There are numerous challenges when it comes to royalty accounting. Mainly because in the intricate world of the music industry, there are different types of royalties based on the medium in which the music is consumed and depending on the contractual agreements. Let’s start with the basics to know why there is a need for accounting management software.

What are royalties?

Music royalties are payments made to songwriters, recording artists, and other rights holders involved in creating music work for the use of their copyrighted music.

The importance of music royalties

Royalties are important for the artists and all the right holders as a part of recognition of their work and help them create more content. The majority of artists and songwriters need support to produce and distribute their own music. And it would also be difficult for them to track sales, radio plays, or streams. This is where music rights societies and record labels come in, as they are well-equipped to manage these tasks. These organizations help artists to collect and calculate royalties on their behalf with 100% accuracy.

Once the sales are over and the playlist logs are received from various sources with the number of streams and downloads, songwriters and artists receive a percentage of the total income earned as royalties. Therefore, proper royalty accounting is crucial for ensuring that the right holders receive the compensation they deserve.

Different types of music royalties:

There are different types of music royalties:

a) Mechanical royalties: MROs pay these royalties to songwriters and publishers for reproducing and distributing their compositions on physical media, such as CDs and digital downloads.

b) Performance royalties: PROs pay these royalties to songwriters and publishers for the public performance of their compositions, such as playing on radio, television, and in live performances.

c) Synchronization royalties: These royalties are paid to songwriters and publishers for the use of their compositions in film, TV, commercials, and other visual media.

d) Streaming royalties: These are paid to artists, songwriters, and rights holders for the use of their music on streaming services like Spotify, Apple Music, and Tidal. These royalties are calculated and paid differently to every right holder depending on certain criteria and the use of their music.

Does your company need royalty accounting management software?

To sustain the career of the artists and in turn the industry, it is necessary to ensure the royalty calculations are performed with 100% accuracy. Based on the medium of music consumption, royalties can be earned from various sources, such as streaming platforms, radio plays, live performances, merchandise sales, and more. These sources have their unique variables, making it challenging to combine and calculate earnings accurately. Artists often receive royalties from international sources as well, taking into account the exchange rates and taxes adds to another layer of difficulty. Some of the companies still rely on manual processes for royalty calculations. These methods are not just time-consuming but also prone to errors and inefficiencies.

As the industry continues to evolve every day with new processes, different standard formats, and the advent of generative AI, only adapting to technological changes can help maintain a fair and growing ecosystem for all stakeholders.

Want to know how Noctil solves the challenges of royalty calculations?

Email us at [email protected] to help us understand your requirements and get a trial run.