Performance Royalties Explained: What They Are and How They Work
Jun 14
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WHAT EXACTLY IS PUBLIC PERFORMANCE?
When you think of the term public performance and where you hear music played publicly – what comes to mind? For many, a live concert is the first image that comes to mind, but where else is a song considered public performance?
A song is considered public performance when it is performed in a public place or for an audience that is larger than just family and friends.
Examples include live performances and songs played in public places like stores, restaurants, clubs, hotels, and many other venues. Songs played via radio, broadcast, or television, certain content posted on the internet (YouTube, social media, webcasts, etc.), and non-interactive streaming services are also considered public performance. In these scenarios, listeners are generally unable to choose the song being played.
Remember that there are two separate music copyrights – one for the musical work (song composition) and another for the sound recording (master). Each copyrighted work requires its own license for use in a public performance. Licenses may be administered individually, or more commonly, as a blanket license for use of an entire music catalog.
The musical work earns public performance royalties, whereas the sound recording earns what are called digital performance royalties.
Let’s take a closer look at each of the music copyrights, some specific scenarios where a public performance license might be necessary, and when certain groups are exempt from needing a public performance license.
PUBLIC PERFORMANCE OF A MUSICAL WORK (SONG COMPOSITION)
A royalty for a copyrighted musical work generates when a song is performed publicly by nearly any means - including all the examples listed above.
Performing rights organizations (PROs) administer licenses for public performance of their members’ registered songs and then collect and distribute royalties to their members (songwriters and publishers). The three main PROs in the U.S. are ASCAP, BMI, and SESAC.
Most commonly, a PRO will negotiate and administer a blanket license to a business or organization for use of their entire catalog. PROs typically do not issue licenses to individuals, but it’s possible to work directly with a songwriter or publisher to license a musical work.
Some public performance royalty rates are defined by statute, set by the Copyright Royalty Board (CRB), an independent agency within the Library of Congress. These statutory royalty rates mostly pertain to non-interactive digital services and educational or public broadcasting, like public television and radio. Most royalty rates, however, are NOT defined by statute and are instead negotiated between a licensing party and a PRO or publisher.
PROs typically keep 10-15% of all royalties collected. The rest are split 50/50 between the songwriters (writer’s share) and publishers (publisher’s share), unless designated otherwise. Split sheets further determine how the writer’s share is divided among multiple writers and how the publisher’s share is divided among multiple publishers.
DIGITAL PERFORMANCE OF A SOUND RECORDING (MASTER)
In the U.S., a royalty for the sound recording is generated for digital performance only, which occurs when a recording is streamed through a non-interactive streaming service, such as on satellite radio like Sirius XM, digital music services like Pandora and iHeartRadio, webcasts on the internet, and digital cable TV music services.
It is important to note here that the license and royalties are not called public performance like they’re called for the musical work. Instead, these are referred to as digital performance royalties.
SoundExchange is the sole U.S. organization who collects and distributes digital performance royalties from non-interactive digital transmissions. They can also receive international royalties on behalf of U.S. rightsholders. SoundExchange does not directly collect any international royalties. Instead, they have reciprocal agreements with many foreign collective management organizations (CMOs) who are responsible for collecting royalties in their respective country.
A note on neighboring rights: Outside of the U.S., these royalties are called neighboring rights, and on top of royalties paid for digital performance, neighboring rights include royalties for AM/FM broadcast. The U.S. does not recognize neighboring rights, and no royalties are paid for traditional terrestrial radio broadcasts (AM/FM radio).
Okay, back to digital performance royalties. Unlike the public performance royalties for song compositions, where PROs often have room to negotiate with licensing parties, ALL digital performance royalty rates for sound recordings are statutory, set by the Copyright Royalty Board (CRB).
These royalty rates are reviewed and updated once every five years. During the review, interested parties like SoundExchange, labels, and trade groups can negotiate with non-interactive streaming providers like SiriusXM and Pandora to determine royalty rates. If the parties agree, the CRB will adopt the new rate, otherwise, it proceeds with administrative hearings to determine the new rates.
