The Road to Royalty Collection : What is Royalty Management & How do Artists get Paid?

Independent record labels or artists should understand the mechanics behind the process of music rights management and the distribution of music royalties within the music industry.

Royalty is a payment to the owner of copyrighted works. A royalty payment is made to the legal owner of the property, patent, copyrighted work, or franchise by licensees or franchisees who wish to make use of it for the purposes of generating revenue or other such desirable activities. Royalty management is the system used to create contracts, define rights of use, and determine what royalties will be paid to the owner, by whom and how often. Royalty managers are responsible for calculating and keeping records of royalties accrued, and eventually collecting royalties owed from the licensors of an IP.

When artists complete a song, the details thereof need to be recorded and agreed upon. This agreement is known as a Split Sheet Agreement. The details of who did what and their share of the copyright is recorded in the Split Sheet Agreement. Furthermore, an artist or their team needs to record the metadata of the song. Metadata most commonly refers to the song credits you see on services like Spotify or Apple Music, but it also includes all the underlying information tied to a released song or album, including titles, songwriter and producer names, the publisher(s), the record label, and more. This information is required by CMOs and publishers to enable tracking and collection of royalties.

CMOs administers the copyright and royalties of its members – being primarily music composers, authors and publishers. Members who are composers and songwriters assign the rights of their musical works to the CMO to administer. The CMO, in turn, uses the assignments to licence individuals and businesses that use music for business or commercial purposes. This includes shopping centres, nightclubs, television and radio broadcasters, and so on.

The CMO collects these licence fees from music users, which are paid out to members in the form of royalties during annual distribution cycles (after administration costs are deducted).

By following simple procedures and paying the appropriate fees, individuals and businesses can use musical works administered by the CMO. This will ensure that creators are rewarded for the public use of their intellectual property.

Digital Service Providers (DSP) – Corporate entities that provide digital services built on a networked ecosystem of consumers and other service providers. DSPs tend to focus on driving almost all interactions online and across devices. DSPs compensate artists for the use of their works and these monies are paid to and collected by CMOs, the distributor, and label.

How Artists are paid ?

An artist needs to affiliate and register their song(s)

1. Affiliation means becoming a member of that organisation or society and granting them a number of responsibilities. These include licensing, tracking, and protecting your songs’ use, authorising other societies, through reciprocal agreements, licensing rights to your songs on your behalf, and of course, paying royalties out to you, the songwriter. After you’re affiliated, the next step is to register your songs. You’ll tell the pay source the name of each song, who wrote it, and who has administrative control of the publishing, this is known as a notification of works.

2. Once you’ve successfully registered your song, you’ll receive an International Standard Work Code, or ISWC. An ISWC is a song’s identifier, unique to the composition, which allows it to be tracked and for royalties to be mapped to it. This is issued by a certified ISWC Agency or in some countries, a local MRO. Once you distribute your music in recorded form, you’ll also be assigned an International Standard Recording Code, or ISRC. An ISRC is a recording’s unique identifier, and allows your publisher to track and collect royalties. This is issued by your distributor or label.

3. The song is then submitted to distributor for distribution on DSPs and publisher with all the necessary metadata to enable registration of works

4. When music is streamed or used in any other way, this will generate revenue that the collecting bodies are able to collect from the DSP. These streaming revenues comprise of various rights (see last week’s Forum Article), which are due to the respective bodies and paid out to the artist.

Flow of registrations & payments when music is streamed

Flow of affiliations & payment when music is played publicly

Kenya Copyright Act:

PART VII – Section 46-48. Collective Administration of Copyright

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RESOURCES

BASIC SPLIT SHEETS

Single Songwriters’ Split Letter

This is to confirm that we, the sole writers of the composition listed below, hereby agree among ourselves to the following writers’ divisions:

Song_Title: “____________________________________________________________________________”

Writers & % Ownership:

Writer Name: Ownership %

Writer Name: Ownership %

Writer Name: Ownership %

Writer Name: Ownership %

Credits:

Lyrics by: ____________________, _____________________

Music by: ____________________, _____________________

Produced by: ____________________, _____________________

If any samples are contained on this song for which the sampled writer(s)/ publisher(s) are to receive a copyright interest in and to the Composition and/ or payment of monies attributable to the Composition, then we agree that our own shares in the copyright and/or monies attributable to the Composition shall be reduced proportionately.

The following list of samples represent all of those samples embodied in the above composition:

Name of Song by Name of Writer

________________________________________________________________

________________________________________________________________

________________________________________________________________

This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the republic of Kenya applicable to contracts wholly entered into and performed entirely worldwide.

Signature(s) below will indicate agreement of the above.

Read and Agreed: Read and Agreed:

Read and Agreed: Read and Agreed:

MEMBERS POLL

ARE YOU AFFILIATED WITH A PUBLISHING COMPANY?

• Yes, I'm getting that Publishing Royalty Bag. Bag SECURED!
• Nah, But I know I need one. Where do I sign-up?
• Never, I'd rather keep losing money

STAY TUNED!!!