Who Pays Music Royalties? A Straightforward Breakdown

Kristian Gorenc Z

Aug 23, 2025

Understanding the Flow of Royalty Payments

For anyone working in the music industry—artists, managers, publishers, or label execs—understanding who pays music royalties is essential to securing revenue and protecting rights. Royalties come from various sources, and the payment pathways depend on the type of music use. To manage royalties effectively, professionals must track both the composition and the recording side.

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Core Revenue Sources

Music generates royalties from several key sources.

Streaming services such as Spotify and Apple Music pay royalties for both the composition and the master recording. They direct publishing payments to PROs or mechanical rights organizations and master-rights payments to distributors, labels, or independent artists. Broadcast outlets and public performance venues like radio stations, clubs, and restaurants pay blanket license fees to PROs, which distribute funds to composers and publishers. In some countries, these venues also pay performance royalties for sound recordings through neighboring rights societies, which then compensate performers and master-rights holders.

Sync licensing applies to music used in TV, film, ads, or games and requires licenses for both the composition and the recording. Sync fees are negotiated directly and paid to rights holders. Physical and digital download sales, such as CDs, vinyl, and iTunes purchases, generate mechanical royalties that are paid by distributors through mechanical rights organizations or directly to publishers.

Who Pays, Who Gets Paid

The complexity of music rights means that royalties rarely flow in a straight line. Each source of music usage has its own payer and a set of recipients.

In the case of streaming services, companies like Spotify and Apple Music pay the master rights holders (labels or artists) and the publishers or songwriters. For public performance of compositions, broadcasters and venues pay songwriters and publishers through performance rights organizations. When it comes to public performance of recordings, those same venues and broadcasters compensate performers and labels via recording rights societies. Mechanical reproduction royalties from digital platforms, physical distributors, and record companies go to songwriters and publishers. For sync licensing, film, TV, and advertising producers make direct payments to both the master rights owner and the publisher or composer.

This division requires anyone managing rights to track distinct income streams and often liaise with multiple organizations to claim royalties correctly.

Streaming Royalties in Detail

Streaming royalties are the most prominent source of revenue today, but they are also among the most complex. Here's how payments are typically split.

Streaming services deduct 20 to 25 percent for operational costs. From the remaining revenue, about 85 percent is allocated to the master rights holder, which is usually a label or artist receiving funds via a distributor. Around 15 percent of the revenue goes to publishing rights, which are collected by PROs or mechanical rights societies. Master-side revenue is passed from the DSP to the label or distributor, and then to the artist, depending on the contract terms. Publishing revenue flows from DSPs to the relevant rights societies, who then distribute it to songwriters and publishers.

Role of Key Stakeholders

Professionals must understand the roles of the different entities involved in royalty collection.

Digital service providers like Spotify, YouTube Music, and Apple Music are responsible for paying both master and publishing royalties. PROs, CMOs, and MROs—such as ASCAP, BMI, PRS, and MCPS—collect performance and mechanical royalties on behalf of composers and publishers. Recording societies like SoundExchange in the U.S. or PPL in the UK handle public performance royalties for sound recordings.

Labels and distributors receive master royalties and manage payouts to artists. Publishers collect and distribute composition royalties to songwriters. Artists and songwriters earn income either through contractual agreements or by registering directly with the appropriate organizations. In many cases, artists or composers are unaware of all the income channels available. It is the responsibility of their managers, publishers, or lawyers to ensure registrations are up to date and revenue streams are fully covered.

Practical Aspects to Consider

Royalty collection requires precision. Poorly registered songs or recordings may lead to unclaimed royalties, so metadata accuracy is critical. Rights must be tracked separately since master and publishing royalties follow different payment flows. Independent artists who own their masters can benefit from direct registration with rights societies, which allows them to retain a larger share of revenue.

Sync licensing has become a growing revenue stream, particularly for artists with niche catalogs, due to the rise of direct sync deals. Many older contracts do not include provisions for digital income, meaning artists and their teams may need to renegotiate terms to ensure access to modern royalty sources.

Takeaway for Industry Professionals

Understanding how royalties flow helps professionals audit income, identify missing revenue, guide artists or rights holders on registrations, and negotiate fair contract terms. It also allows them to maximize income across multiple channels.

Streaming services pay both master and publishing royalties. Public venues and broadcasters pay performance royalties through PROs and recording societies. Sync users pay fees directly to master and composition rights holders. Mechanical royalties from physical and digital sales require separate tracking and management.

Professionals need to monitor rights across both the master and composition side, ensure accurate metadata, and actively manage registrations. Staying informed about who pays music royalties and how those payments are structured is essential to sustainable career development in the music industry.