What are streaming royalties?

Despite the music industry’s reluctance to music streaming, it has become clear that it is here to stay and of great importance to both artist’s and songwriters’ careers. How? For artists, streaming is how a vast majority of listeners are consuming music today. So to get exposure to as many ears as you possibly can, you want to be where they are most likely to hear you, right? For songwriters, music streaming is helping you generate more revenue via streaming royalties, which is what we’ll focus on more here.

Interactive Streaming vs. Non-interactive Streaming

Streaming is divided into two different types: Interactive and Non-interactive.

Interactive streaming (also known as “on-demand” streaming) gives users the ability to choose the songs that are played (“interact” with the service). Services that offer interactive streaming include Spotify, Apple Music, Tidal, Google Play, and now Amazon with their Amazon Unlimited Music offering.

Non-interactive streaming (also known as “internet radio) allows users to create a station or playlist generated from algorithms based on an artist, song, genre, etc. However, the user is not able to directly select a song, resulting in a laid-back listening experience. Services that offer non-interactive streaming include Pandora, SiriusXM, and Last.FM.

What royalties are paid out from interactive and non-interactive streaming?

Both interactive and non-interactive streaming services are responsible for paying out streaming royalties to songwriters and publishers.

Non-interactive streams generate performance royalties. Performance royalties are paid out whenever a composition is broadcast or performed publicly. Performing rights organizations (PROs), like ASCAP, BMI, and SESAC collect and distribute these royalties to songwriters and publishers.

On the other hand, interactive streams generate both performance royalties and mechanical royalties.

Mechanical royalties are royalties paid to songwriters whenever a copy of their composition is made via CD, vinyl, tape, digital download, or streamed. In the US, mechanical royalties are collected and distributed by the Harry Fox Agency. However, mechanical royalties are handled differently from country to country. So, if your music is available internationally and you anticipate you will be collecting mechanical royalties in different territories, you must register with the appropriate collecting agency in each country.

Keep in mind, PROs do NOT collect and distribute mechanical royalties. So you MUST be registered with an agency that specifically works with mechanical royalties.

Next Step: Click here to read about understanding your distribution statements.