SoundExchange is a non-profit organization and does not keep any of the royalties it collects. There is a fixed payout structure no matter how ownership of a sound recording is divided. 50% of SoundExchange royalties are paid to the sound recording owner (usually a label, unless the main performing artist owns their masters), 45% is paid to any featured artists, and the remaining 5% goes into a fund for non-featured artists, which include session musicians and background vocalists. Non-featured artists collect these royalties through organizations like AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund. Artists can also redirect portions of their royalties by filing a Letter of Direction (LOD).
If someone purchases sheet music for a song composition, does it include permission to be played publicly?
No, purchasing sheet music of a copyrighted song means obtaining a print license for the musical work. It does not include the right to publicly perform the printed song, and a separate license for public performance may still be necessary.
Does a performing artist, band or DJ need a public performance license to perform?
If a performing artist is the exclusive owner of the musical work copyright (song composition) and is performing the song live, no public performance license is needed – no need to license a right you already own! If the performing artist is also the sole owner of the sound recording copyright (master), then no license is needed to use the recording during the live performance.
However, when a performing artist does not own one or both copyrights, a public performance license is required for each work used. This includes performing cover songs or using someone else’s recording. This is also important for DJs, who often use multiple pre-recorded songs owned by others in their sets.
When a performance takes place in a business establishment like a restaurant, bar, or venue, it is usually the business owner’s responsibility to obtain a blanket license through a performing rights organization (PRO). Performers should always ensure licensure is in place before performing, as they may be held liable in cases of copyright infringement.
How to find which PRO represents a song
To find out which PRO represents a song, you can search the following:
ASCAP ACE Repertory - https://www.ascap.com/repertory#/
BMI Songview Search - https://repertoire.bmi.com/
SESAC Search Repertory - https://www.sesac.com/repertory/
Songview is a data platform integrated in ASCAP and BMI’s repertory search sites that provides aggregate data for both ASCAP and BMI when searching from either site. It does not show data from SESAC.
WHO IS EXEMPT FROM NEEDING PERFORMANCE LICENSES?
In the U.S., there are certain scenarios where music can be played publicly without having to obtain a license:
Educational and religious institutions – non-profit educational institutions may use legally obtained music in face-to-face classroom instruction without needing a license. This exemption may also extend to virtual or distance learning environments when the music is an integral part of teaching and proper technical measures are in place to prevent unauthorized copying or sharing. Similarly, music performed or played during religious services at places of worship or religious assemblies does not require a public performance license.
Public broadcast – when music is played by public broadcast and no one is financially gaining from a broadcast, then no public performance license is required. The copyright owner may serve notice to the company responsible for the broadcast and object to use of the song.
Small businesses – the “home-style” exemption allows businesses to play music without a license when certain conditions are met. The building must be of a certain size or smaller, listeners cannot be charged money to hear the music, and there is a limit on the number of devices / speakers that are used.
Agricultural organizations – government or nonprofit agricultural and horticultural organizations hosting an annual fair or exhibition are not required to obtain public performance licenses and cannot be held liable for infringement. Vendors and performers playing music at these events are not exempt and are required to obtain public performance licenses.
Music stores – music stores (and similar retail shops) can play music without a public performance license as long as it’s played within the store, for the purpose of selling music or music equipment, and listeners are not charged money to hear it.
Nonprofit veterans’ or fraternal organizations – no public performance license is necessary to play music at a private social event (not open to the general public), and any money raised (after covering costs) goes to charity. Events at college fraternities and sororities do not count unless the event is specifically to raise money for charity.
On top of these exemptions, there are additional examples of times when a public performance is not necessary:
Public domain music – Music that is no longer protected by copyright is considered public domain and can be used without a license. Remember that the two music copyrights. Just because a musical work (song composition) is public domain does not necessarily mean a sound recording is.
Playing music privately – music played privately (in a private setting, like a home) does not require a license.
CLOSING
Understanding when you need a public performance license (and when you don’t) is essential for every independent artist, venue, and creative business. Whether you’re spinning your own tracks at a pop-up event or teaching with music in a classroom, knowing the legal boundaries helps protect your work and others’.
OCM is here to help you make informed moves in the industry. Check out our related posts below for more insights that support your growth. Let’s build smart, creative careers – together!
Disclaimer: The information provided in this blog is for general educational purposes only and does not constitute legal, financial, or professional advice. OnSight Collective Music makes no guarantees regarding the accuracy or applicability of the content. Readers should consult a qualified professional for guidance specific to their situation.
