Music licensing rests at the heart of our industry. Intellectual property laws have defined contract design and in part determined the value of art. Copyrights, to oversimplify, reflect the finite claim of ownership to a tangible idea—stories, films, lyrics, recordings.

For another person or entity to use what you own, they must first obtain permission—the license, or right—to do so. This exchange tends to be monetary and varies in form. Label deals, television synchs, streaming and radio spins maintain legal standing by adhering (in theory) to IP regulations.

This realm of oblique language and complex formulas requires patience and persistence. Artists and teams who pursue key knowledge regarding music rights will only benefit. They will likely find themselves better equipped when negotiating or strategizing ways to maximize earnings.

Keep scrolling to read five demystified facts every artist should know, ranging from masters and compositions to music licensing and advances. Spend more time on our blog for deeper dives into the realms of publishing, cover songs and artist management.

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Some copyrights protect better than others

In the United States, once an idea becomes reproducible (e.g. an iPhone memo, an Ableton file), you can claim to own the copyright. This is true of an original work if you can clearly prove the following.

  1. Your version existed before any copycat version
  2. The person behind the copycat was aware of your original

However, to actually file suit against an infringer, you must possess an added layer: recognition from the U.S. Copyright Office. Fortunately, attaining this added legitimacy is straightforward.

  • Securely submit your material through the Office’s electronic portal (eCO)
  • Pay $35 for a single-author work to do so
  • Bundle songs together and submit an album or EP at once to save money
  • Click here to get started

There are two sides to every song

‘Artist’ serves as an umbrella term for ‘performer’ and ‘writer.’ Resultantly, two distinct business sectors exist within the ‘music industry’ catch-all. Some artists might sing and write their own songs, others might not. Regardless, to maximize the fruits of your labor, we recommend familiarizing yourself with both.

Master (Record Business)

  • Intellectual property: sound recording copyright
  • Beneficiaries: Artists, performers and labels
  • Definition: Tangible, playable audio file you can distribute and sell through a company like Stem
  • Metaphor: Stem’s website

Composition (Publishing Business)

  • Intellectual property: performing arts copyright
  • Beneficiaries: Lyricists, composers, producers and publishers
  • Definition: A song’s lyrics and melodies
  • Metaphor: The code that built Stem’s website

music licensing

Different platforms owe you different royalties

Even as the music industry continues to consolidate around a handful of power player streaming services, payout systems can differ between platforms. Below is a high-level breakdown of what royalty types you should expect to see from different companies or formats.

  • Apple Music, Tidal, Spotify, Amazon Music, Pandora Plus, YouTube (Interactive Streaming)
    • Mechanical royalties owed to composition owners, paid out by your publisher or third-party collectors such as Songtrust or the Harry Fox Agency
    • Performance royalties owed to composition owners via Performing Rights Organizations (PROs)
    • Artist royalties owed to master recording owners via labels or digital distributors like Stem
  • Pandora, Sirius XM (Internet Radio)
    • Performance royalties owed to composition owners
    • Digital performance royalties owed to master recording owners
      • 45% of royalties go directly to featured artists via SoundExchange
      • 50% of royalties go to the master owner(s) via a label or distributor like Stem
  • iTunes, Amazon, Google Play Store (Downloads)
    • Artist royalties owed to master recording owners via labels or digital distributors like Stem
    • Mechanical royalties (9.1 cents per download) owed to composition owners. Stem admins mechanicals from U.S. downloads and pays them quarterly to writers and publishers
  • Terrestrial Radio / Television (Broadcasts)
    • Performance royalties owed to composition owners

Advances aren’t free money

A record deal does not inherently warrant fear or joy. Labels, however vilified, tend to consist of music lovers. Some contracts play fair, plenty fall short of ideals, but almost all of them involve one thing: advances—upfront money provided by the company to the artist.

Signings, in public, appear celebratory, as they ideally should. Usually, if press members can include the word “million” in a write-up, headlines will follow the announcement that so-and-so signed to XYZ for an impressive dollar amount. Lots of good can come from a label’s support. However, advances come with several commonplace misconceptions worth clarifying.

  • A $5 million deal is not the same as a $5 million salary
  • A $5 million signing can break down to $500,000 per album in a 10-album deal
  • Many advances are partly pre-designated to cover the costs of recording or promotion
  • Advances resemble loans an artist must recoup, or pay back, through the their royalties
  • For the label to make money from your royalties, they have to at least temporarily own a portion of your copyrights

Video covers require music licensing

Artists create covers when they perform or record someone else’s lyrics and melodies. Say you record a demo of yourself singing “Blackbird,” written by Paul McCartney and the late John Lennon. To legally record Lennon and McCartney’s composition and commercially release it, the record owner (you, and your label if you have one) must compensate the writers for the right to reproduce their work.

Master owners have the right to reproduce compositions when they purchase a mechanical license. Without further ado, here’s what you need to know about it.

  • It’s the music licensing backbone of the publishing world
  • The U.S. Copyright Board sets the cost to obtain it

Stem users can obtain mechanical licenses directly through our web dashboard thanks to our integration with Loudr. Here is what you need to know about doing so:

  • No Up-Front Costs – Instead of requiring you to pay the $10 fee-per-cover up front, the cost will instead be split between the royalties that you and your collaborators earn on that song.
  • Auto-Renewing Licenses – No need to keep track of how many downloads you have left on your license. Once you hit the limit, Stem will automatically renew your license for you.

To get started on distributing a cover song via Stem, simply log in to your account and upload content.

Releasing a cover video complicates things. Performers must obtain a synchronization license when audio meets video. Here’s what you should know about sync.

  • Sync licenses let you include copyrighted compositions and/or recordings in a visual medium
  • Examples include film, television, video games and ads
  • Cover songs on YouTube also require this license
  • Performers must receive direct permission from the composition owner(s)
  • Sync licenses, unlike mechanicals, don’t have a set fee
  • BMI and ASCAP have search sites to help find the writers and publishers behind songs
  • To learn more about licensing cover songs, click here

We hope this article helps clarify common points of confusion. For more tips, tricks and insights about making it through the music business, visit Stem’s blog.

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