Note: This article may be in English, but it refers to the German music rights and royalties landscape.
Do music rights give you headaches? Particularly when it comes to new industry developments like NFTs, AI-music or virtual concerts? Keeping track of which rights arise when and where, and how to manage them properly, may seem more complicated than ever, but managing your music rights doesn’t have to be a chore. Managing your music rights well allows you to expand your reach and audience, increase your income and boost your career in the long run. In this article, you'll learn how musicians can properly exploit their creative works and maximise their royalties, while maintaining full control.
Possible roles in your journey as an artist
First and foremost, it helps to understand where music rights and royalties can actually arise in your artistic journey. In principle, the answer is everywhere that something is created or performed. There are corresponding roles attached to this - i.e. natural or legal persons who are involved in the creation, distribution or performance of the music, lyrics or artwork.
These can be, for example:
- many more
The roles tell you what the person contributed. Several people may have made a similar contribution, e.g. two lyricists and three performers. Who was involved and how much these people or company contributed should be written down from the beginning (we will get to this in greater detail later). The concrete contributions to the music can in turn result in music rights and thus claims to remuneration or royalties.
So along the creation of the "work", up to its publication and performance, take a close look at who did what, when and how, and how the composition, lyrics and recording came about.
Our example journey here includes the creation of the work and the recording or performance - we are focusing mainly on music rights which are primarily held by artists rather than companies. However, recording rights, for example, can be held by a person as well as by a company (such as a label).
From all the creation and performance and the resulting resonance and recognition of the listeners and the audience, music rights and revenues then arise in a variety of ways. It is important to point out that royalties are not automatically paid to you and all those involved. It is therefore always a good idea to fix the rights and, if necessary, "register" them using the metadata of the rights holders.
The work and intellectual creation
In the beginning comes an idea for a musical composition or song lyric. As soon as this is developed and given a perceptible form, e.g. written down, an intellectual creation or a so-called "work" is created. In the creation, the author must express their own individuality - e.g. through a unique melody, rhythm, baseline, hookline, etc. Because of this individuality, only natural persons can hold work copyright (”Urheberrecht”) in Germany and it is not transferable.
If an arranger provides an individual creation in the instrumentation and arrangement of the work, copyrights can arise from this. The same applies to the lyrics or the artwork. In all of these cases, an intellectual, perceptible creation is achieved by one or more authors. The work is protected by copyright as soon as it is created and brought into the corresponding form. In contrast to American law, in Germany the work does not have to be registered in order to be protected by copyright - nevertheless, registration is also recommended in Germany so that the rights can be exploited and royalties generated. In Germany, work copyright lasts for a lifetime and is transferred to the heirs or legal successors, up to 70 years after the death of the author. As soon as the work, text, etc. is used by others - whether in a recording, performance, broadcast or cover version - the authors are entitled to work copyright royalties.
The German “Urheberrecht” is simply called "copyright" in English - accordingly, the © or the "C-line" stands for copyright. However, American copyright, for example, is not the same as German work copyright (”Urheberrecht”). In American law, recording rights are called "Recording Copyrights", which in Germany, in turn, do not fall under copyright but under so-called ancillary rights (”Leistungsschutzrechte” - more on this later). In general, it is advisable not to lump music rights and royalties together internationally, because the legal situation can vary. As an independent music creator, it is good to know and understand the rights for your home market. For regulations beyond that, a collecting society is the right contact.
Work copyright exploitation
How do you keep track of when, where and how your work is used? If your work is popular and used frequently or even internationally, it can be quite difficult to keep track of it and claim the royalties. This is exactly why it makes sense to commission a collecting society to manage your music rights. You can also commission a publisher to distribute your work, but then you have to give them a share of your royalties. In any case, you must document all those involved in the creation of the work and state this correctly and congruently when registering your work and when publishing and using it. In Germany, you can register your work with GEMA (”Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte” - literally translated to “Society for musical performing and mechanical reproduction rights”). You should do this for each of your works in order to receive royalties if it is used (e.g. performed in public). In addition, you can also activate the so-called "soundfile upload" (or "broadcast monitoring"), with which GEMA can track via audio fingerprint technology when your works are used, for example, on TV, radio or in clubs. If you are a GEMA member, you can activate both functions in one step together, while creating your release in the MusicHub platform. This saves you a lot of time, provides you with correct and consistent metadata and ensures that the royalties for your works can be allocated and paid out more quickly.
