The Four Core Royalty Streams
This episode is a foundational deep dive into exactly how music copyrights generate a paycheck. Host Josh Gilliland breaks down the four primary income sources for any music asset, explaining the engine that drives your potential returns.
In this episode, you will learn about:
Mechanical Royalties: Generated from every reproduction of a song, from vinyl to Spotify streams.
Public Performance Royalties: Earned from plays on the radio, in restaurants, on TV, and online.
Synchronization (Sync) Royalties: The powerful income from placing songs in movies, commercials, and video games.
Print Royalties: The smallest but still important stream from the sale of sheet music.
Resources Mentioned:
Download your free Advanced Investment Calculator: https://www.jgsoundofmoney.com/calculator
Pre-Order the companion book, The Sound of Money: https://a.co/d/7132rZv
Transcript:
[00:00:00] Welcome back to the JG Sound of Money. I'm your host, Josh Gilland. So last week we explored the three primary paths, uh, an investor can take to get into music royalties, the stock market approach, uh, the fund approach, and then the approach that we are most focused on with this PO podcast, and that is the direct ownership approach.
So if you haven't listened that episode, please go back and do so. Uh, it's a pretty good foundational knowledge that you need to have, uh, to get into the world of music royalty investing. Well, today we're going to zoom in on a foundational topic, uh, another foundational topic that is very, very important.
It deserves its own dedicated episode, and that is really understanding how the music you invest in. Actually earns money. So we're gonna break down the four core royalty streams today. [00:01:00] All right. And just right on cue, my neighbor's dog decides to bark. So we could have a little bit of a singing dog in the background in today's episode.
So apologize for that. And actually we'll see if his owner comes to me for a sink payment, uh, on that audio. We'll get in that in a second. So in today's episode, we're going to really dig into how the two copyrights we discussed back in episode two, which. The analogy is the blueprint in the building, how they actually generate a paycheck, right?
Because as an investor, that's what we most care about, is how these are actually generating income and generating money. Uh, they do so in four primary ways for investors. These income sources are known as royalty streams. So this isn't like streams, music streams on Spotify, although that's part of it.
[00:02:00] But these are just royalty streams, uh, income that royalties produce. And you absolutely must understand these because each one of them have their own little nuances that you need to pay attention to as an investor. That we will explore throughout this podcast and future episodes. So let's start with first up, mechanical royalties.
So this is a very old fashioned term. It, it actually came back in the day of player pianos where somebody would write music and then they would take that music and stamp it into those cylinders. That then they would use and play our pianos to have the pianos play that piece of music. And so the person who wrote that music wanted to make sure that they were getting paid for that music.
Hence the mechanical royalty was born. And [00:03:00] so that name stuck around. I mean, this came back in the late 18 hundreds, so it's been around forever. Uh, but it, it applies to a broad brush of, of ways that music is captured. The music medium is captured. Um, so you know, it, it evolved to the mechanical process of pressing vinyl records.
As an example, but today the definition has, has expanded. So every time a copy of a song is made, it doesn't matter if it's a vinyl record, a cd, a digital download, which is different than a digital stream by the way. Um, a mechanical royalty is, is generated. And so these royalties are one of the four primary streams for music royalties.
Now, there's a whole separate organization that manages the mechanical royalty stream payments. [00:04:00] We'll get into that in a future episode, but just know that mechanical royalties are one of the four streams. The second stream is public performance royalties. So these are generated whenever a song is performed publicly.
Now the definition of public is incredibly broad. So this includes a song being played on the radio, on a TV show in a bar, a restaurant at the gym that you go to. Uh, and most importantly for us, when the song is streamed online. And so just, just view this as, anytime that that song is actually publicly being, being played, or broadcast, that is what a public performance royalty is.
Now again, there's a separate organization that [00:05:00] is in charge of capturing these royalty payments. Actually multiple organizations, and we'll get into those in a future episode. But just know that public performance royalties are one of the four core royalty streams. So third, we have synchronization royalties, or sync it's com commonly just referred to as sync.
So this is when music is licensed to be synced with visual media. So think commercials, uh, think a television show or a movie or video games, anything that has music as as a component that is synced to the visual elements of that. You can also think of training videos for corporations as a niche example of that as well.
You know, for my business, JG Beats lab, we actually do a lot of this, really got into sync, sync, um, sync music creation. And so I'm starting to get a lot of insider knowledge in this [00:06:00] as well, which is really, really interesting. It is a very interesting area of music royalties. Okay, so a sync license is typically a one-time upfront fee.
So somebody comes in, they buys the rights to use that song in whatever medium that they have. So it's a one time fee that you as an artist or the producer or whatever, uh, capture for that. But then every, let's say it's used in a commercial or a movie every time that airs. Um, like commercial, every time it airs on television, it also generates a separate public performance royalty, which is the second one that we talked about.
Uh, so this creates like this income tail for sync that can last for years or decades depending on, on the, you know, the, the television show or the movie or whatnot that it's a part of. [00:07:00] And so sync is a very interesting area because. You know, the primary initial driver is that one time payment that you receive.
But then that opportunity for things to land on big productions that carry on, you know, for years and decades to come is a nice little, uh, nice little byproduct or bonus from, from that as well. Okay, so those are the three primary ones. Now there is a fourth, which. Mm, I don't think any of us will ever deal with, but that is the print music royalties.
This is very simply payment. For the sale of printed sheet music. Now I'm, I'm a musician, so I do have some printed sheet music, but, uh, not a lot of it. And it's really not that expensive and so, uh, just not a big stream, but it is one of the four that we should, we should understand. I don't think any of the royalties that I'm actually an investor in have [00:08:00] ever seen even a dime from this stream though.
So it's, uh, you know. It's not the big one, I'll put it that way, but it does exist. So anyway, so those are the four core ways a song makes money. So to recap, you have the mechanical, the performance, the sync. And the print, those four. So we will get into all of those in much, much more detail as this podcast goes along in future episodes.
But just understand these four primary components, and again, in, in the book that's coming out, uh, mid-October of this year, the, uh, sound of Money. We, I break all of this down in great detail, so if you haven't had a chance to check that out and pre-order it, please, I encourage you to do so. Now, uh, if you're listening to this podcast, podcast after October 14th, 2025, that book is available.
Uh, I encourage you to go, [00:09:00] go purchase it wherever you purchase books. Um, and so. Now that you have, you know, this complete foundational knowledge of these four streams, well now we're ready to go shopping. So next week we're going to begin our deep dive into specific platforms where you can invest in music royalties, where you can actually buy these assets.
So next week we're gonna talk about the one that I have used the most. And it's the biggest and the oldest of the marketplaces, and that's royalty exchange. So looking forward to that episode now. Please don't forget to also download the free advanced investment calculator at JG sound of money.com/calculator.
Thanks for tuning in to the JG Sound of Money. Please subscribe and leave a review and we'll see you next week.[00:10:00]
