The details of performance rights royalties can vary slightly from country to country. The information included here refers primarily to the American system, but the general facts are relevant to all readers.
Performance rights royalties are royalties paid to a songwriter when one of their songs is played live. A live performance of a song doesn't have to mean strictly "live," - as in a performance in a concert setting. A live performance of a song can also mean a public airing of a recorded version of a song - like a radio play, television play, etc. Any time a song is played publicly, the songwriter is due a performance rights royalty.
As you can imagine, keeping track of these public performances of a song is quite difficult, especially for very popular songs, and tracking these performances is more than most songwriters and publishers can manage. Instead of trying to take on this job themselves, songwriters and publishers turn to performance rights collection societies (in the US, these are BMI, ASCAP and SESAC). The performance rights companies issue licenses to anyone who uses live music, collects licensing fees and royalties and distributes those payments to their members.
How does this system work? For starters, songwriters and publishers apply for memberships to performance rights societies separately. Songwriters can only have a membership with one society, while publishers technically need memberships with all of them, so that they can manage the works of all of their songwriters. For instance, if publisher has two songwriters, one who is a BMI member and one who is an ASCAP member, the publisher would need to be a BMI member AND an ASCAP member to collect their shares of the royalties from each songwriter.
When a publisher and a songwriter joins a society, each is awarded 50% of each of the songs they register. That means that when royalties are collected, the societies pay each of them half - and the societies pay each DIRECTLY - meaning the songwriter doesn't have to wait on their publisher to redistribute their share. This is beneficial for the songwriter, because it means they don't have to pay an addition cut to the publisher, which they would surely have to do otherwise if the publisher collected 100% of the royalty and then paid the songwriter their share. Further, it allows the songwriter to manage their royalties personally and make sure they are collecting everything they should be.
As for the part of the performance rights societies, they go out to companies who play live music and issue them blanket licenses. A blanket license gives that company the right to play any music in the catalog of that performance rights group. For example, if a radio station is issued a blanket license by BMI, that license allows them to play the music of any songwriter that has a membership with BMI. The licensing fees that the companies pay vary depending on a number of factors, like size of the business, how much music they use and the size of their audiences. Small businesses may pay very small fees while large companies can pay millions.
To distribute that money to their members, the performance rights groups track live performances of songs. Even for these societies, however, tracking everything is impossible. Each group has its own methods for tracking things like radio, TV, digital performances and so on, but tracking usually involves some mix of digital tracking coupled with reporting by the license holder. That data is then used to determine what percentage of share of royalties should be distributed to each member. Inevitably, there are plays that are not captured by the performance rights groups. However, digital plays are nearly 100% paid out on, because digital groups are able to deliver 100% complete playlists to the performance right societies.
Performance rights royalties are paid out to songwriters and publishers quarterly.
Are you a songwriter who needs someone to make sure your performance rights royalties are being properly collected? Find out how to join ASCAP or BMI.