Which Royalties Are You Missing Out On Without Knowing It?

Many independent artists are already earning royalties they never receive. Not because platforms failed to pay — but because different royalty streams are collected by different organizations, and registration is rarely automatic.

Disclaimer: This article is for general informational purposes only and does not replace legal advice for specific situations.

TL;DR

Under U.S. Copyright Law, every recorded song generates royalties from two parallel copyright layers: the Musical Composition (melody and lyrics) and the Sound Recording (the specific recorded performance) [1]. Each layer is collected by different organizations under different statutory and contractual rules, and registration is rarely automatic. Independent artists commonly leave money on the table because they (i) collect from the Sound Recording side via a distributor but never register the Composition side with a Performing Rights Organization (PRO) for performance royalties and the Mechanical Licensing Collective (MLC) for digital mechanicals [5][6], (ii) overlook the digital performance royalties payable to performers and Sound Recording owners via SoundExchange for non-interactive streaming (e.g., Pandora, SiriusXM) [3], (iii) fail to register physical mechanicals through the Harry Fox Agency or a publishing administrator [9], or (iv) have no publishing administrator handling YouTube composition (UGC) royalties [7][8].

The diagnostic is straightforward: for each track generating commercial activity, identify which collector is registered to receive each stream, and where no collector is registered, that stream is a likely leak.

Why this gap exists: the two-layer foundation

Under U.S. Copyright Law, a song is treated as two distinct works embodied in the same recording:

• Musical Composition (the underlying lyrics, melody, harmony, and arrangement); and
• Sound Recording (the specific audio fixation of that composition) [1]

Each work is owned separately, and each generates its own set of royalties when the song is used commercially. The Composition is typically owned and managed by songwriters and music publishers; the Sound Recording is typically owned and managed by the recording artist or the record label that funded the recording [1].

See more: "What is Music Copyright?" & "Which parts of a song are protected by Copyright?"

This separation has a direct financial consequence: when a song is streamed, broadcast, performed publicly, or synced to a video, the law expects payments to flow to both layers — not just one. If a creator controls both the Composition and Sound Recording rights but is registered to collect on only one side, royalties generated on the unregistered side may remain unclaimed, be held by collecting organizations in a "black box", or eventually be distributed to other rightsholders under market-share rules [5].

A second feature of U.S. law adds further complexity: the public performance right in sound recordings is limited. Under Section 106 of the Copyright Act, the sound recording public performance right covers only digital audio transmissions, not terrestrial AM/FM radio [2]. This means that AM/FM radio plays generate royalties only on the Composition side, never on the Sound Recording side [2]. This asymmetry creates one of the largest and most counter-intuitive royalty gaps in the U.S. system.

See more: "Exclusive Rights in Music in U.S Copyright Law?"

To see what is potentially being missed, it helps to walk through each major royalty stream, identify which layer it belongs to, and identify which body collects it.

Stream 1: Mechanical royalties — interactive streams and downloads (MLC)

A mechanical royalty is paid whenever a Musical Composition is reproduced — historically on a vinyl record or CD, today every time a song is streamed on an interactive platform like Spotify or Apple Music, or sold as a permanent digital download [1]. The royalty flows to the songwriter and music publisher, not to the recording artist or label (unless they happen to be the same person).

For digital uses, the Mechanical Licensing Collective (MLC) — designated by the U.S. Copyright Office under the Music Modernization Act of 2018 — administers a blanket compulsory license under Section 115 of the Copyright Act that covers digital phonorecord deliveries from eligible interactive streaming services and downloads [5][6]. The MLC has paid out over USD 1 billion in mechanical royalties to rightsholders since beginning operations in January 2021. [5] To receive these royalties, the songwriter or publisher must register their Compositions in the MLC database; the royalties do not flow automatically from a distributor registration on the Sound Recording side.

A common misconception: Many believe that a distributor like TuneCore, DistroKid, or CD Baby pays out all streaming royalties from the Sound Recording side. In reality, they primarily collect and pay out from the Sound Recording side. The Composition side — the mechanical royalty payable to the songwriter of that same track — is a separate collection channel that the distributor typically does not cover unless the artist enrolls in a separate publishing administration service.

The gap: Self-released artists who write their own songs but never register with the MLC may forfeit the mechanical royalty share of every interactive U.S. stream of their music. The MLC's scope is also limited. It does not cover physical mechanicals (vinyl, CDs), micro-sync uses on YouTube, TikTok, or Facebook, or any non-U.S. territory [6]. Each of these requires a separate collection channel.

Stream 2: Mechanical royalties — physical formats and downloads (HFA)

Mechanical royalties for physical formats (vinyl, CD, cassette) and certain non-blanket digital uses are not administered by the MLC. They are typically obtained via a direct license from the publisher, or through the Harry Fox Agency (HFA), which has administered mechanical licensing on behalf of U.S. publishers since 1927 [9]. After the MMA, HFA's role narrowed but did not disappear: it continues to administer licenses for non-digital phonorecord deliveries and for certain digital transmissions outside the Section 115 blanket license [9].

