How music streaming royalties reach artists and writers

A single play of a song can send money to more than one place. Every released recording carries two copyrights, and each earns royalties on its own terms with its own collector.

Two copyrights in one song

The composition is the song as written - melody and lyrics - and it belongs to the songwriter or their publisher. The sound recording, or master, is the captured performance, owned by whoever paid for it, usually a label or the artist.

Because these are separate rights, a stream pays the recording side and the songwriting side through different channels, and following only one channel is the most common reason royalties go uncollected.

What one on-demand stream pays for

On an interactive service, where the listener picks the track, the platform pays the master royalty to the label or distributor that delivered it. The songwriting side is divided again: a mechanical royalty is owed for reproducing the composition, and a performance royalty for performing it publicly.

Those two go to different collectors in the United States. The Mechanical Licensing Collective handles digital mechanical royalties, while performing rights organisations handle performance royalties. The MLC (themlc.com) says it does not collect performance, synchronisation or record royalties, so several organisations handle one track.

The mechanical rate is a formula, not a price list

Mechanical royalties are set by law rather than negotiated track by track. The rate depends on the use: a permanent download is a fixed amount per sale, while interactive streaming is a formula that produces an amount per play. That is why a service's revenue and subscriber mix move the figure, so any flat per-stream number is an average rather than a rate.

The MLC was created by the Music Modernization Act and designated by the US Copyright Office. It began administering blanket mechanical licences in January 2021, is funded by the streaming services, and pays members monthly once usage is matched to registered songs.

Digital radio follows a different route

Non-interactive services, where listeners get a programmed stream instead of choosing the track, sit under a statutory licence. The US Copyright Office summary of the Music Modernization Act (copyright.gov) describes that blanket licensing system, and the same law asked the designated collective to pay producers' royalties through a letter of direction.

That collective is SoundExchange, designated by the US government to administer the Section 114 sound recording licence. Its rates are set by the Copyright Royalty Board, and by law 45 per cent goes to the featured artists, 50 per cent to the owner of the recording, and 5 per cent to a fund for non-featured performers (soundexchange.com). On-demand platforms are not part of that route.

The bottom line

Streaming royalties are not one payment but a set of them, each with its own collector, rules and waiting time. A distributor registration covers the recording side only, so the composition side usually needs separate registration with a mechanical collector and a performing rights organisation.