Why do Record Labels need to account Mechanicals?
So, what is a Mechanical Royalty?
Whenever a song is reproduced a royalty called a Mechanical is due to the associated songwriters for every reproduction. The revenues for these royalties are generated by licenses issued by Mechanical Collection Societies.
The process differs slightly between calculating the license fee, and subsequent royalty, between the reporting of physical products and digital sales.
For physical products, the labels report to the collection societies how many units they have manufactured (or sold) & pay the necessary fee.
For digital sales & streams, it is the DSPs that report to the societies how many times a song has been downloaded or listened to via their platform and pay the necessary fee. There are a few exceptions to this on a territory basis. For example, in the US, the download stores pass the mechanical royalty back to the master rights owner who is then obliged to report to the necessary publisher(s). The recent launch of the MLC is designed to streamline this, so that the DSPs will no longer pass it back to the Master rights owners, but instead to the MLC who will distribute to publishers.
The collection societies then report this to either a sub publisher or original publisher for then paying to the relevant songwriters and composers.
And why do labels need to pay mechanical royalties?
In essence, they have a legal obligation. In most territories, such as the UK, there is a mandated collection society to which all mechanical royalties should be paid for disbursing to publishers and songwriters. A label which is audited and found not to have paid due mechanicals risks being fined.
Mechanical royalties are the means by which songwriters get paid for all and any reproduction of the master recordings of their songs. Songwriters do not always perform on recordings of their songs. Mechanicals ensure that the record companies are paying both the performers and the composers.
How can Curve make Mechanical reporting less, well, mechanical?
Curve makes managing your mechanical reporting easy. It can be used to calculate royalties due from downloads in the US & Canada, royalties due from manufacturing of physical products and AP1 reporting for MCPS in the UK. Want to know more? Take a tour here, find out why Curve is the royalty management choice for record labels across the globe.