The U.S. statutory mechanical royalty rate — set by the Copyright Royalty Board — currently stands at 12 cents per track or 2.31 cents per minute of playing time, whichever is greater, for physical records and permanent digital downloads (rate period 2023–2027) [10]. For streaming, the statutory rate is calculated as a percentage of service revenue.

The gap: Songwriters with music sold on vinyl, CD, or as paid downloads who are not registered with HFA (or with a publishing administrator that registers with HFA) may not receive accurate mechanical accountings from those formats. Vinyl in particular has experienced a sustained consumer revival, and the per-unit mechanical royalty applies regardless of whether the unit is ultimately sold or simply manufactured [10].

Stream 3: Performance royalties — Composition (PROs)

Whenever a Musical Composition is publicly performed — on radio, TV, in a venue, on an interactive streaming service, or via a non-interactive webcast — a performance royalty is owed to the songwriter and publisher [2]. In the United States, these royalties are collected by Performing Rights Organizations (PROs): ASCAP, BMI, SESAC and GMR.

To collect performance royalties, the songwriter must affiliate with a PRO and register the work in that organization's database. Affiliation is voluntary but, in practice, indispensable: without it, the venues, broadcasters, and streaming platforms that license through the PRO have no way to identify the rightsholder when usage is reported. Crucially, while a publisher can affiliate with multiple PROs, a songwriter can only affiliate with one PRO at a time. PROs distribute collected fees back to their members on a regular schedule — ASCAP, for example, reports distributing 88 cents of every dollar collected back to members as royalties [8]. Furthermore, PROs pay the "writer's share" of these royalties directly to the songwriter, bypassing the publisher entirely - a system designed to protect writers from unpaid royalties.

The performance royalty stream is broader than many independent artists realize. It includes not only terrestrial radio play and live venue performance but also the public performance component of interactive streaming, broadcast and cable TV use, and music played in commercial establishments. Performance royalties are separate from mechanical royalties on the same stream: when a song is streamed on Spotify, both a mechanical royalty (collected by the MLC) and a performance royalty (collected by the PRO) are generated on the Composition side. Affiliating with only one of the two leaves the other uncollected.

The gap: A songwriter whose music is played on U.S. radio, in venues, in restaurants, on TV, or on streaming services typically cannot collect performance royalties without a PRO affiliation. Songwriters whose works are unregistered with any PRO will not appear in the matching databases that PROs use to identify rightsholders and may forfeit performance royalties that have been collected but cannot be paid out.

Stream 4: Digital performance royalties — Sound Recording (SoundExchange)

In the U.S., the public performance right in Sound Recordings is limited by statute: it applies only to "digital audio transmissions" — meaning non-interactive streaming services like SiriusXM, Pandora, and internet radio. AM/FM terrestrial radio in the U.S. does not pay royalties for the public performance of Sound Recordings; it only pays Composition royalties [2].

For the covered digital uses, SoundExchange is the sole organization designated by the U.S. government to administer the Section 114 statutory license and to collect and distribute these royalties [3]. The statutory split is fixed: 45% to the featured artist, 5% to a fund for non-featured artists, and 50% to the sound recording copyright owner. Rates are set by the U.S. Copyright Royalty Board [4].

Registration with SoundExchange is required to claim. The royalties do not flow through a distributor; SoundExchange is a separate collection channel from interactive streaming royalties paid by Spotify or Apple Music via the distributor. SoundExchange administers over 700,000 music creator accounts and represents the only path for U.S. artists to collect digital performance royalties from satellite and internet radio [3].

The gap: Featured artists and master rights owners whose recordings have been played on SiriusXM, Pandora, or U.S. internet radio for years may have SoundExchange royalties sitting unclaimed under their name simply because they never registered. Producers, mixers, and engineers may also redirect a share of these royalties through SoundExchange's Letter of Direction program — another mechanism frequently overlooked by collaborators on a recording [3], which was recently codified into law under the Allocation for Music Producers (AMP) Act as part of the 2018 MMA.

Stream 5: Sync fees and master use fees (both layers)

When music is paired with a visual project — a film, TV show, advertisement, video game, or branded content — two separate licenses are typically required under U.S. law: a synchronization license for the Composition (paid to the songwriter or publisher), and a master use license for the specific Recording (paid to the master owner) [11]. Both generate upfront fees, and the Composition side typically also generates downstream performance royalties via the relevant PRO whenever the visual project airs or streams publicly (such as on broadcast TV or cable). Industry custom is to pay equal amounts for the composition sync and the master use license, often through a "Most Favored Nations" clause.

The licenses are not statutory; they are negotiated directly between the user and the rightsholder. There is no compulsory license for synchronization under U.S. law, which means a rightsholder can decline the use or set any fee.

