licensing covers the mechanical rights that a consumer wouldn't (learn more about what your license covers).

As a business owner, choosing Soundtrack not only supports the creative community, but it boosts your brand. Opting for a leading business music streaming service and holding a valid public music performance license communicates to customers that your enterprise is trustworthy, respectful of the rules and values creativity. As an added bonus: it eliminates the risk of consumer service usage and ensures that your customers can savor the music you choose on proper legal grounds.

Soundtrack steers the way through the complex world of global PROs and record labels to simplify business music and help you play music securely in your enterprise. Start your 14-day free trial today.

Related FAQs

What is the primary difference between mechanical and performance royalties?

Mechanical royalties are paid when a song is copied either physically or digitally, while performance royalties are paid when a song is played in a public setting, including businesses.

Does my Soundtrack subscription cover mechanical royalties?

Yes, Soundtrack subscriptions cover mechanical royalties. Soundtrack works with PROs and record labels to ensure that music creators are justly paid when their songs are streamed.

Why are master royalties separate from publishing royalties?

Master royalties and publishing royalties cover two distinct copyrights. Master royalties are concerned with the sound recording and are paid to recording artists and record labels; while publishing royalties are concerned with the composition of the song and are paid to songwriters and music publishers.

Do I need a sync license to play music in my store?

You do not need a sync license to play music in your store, but you will need a performance license. Sync licenses are required if you want to match music to visual media.

How does licensed streaming support correct artist payment?

Through subscription payments and tracked song plays, licensed streaming sends payments to PROs and record labels which are then distributed amongst artists. This ensures that everyone involved in making a song is paid fairly and steadily for their songs. Licensed streaming subscriptions like Soundtrack Unlimited help creators make royalty payments up to five times higher than streaming services for private use.