The details of performance rights royalties can vary from country to country. The information included here refers primarily to the American system.
Performance Rights Royalties
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 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. Every time a song is played publicly, the songwriter is due a performance rights royalty.
Performance Rights Royalties vs. Other Types of Royalties
It's important to note that performance rights royalties are different from mechanical royalties (the percentage you get when someone buys a copy of your album), or synchronization royalties (when you sell the rights to a TV show, movie, or other visual media that requires synchronized music).
As you can imagine, keeping track of public performances of a song is 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 U.S. these include 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 the Royalties System Work?
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.
When a publisher and a songwriter join a society, each is awarded 50 percent 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 person/business directly. The songwriter doesn't have to wait on their publisher to redistribute their share, which allows the songwriter to manage their royalties personally and make sure they are collecting everything they should be. Performance rights royalties are paid out to songwriters and publishers quarterly.
Performance Rights Societies and Blanket Licenses
As for 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 the 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.
Tracking Live Performances
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 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.
Thre are also procedures for bands/musicians to report their own live performances of their own original music. They are entitled to royalties for these performances, too.
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.
Are you a songwriter who needs someone to make sure your performance rights royalties are being properly collected? You may want to join ASCAP or BMI.