The gap: Independent artists who write and record their own songs are entitled to both the sync fee (Composition side) and the master use fee (Recording side) for any commercial placement — and to the downstream performance royalties when the project airs. However, these downstream royalties are entirely dependent on the submission of a "cue sheet" to the PROs (detailing the song's usage, duration, and rightsholders). If the production company fails to file a cue sheet, or if the artist is unregistered, the PRO has no way to track the performance, and the backend royalties are lost. Where the artist has signed a publishing or label deal, those fees flow through intermediaries, and visibility into the placement, the negotiated rate, and the downstream royalty stream may be limited without explicit contractual reporting obligations.

Stream 6: YouTube and User-Generated Content (UGC) royalties (both layers)

YouTube generates two distinct royalty streams from the same upload. When a video uses a Sound Recording, the Sound Recording owner may receive a share of the ad revenue via the Content ID system, typically flowing through the distributor or a Content ID partner. When the video contains a composition — including a cover version, a melody match, or a UGC clip — collecting societies and publishers may also claim the composition share, with royalties flowing through PROs like ASCAP and BMI under their YouTube agreements [7][8].

Notably, YouTube's Content ID can detect not only the exact fingerprinted recording but also cover versions and re-recordings via melody-matching [8]. This means a songwriter whose composition is used in a fan cover or UGC video may be entitled to a composition royalty even if their own master recording was not used — but only if they are affiliated with a PRO or publishing administrator that has access to YouTube's Publishing Content Management System.

The gap: A songwriter whose Composition is used in user-generated content on YouTube cannot collect the composition share unless they are affiliated with a PRO that has a YouTube collection arrangement or with a publisher or administrator that has direct access to YouTube's Publishing CMS. The MLC, importantly, does not cover YouTube reproduction royalties — those are outside its statutory scope [6]. They are handled through separate publishing and Content ID arrangements.

The diagnostic table

For an independent U.S. artist who writes and records their own songs, the practical audit runs across both layers:

The practical takeaway

For most independent artists in the U.S., the royalty gap is not bad faith — it is structural. The distributor handles the Sound Recording side of interactive streaming. Everything else — mechanicals (both digital via the MLC and physical via HFA), performance royalties via the PROs, digital performance via SoundExchange, sync fees, master use fees, and YouTube composition royalties — requires a separate registration with a separate organization, and in many cases a contractual relationship (publishing administration or Content ID partnership) to operate that registration at scale.

The diagnostic is straightforward: for each track generating any commercial activity, work down the table above and ask, for every row, is there a registered entity collecting on my behalf? Where the answer is no, that row is a potential leak. Some may be small; some may, over years of accumulated unclaimed royalties, be material (and ultimately lost to industry "black boxes" where unclaimed funds are distributed to other parties based on market share).

Once the registration audit is complete, the next layer of diligence is detection: identifying unauthorized uses that have escaped the licensing perimeter entirely.

See more: "How Do I Know If Someone Is Using My Music Without Permission?" & "What Should I Do If I Find My Music Being Used Without Permission?"

If you are unsure whether your PRO, MLC, SoundExchange, HFA, and Content ID arrangements are complete, non-duplicative, and not contradictory — a frequent issue when multiple administrators have been engaged over time — this is the point at which a focused conversation with a music lawyer or a rights administration partner is typically more efficient than continuing to guess.

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REFERENCES

[1] Musical Works and Sound Recordings, U.S. Copyright Office (M-309, Rev. Feb. 2020); see also What Musicians Should Know about Copyright, U.S. Copyright Office.

[2] Musical Works and Sound Recordings, U.S. Copyright Office (M-309, Rev. Feb. 2020); 17 U.S.C. § 106(6) (digital audio transmission right).

[3] SoundExchange, For Artists, Labels & Producers (soundexchange.com); 17 U.S.C. § 114.

[4] SoundExchange, Digital Performance Royalties (soundexchange.com/digital-performance-royalties).

[5] The Mechanical Licensing Collective, USCO & The MLC (themlc.com/usco-and-mlc); 17 U.S.C. § 115.

[6] U.S. Copyright Office, Music Modernization Act — FAQ (copyright.gov/music-modernization/faq.html).

[7] About Collecting Societies, YouTube Help (support.google.com/youtube/answer/2620262).

[8] ASCAP, How to Earn ASCAP Royalties for Your Music on YouTube (ascap.com).

[9] Harry Fox Agency, About HFA and FAQ (harryfox.com).

[10] U.S. Copyright Royalty Board, Statutory Mechanical Royalty Rates 2023–2027 (per Section 115 rate-setting proceedings); see also U.S. Copyright Office Circular 73, Compulsory License for Making and Distributing Phonorecords.

[11] CD Baby, Sync Licensing and Placement Guide; see also Music Synchronization License vs. Master Use License Agreement.