In order to claim your music rights and royalties internationally, it makes most sense to commission a collecting society, which is a collective of music creators, with the exploitation. If you want to take the exploitation of your rights into your own hands, you may soon find that collecting the necessary data (whether and how your works have been used) and negotiating agreements with interested parties would be far too burdensome.
Recording and intellectual performance
When it comes to the ancillary rights (”Leistungsschutzrechte”), things get a bit more complex, because ancillary rights can cover a wide variety of areas that are related to your works. Ancillary rights are not linked to the fulfilment of a personal intellectual creation, but to "performances of another kind which are "similar to the intellectual creation of the author or are performed in connection with the works of the author.
But what does that mean in concrete terms and how do ancillary rights come into being? If, for example, a recording of your work is made and the work (i.e. the composition and, if applicable, the lyrics) is used as the basis, the interpretation of the work (recording, performing, producing, etc.) creates a performance that is not an intellectual creation but a performance linked to the creation. It is difficult to separate these terms exactly, but basically you only have to consider: if something that already exists is used - e.g. interpreted, recorded, performed, broadcast - this is to be regarded as a performance and not as a creation, and ancillary rights arise accordingly. Performing musicians, singers etc. also render a performance through their interpretation of the work and create a performance, recording or similar (as so-called "performing artists"). Since your work (e.g. the composition or lyrics) is the basis for this performance, you as the author also receive work copyright royalties for every use of the recording, e.g. in media such as TV or radio. The owner(s) of the ancillary rights, in turn, receive royalties on the use of the creative performance, e.g. the recording.
Recording rights are often indicated with ⓟ or the "P-Line". The P comes from "phonogram" and refers in English to "phonogram rights" or "recording rights". Here, too, the terminology differs internationally and we only refer to the German legal situation in this article. If you are the owner of ancillary rights, it may also make sense for you to commission a collecting society to manage these rights. In Germany, this is the GVL (”Gesellschaft zur Verwertung von Leistungsschutzrechten” which literally translates to “Society for the exploitation of ancillary rights”).
Royalties from recording rights
In contrast to work copyrights, ancillary rights do not have to be linked to a natural person. A legal person, such as a phonogram producer or label, can also own the recording rights, for example. Furthermore, these rights can also arise through an economic performance. This is the case, for example, when the production in a studio is financed by the label or the performer. In this case, recording rights arise not only for the team involved in the sound recording (producers, musicians, etc.), but also for the financier through the economic performance. Recording rights can then also be divided or allocated individually (depending on the deal or agreement) because they are not tied to one person.
Other ancillary rights
In addition to recording rights, ancillary rights include other areas that constitute a performance linked to the work and thus generate rights.
The ancillary rights are roughly divided into these four areas:
- The right of the performing artist - in the case of musical performance
- The right of the phonogram producer - music recording
- The right of the organiser - in the case of a musical event
- The right of the broadcasting organisation - in the case of music broadcasting
In general, the intention of protection can be divided into two areas: either ancillary rights cover the protection of specific personal performances (as in the case of the protection of the performer) or the protection of economic, organisational and technical performances (as in the case of the protection of the phonogram producer).
What happens if there are several rights holders for the same role - e.g. three composers of the work, two lyricists, two main artists and possibly session musicians and performers on the recording? When several people are involved in the creation or performance in different or the same roles, it makes sense from the beginning to document who contributed what to the work, lyrics or recording. This way you ensure that it is clear from the beginning who holds which rights, who is entitled to what income and royalties and that the so-called "splits" can be allocated correctly.
This documentation can be done informally, e.g. in a splitsheet (you can find numerous templates for this online) or in a contract. In the best case, you should also put these splits into practice: In the case of a release via MusicHub, you document all participants directly as metadata in the platform. In addition, you can document the participants in the work directly via GEMA work declaration and thus ensure that they all receive their work copyright royalties later.
