Every time a song plays on a streaming service, money flows to two separate sets of rights: the recording itself (the “master”) and the underlying song (the composition). The recording side usually pays the record label and artist, while the song side pays songwriters and publishers through mechanical and performance royalties.
At Buddymagazine.org we get a lot of questions about why artists say streaming pays so little, and why the answers online contradict each other. Most of the confusion comes from mixing up these different rights and the organizations that collect them. This guide walks through each piece in plain English.
Key Takeaways
- Most recorded songs carry two copyrights: one for the sound recording (master) and one for the musical work (composition).
- Composition royalties come in two main types: mechanical royalties and performance royalties.
- The Mechanical Licensing Collective (The MLC) handles the blanket mechanical license for U.S. streaming and download services.
- Performance rights organizations such as ASCAP and BMI collect performance royalties for songwriters and publishers.
- SoundExchange collects digital performance royalties for recordings played on non-interactive services like internet and satellite radio.
Two Copyrights in Every Recorded Song
A recorded song is really two creative works stacked together. The musical work (or composition) is the melody and lyrics, written by songwriters and often managed by music publishers. The sound recording (or master) is the specific recorded performance, usually owned by a record label or by an independent artist who releases music themselves.
One song can have many masters. A cover, a live album and a remix each create a new sound recording of the same composition, which is why songwriters can earn from songs they never performed.
Who usually owns what
- Master owner: a record label, a distributor acting for an artist, or a self-releasing artist.
- Composition owner: the songwriters, often through a publishing deal that splits ownership with a publisher.
- Featured artists and session musicians: may have contract rights to a share of master income, and certain statutory royalties, even when they own neither copyright.
The Main Types of Music Royalties
Different uses of music trigger different royalties. The table below summarizes the ones most relevant to streaming in the United States.
| Royalty type | Which copyright | Typical trigger | Who collects in the U.S. |
|---|---|---|---|
| Master (recording) income from on-demand streams | Sound recording | Streams on services where you pick the song | Paid to labels or distributors under direct deals |
| Mechanical royalty | Composition | Reproducing a song via downloads and interactive streams | The MLC (blanket license for digital services) |
| Public performance royalty (song) | Composition | Streams, radio, TV, live venues, businesses playing music | PROs such as ASCAP, BMI, SESAC and GMR |
| Digital performance royalty (recording) | Sound recording | Non-interactive digital radio, such as satellite and webcasting | SoundExchange |
Mechanical royalties
A mechanical royalty is paid for reproducing a composition. Today it covers digital uses such as downloads and on-demand streams. In the U.S., mechanical rates for these uses are set through proceedings at the Copyright Royalty Board rather than negotiated song by song.
Performance royalties
A performance royalty is paid when a composition is performed publicly, which includes being streamed, broadcast on radio or TV, or played in a bar, gym or concert hall. Songwriters and publishers usually join a performance rights organization (PRO), which licenses music users and passes the money back to its members.
The Music Modernization Act and The MLC
For years, digital services struggled to license every song they streamed because ownership data was messy and many songs were never matched to their writers. Congress addressed this with the Music Modernization Act. According to the U.S. Copyright Office’s Music Modernization Act overview, the law created a blanket licensing system for digital services making downloads and interactive streams, and the Office designated the Mechanical Licensing Collective to administer it.
The Copyright Office notes that, as of January 1, 2021, songwriters and publishers need to register with The MLC to receive royalties under that blanket license.
The MLC describes its job as collecting royalties from eligible U.S. streaming and download services, matching the reported usage to registered songs, and paying its members, which include self-administered songwriters, publishers and administrators. Importantly, The MLC handles mechanical royalties only. Performance royalties still go through PROs.
Where SoundExchange Fits
Not every streaming service works the same way. On-demand services, where you choose exactly what to hear, license recordings directly from labels and distributors. Non-interactive services, which work more like radio, can rely on a statutory license for sound recordings instead.
SoundExchange collects those digital performance royalties from services such as satellite radio and internet radio and distributes them to recording rights owners and artists, including featured artists who may not own their masters. A key point for U.S. readers: traditional AM/FM radio pays songwriters through PROs but generally does not pay a performance royalty for the sound recording itself.
If you release music yourself, registering with a distributor is not enough to collect everything you may be owed. Composition royalties often require separate registrations with a PRO and The MLC, and recording royalties from digital radio require registration with SoundExchange.
Why “Per-Stream” Numbers Are Misleading
Readers often send Buddymagazine.org charts claiming a service pays a fixed amount per stream. In practice, there is no single official per-stream rate. Payouts depend on contracts that are usually confidential, the listener’s country, whether they pay for a subscription, and the total pool of streams in a given period.
The money also passes through several hands. A label or distributor takes its contractual share before an artist sees master income, and a publisher may take a share of composition income. Two artists with the same number of streams can therefore be paid very different amounts.
For a broader look at how companies report revenue, our Business section and guide on how to read an earnings report cover basics that apply to music companies too.
What Artists and Fans Can Do
For musicians, the practical steps are about paperwork. Accurate credits and registrations let the system find you.
- Confirm who owns each master and each composition, with written split agreements among co-writers.
- Join a PRO as a writer, and as a publisher if you self-publish.
- Register your songs with The MLC so mechanical royalties can be matched.
- Register recordings with SoundExchange to collect digital radio royalties.
- Keep identifiers such as ISRCs (for recordings) and ISWCs (for compositions) consistent across platforms.
For fans who want more money to reach artists, buying music, merchandise and tickets directly can deliver a larger share than streams alone. If you go the ticket route, read our concert ticket buying guide first. You can find more explainers like this in Music Culture, and new guides across every topic on the Buddymagazine.org homepage.
Rules in this area keep shifting as rates are reviewed and new technologies such as AI-generated music raise fresh questions. We treat official sources, not viral charts, as the starting point.
Frequently Asked Questions
What is the difference between a master and a composition?
The composition is the song itself, meaning the melody and lyrics written by songwriters. The master is one specific recording of that song, usually owned by a label or a self-releasing artist. Each is a separate copyright, so each earns its own royalties when the music is streamed, broadcast or sold.
Does The MLC pay performance royalties?
No. The MLC administers the blanket mechanical license for eligible U.S. streaming and download services, so it collects and pays mechanical royalties only. Performance royalties for songs are collected by performance rights organizations such as ASCAP and BMI, and digital radio royalties for recordings are handled by SoundExchange.
How much does a streaming service pay per stream?
There is no single official rate. Payments depend on confidential contracts, subscription type, country and the total pool of plays in a period, and money is split among labels, distributors, publishers and creators. Treat any fixed per-stream figure you see online as a rough estimate at best, not a rule.
Do I need to register with all of these organizations?
If you write and release your own music, generally yes. A distributor collects master income from on-demand services, but a PRO handles performance royalties, The MLC handles U.S. digital mechanicals, and SoundExchange handles digital radio royalties for recordings. Missing a registration can mean money goes unclaimed or is delayed.
