How do you determine the appropriate royalty rate for a mechanical license?

There's a baseline set by the government copyright office (the Copyright Royalty Board in the US) [US Copyright Royalty Board]. This is the minimum a licensee must pay per reproduction (like a download or physical copy). It's a good starting point, but you can negotiate for a higher rate.

The minimum mechanical royalty rate only applies to the United States, so bear that in mind in case your main market is another country. Also, the compulsory mechanical rate does not apply for on demand streaming services such as Spotify, or Apple Music. Usually, the bigger the label, or distributor, you work with, the better rate you’ll get due to their negotiation power. It is also important to remember that for international markets, the royalty rate will vary as it is influenced not only by label or distributor you work with, but also due to the exchange rate of the currency where they streams originated, as well as if the streams come for the ad supported or premium tiers; this means that you’ll get a “blended” rate unique to you.

Determining the appropriate royalty rate for a mechanical license involves several key factors. Firstly, consider industry standards; rates can vary between sectors like physical sales, digital downloads, or streaming. Secondly, evaluate the song's commercial potential, including its popularity and anticipated sales volume. Thirdly, assess the bargaining power of the licensee and licensor. Lastly, negotiate terms based on the song's length, prominence within the product, and exclusivity. Striking a balance ensures fair compensation for rights holders while facilitating widespread use.

Determining the appropriate royalty rate for a mechanical license involves various factors. Firstly, analyzing industry standards is crucial. This entails researching rates set by major music publishers and industry organizations. Additionally, considering the type of work, its popularity, and the potential market impact aids in setting a fair rate. Moreover, negotiating with the licensee based on usage scope and distribution channels is vital for equitable compensation. Balancing these factors ensures a mutually beneficial agreement for both parties involved in the licensing process.

Not only in the US. Canada has the same copyright laws as per their international treaty deal with the US, so you should verify if other countries will have the same application over mechanical rates.

This is where you leverage your bargaining power and the song's potential. If you're an established artist or the song is expected to be a hit, you can negotiate for a higher royalty rate as a percentage of sales or streams.

There is some truth in this, but it’s a little misleading in the context of CRB. To correct this article: - CRB rates are for publishers. Labels set their own rates. - CRB rates aren’t the minimum you’re allowed to charge, they’re the minimum a licensee has to pay - rates only apply to the US. DSPs pay different rates elsewhere. Usually mechanical licenses are determined on a pan European basis via ICE etc. - payments at CRB rates mean licensees are compliant. They don’t have to enter into negotiations. They might choose to outside of the rate for exclusives etc. but that’s separate. - unless you’re a Taylor Swift level artist, good luck negotiating anything. Deals aren’t with artists, they’re with publishers via MLC.

Research what royalty rates other songwriters and publishers are getting for similar songs or in similar situations. Industry associations and online resources can provide guidance.

I agree this could be somewhat helpful negotiating other types of mechanical licenses. But the focus of this articles seems to be digital licensing for steaming and downloads specifically. Therefore I disagree with most of this segment. Outside of CRB, rates are unique to rightsholder and are dependent on so many factors. Genres for example play no part is rates. As previously mentioned songwriters don’t charge for songs - their publishers do. Unless you’re talking about sync. Where they can possibly inform their publishers fee to a licensee (not their mech. rate split which is pre negotiated with the publishers) this is misleading.

For me, it's about the song. If the song is a new release or if it's catalog, in which case it depends on the song's previous success. If the song is new it comes down to the artist's management strategy, as it can be used to make potential fans aware of the artist's music, in a way they can enter the funnel and become fans. If the song was or has been a success then the negotiation would go around this because then it is the movie/film/game/commercial that would benefit from the deal by association with the artist. Also I think music managers involved in sync should be benchmarking all the time so they can be updated on what other artists are trying to get for their music and also production studios are paying for their sync needs.

AI has messed this up. The artist or label aren’t licencees. The label is a licensor. So is the publisher. A DSP is a licensee. Also whilst labels have mech rights. They typically aren’t called mechanicals. The rest of this article seems to refer to US publishers and their rights for digital streaming specifically . Consequently labels shouldn’t be referenced and artists isn’t a word that should be used - it’s songwriters.

Be realistic about the licensee's budget, especially for smaller labels or independent projects. A smaller upfront royalty with a higher percentage on sales success could be a good compromise.

Type of use; royalty rates can differ for physical sales, downloads, streaming (which has complex formulas), and other uses like ringtones or compilation albums. Territory; royalty rates may vary depending on the geographic territory where the music is being reproduced. Exclusivity; exclusive licenses (giving the licensee sole rights for a certain period) often command higher royalty rates than non-exclusive licenses. Your representation; consider involving a lawyer or music industry professional who can negotiate on your behalf and ensure you get a fair rate.