09/03/2014 01:45 pm ET Updated Nov 03, 2014

The Business of Music: Understanding 4 Distinct Revenue Streams for Songwriters

Your gift will make room for you. I believe this saying is true. Songwriters and producers have the gift of creating music that inspires and shapes our culture. I often meet independent songwriters and producers and I am inspired by their God-given talent to create content that the world has not experienced thus far. However, I have observed a slight disconnect -- most of these talented songwriters and producers are not fully equipped with the knowledge of how to capitalize on their art form.

The music business is just that -- a business. The purpose of most businesses is to produce income. The music industry is no different. When meeting with songwriters and producers, my goal is to educate them on at least one aspect of copyright ownership that they may not have known prior to our meeting. As the saying goes, "you don't know what you don't know," so I make it my point of duty to educate content creators, as a result of my passion for music and its lasting effect on our culture.

Below is a brief description of four types of royalties in which songwriters and producers can collect for the content that they create, in hopes of establishing solid revenue streams for the content creator.

Mechanical Royalties
The term "mechanical" and mechanical license has its origins in the "piano rolls" on which music was recorded in the early part of the twentieth century. The United States Copyright Act provides that the owner of a copyright of a song has the right to create copies of the song, which may be heard with the aid of a mechanical device. In the early twentieth century, the piano roll was the recognized mechanical device, next it was a vinyl disc, then an eight-track tape, and so on. Although the method of the mechanical device has evolved from a piano roll to the current digital distribution of music, the rights of the original content creator has not changed.

In the United States, while the right to use copyrighted music for making records for public distribution is an exclusive right of the composer, the Copyright Act provides that once the music is so recorded, anyone else can record the composition or song; however, the individual must pay the copyright owner a statutory compulsory royalty for its use of the copyrighted work. Thus, the use of the original content creator's composition or song by different artists can lead to several separately owned copyrighted "sound recordings" which yield mechanical royalty payments to the original creator of the song.

Performance Rights Royalties
The owner of the copyright in a musical composition owns the exclusive right to perform or authorize others to perform the music publicly. Today, in the United States, this performance income is licensed by three societies known as performance rights organizations (PRO) -- ASCAP, BMI, and SESAC. "Performance" in the music industry can include any of the following:

• A performance of a song or composition - live, recorded or broadcast;
• A live performance by any musician;
• A performance by any musician through a recording on physical media;
• Performance through the playing of recorded music; or
• Music performed through the internet (digital transmissions)

Typically, a PRO negotiates blanket licenses with radio stations, television networks, and other "music users", each of whom receives the right to perform any of the music in the repertoire of the PRO for a set sum of money. In the United States, only the composer/songwriter and the publisher are paid performance royalties and not performing artists. Where a performance has co-writers along with the composer/songwriter they will share the royalty.

Synchronization Royalties
Synchronization income is derived from the license by the music publisher to a producer of audio visual content (i.e. a television show, commercial, film, etc.) to use the music in a synchronized fashion, or in timed relation to the visual image appearing on the screen. Synchronization licenses consist of background uses, where the music is used in the background of a scene, a visual-vocal, where a character actually sings the songs, or over titles, such as the closing credits of a movie. Each synchronization license is negotiated on an as needed basis for rates which depend on the needs of a willing buyer (licensee) and a willing seller (licensor). Typically, the use of a synchronization license also generates performance income when the television show, commercial, or film is displayed and publicly performed.

Print Royalties
Print income is derived from printed copies of a song, from the sheet music. Sheet music consists usually of the melody notes and the lyrics which may accompany those notes. The copyright owner or administrator frequently licenses the right to print such sheet music to print publishers, in exchange for royalties. Print income is considered to represent a small percentage of the total income from a song.

Being exposed to the previously listed revenue streams will better equip a songwriter or producer of their rights within the music industry. Once the content creator possesses adequate knowledge of their rights, they can move forward with capitalizing on their talents and making a name for themselves in this business called music.