To simplify the metadata entry, it is best to define who has which exact roles: Who is the main artist, are there featuring artists, who is a contributor (e.g. with an instrument), are there other contributors for different versions or recordings of the piece of music, etc.?
How are splits made up?
In the case of a work, the shares are usually divided equally - e.g. 33% each for three composers. However, depending on the share in the creation of the work, this can also vary - e.g. if one person has composed only one verse and another person two verses, the chorus and the intro.
When it comes to the relationship between music and lyrics, there are differences between reproduction rights and performance rights:
When it comes to reproduction rights, the composers receive 50% and the lyricists 50%. If a work is additionally published, the publisher receives 40%. In this case, composers and lyricists each receive 50% of the remaining 60%.
In the case of performing rights, there is a so-called basic split, which means that if the composer and lyricist do not reach a free agreement and the work is not published, the composer receives 64% and the lyricist 36%. Since 2021, there has also been a "free agreement" between music and lyrics (previously, this was limited solely to light music - in German “U-MusiK”). Here, however, a minimum share of 35.20% must remain for the musical share and 19.80% for the text share. If a work (share) is published, the publisher receives 33.33%.
For the recording rights, the splits can, in principle, be freely determined. It is also possible, that only one rights holder is agreed, e.g. the label or the main performer.
Those involved in the recording (i.e. those who do not hold the recording rights themselves) are often paid out once and thus have no claim to royalties later. This affects performers in particular, but also producers.
Rights management for different control areas
How do you get royalties? In order to know how/in which cases you manage your music rights, commission them for exploitation or license them for use and thus receive income, so-called control areas are relevant. They tell you what happens to your works and recordings and whether and how they are used. Rights holders or representatives and exploiters therefore exercise control over certain actions:
- Duplication or reproduction: copies of the music
- Distribution: spreading the copies
- Rental of copies
- Adaptation: editing or remixing the music
- Performance of the music in public
- Communication: broadcasting or webcasting of the music - e.g. TV, radio, but also live streams
- Making it available to the public: making the music available online
If these areas of control are affected and your music is used, you can grant a licence by agreeing to its use, which in turn earns you money. Therefore, royalties are the income from the granting and exploitation of licences (after deducting administrative expenses).
For example, in order to receive royalties from work copyrights, authors grant GEMA the rights to use their works. GEMA then grants a licence for a use once, but the royalties are maximised the more often the use takes place - e.g. frequent playing of a song at an event, on the radio, etc. You then receive your royalties from GEMA in the form of a payout.
As an artist, you also grant a licence to your distribution partner. If you release your music independently (e.g. with MusicHub), you grant a non-exclusive licence for public release - i.e. for your music to be made available on the leading streaming, download and social media platforms. In return, you receive royalties as your music is available and used for streaming and downloading to the general public.
In contracts with labels, publishers, distributors, etc., shares are also agreed - i.e. the original rights holder receives an agreed share of the royalties, as the contractual partner retains a share for its services (e.g. 50% publisher).
It can also be possible that you license certain music rights to third parties, e.g. to your label on an exclusive basis and thus assign them (at least for a certain period of time). In this case, you must ask for permission yourself if you want to use your music for certain purposes or control areas. If, for example, you have exclusively licensed the rights to make your music available to the public to a label, you may not make your music available to the public yourself (e.g. by uploading it to your website) without the label's permission.
Concrete examples of use
To find out how your royalties come about, it helps to ask yourself five key questions:
- What creations or performances are involved?
- Which areas of control and, in turn, which uses are affected?
- Who are the rights holders?
- Which partners manage/exploit the music rights?
- Are the performers entitled to royalties?
Finally, using a few examples, we will show you how music rights arise from a creative work or performance, which lead to royalties through uses and licences.
The case of streaming is particularly relevant for independent music creators.
In an upcoming article, using a fictitious release, we will show you which rights and royalties arise from the release and which participants have specifically contributed to the work or recording.
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