MECHANICAL ROYALTY
DEFINITION
A mechanical royalty is payment owed to a composition's songwriter or publisher whenever the work is reproduced in a physical or digital copy, such as a CD, download, or stream. It is distinct from performance royalties, which are paid for public playing rather than reproduction.
WHAT IT MEANS IN PRACTICE
In the US, mechanical royalties for musical works are largely governed by a statutory rate set through the compulsory license system, most recently administered under the Music Modernization Act through the Mechanical Licensing Collective, which handles blanket licensing for streaming services.
In the EU there is generally no equivalent compulsory statutory license; mechanical rights are typically licensed collectively through national societies like SACEM in France or GEMA in Germany, at rates those societies negotiate rather than a fixed government rate.
The royalty is paid to the composition owner, not the master owner, which is why a songwriter can earn mechanical income from a cover version they had no involvement in recording, as long as the cover was cleared correctly.
Streaming has folded mechanical royalties into a complicated pro-rata pool, meaning the per-stream mechanical rate a songwriter actually receives is small and variable, unlike the old fixed per-copy rate for physical sales.
AN EXAMPLE
A folk singer records a cover of a song written and owned by someone else. Once the cover is released, the covering artist's distributor pays a mechanical royalty to the original songwriter's publisher for every stream and download, calculated under the applicable statutory or collective rate.
WATCH OUT
People conflate mechanical royalties with performance royalties, but a song can generate one without the other depending on how it is used.
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