Performance Royalties vs Mechanical Royalties: Two Payments From One Song

One song, two composition royalties

When most independent artists think about getting paid from a stream, they picture a single payment. In reality, a single song carries two separate copyrights, and one of those copyrights generates two distinct royalties. The result is that one interactive stream can produce three different payments flowing to potentially different parties.

The two copyrights are the composition (the song itself: the melody, the lyrics, the underlying musical work) and the sound recording (the specific recorded performance, the master). Performance royalties and mechanical royalties are both composition royalties. They are owed for the song, not for the recording. The master royalty, paid to whoever owns the sound recording, is a separate third payment and is not the subject of this comparison.

The reason this matters in practice is that performance royalties and mechanical royalties are collected by different organizations, and an artist who registers to collect one but not the other leaves money sitting uncollected. Understanding which is which, and who collects each, is the difference between collecting your full composition income and collecting half of it.

What a performance royalty is

A performance royalty is generated when a musical work is performed publicly or communicated to the public. The historical examples are a song played on broadcast radio, performed live in a venue, or played in a bar or restaurant. The category also includes streaming: when a song is streamed, it is treated as a public performance of the composition, and a performance royalty is generated.

In the United States, performance royalties for the composition are collected by a performing rights organization, or PRO. The three main PROs are ASCAP, BMI, and SESAC. A songwriter affiliates with one PRO, registers their works, and the PRO collects performance royalties from the services and venues that use the music, then distributes the royalty to the songwriter and, separately, to the music publisher.

The key point is that the performance royalty is a payment for the act of performing or communicating the song to the public. It exists independently of any reproduction of the song.

What a mechanical royalty is

A mechanical royalty is generated when a musical work is reproduced. The term traces back to the era of mechanical reproduction (player piano rolls and later physical records), and it has always covered the making of copies: pressing a vinyl record, manufacturing a CD, or selling a digital download all generate mechanical royalties for the composition.

Interactive streaming also generates a mechanical royalty. The legal reasoning is that an on-demand stream involves a reproduction of the composition, so in addition to the performance royalty, the stream owes a mechanical royalty. For streaming and downloads in the United States, this mechanical royalty is collected by The MLC, the Mechanical Licensing Collective, established under the Music Modernization Act to administer the blanket mechanical license. The MLC collects mechanical royalties from the streaming services and distributes them to songwriters and publishers who have registered their works.

A songwriter who has never registered with The MLC has mechanical royalties accumulating in the system unclaimed. This is one of the most common gaps for self-releasing independent artists, who often affiliate with a PRO but never set up a publisher account at The MLC.

How both royalties come from one stream

Here is the sequence when your song is streamed on an interactive service like Spotify or Apple Music:

The composition generates a performance royalty, collected by your PRO (ASCAP, BMI, or SESAC) and paid to the songwriter and publisher.

The composition also generates a mechanical royalty, collected by The MLC and paid to the songwriter and publisher.

Separately, the sound recording generates a master royalty, which the streaming service pays to the rights holder of the recording. For an independent artist, this typically arrives through their distributor (DistroKid, TuneCore, CD Baby, or similar).

Three payments, two copyrights, multiple organizations. For a fully independent artist who wrote and recorded their own song and self-publishes, all three payments can ultimately return to the same person, but only if that person is registered in each capacity: with a PRO for performance, with The MLC for mechanical, and with a distributor for the master.

What the streaming mechanical rate actually is

The U.S. streaming mechanical royalty rate is not negotiated; it is set by the Copyright Royalty Board through its periodic Phonorecords proceedings. The current rate period is governed by the Phonorecords IV determination.

Under Phonorecords IV, the headline rate for interactive streaming is calculated as a percentage of the streaming service's revenue, and that percentage escalates across the rate period. As published by the Copyright Royalty Board and summarized by The MLC, the all-in royalty pool percentage rises from 15.1 percent of service revenue in 2023 to 15.2 percent in 2024, 15.25 percent in 2025, 15.3 percent in 2026, and 15.35 percent in 2027.

It is important to understand that this is not a fixed per-stream penny amount. The mechanical royalty paid for a given stream depends on a formula that weighs streaming service revenue against the total content cost and the number of streams. The per-stream figure that an individual songwriter sees varies by service, by month, and by the service's revenue.

For physical and download mechanicals, by contrast, the rate is a fixed statutory penny rate per copy, which under Phonorecords IV was set at 12 cents per track (or 2.31 cents per minute of playing time, whichever is greater) in 2023, rising in subsequent years. That penny rate governs physical sales and permanent downloads, not interactive streaming, which uses the percentage-of-revenue formula.

The practical takeaway for independent artists

If you write and release your own music, you have two composition royalty streams to collect and one master royalty stream:

Register with a PRO (ASCAP, BMI, or SESAC) to collect performance royalties. You can affiliate with only one PRO at a time.

Register with The MLC to collect streaming mechanical royalties. Registration is free, and you set up a publisher or self-administered songwriter account and register each of your works.

Make sure your distributor is correctly delivering your masters so the sound recording royalties flow to you.

The most common and costly mistake is treating "I signed up with BMI" or "I'm on DistroKid" as if it covers everything. A PRO does not collect your mechanicals. A distributor does not collect your composition royalties. Each organization administers a specific right, and collecting your full income means being registered in each capacity.

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From The Stem Editorial. This article is general industry information and is not legal or financial advice. Royalty rates and collection structures change; verify current rates with the Copyright Royalty Board, The MLC, and your performing rights organization.