Any links on this page that lead to products on Amazon are affiliate links and I earn a commission if you make a purchase. Thanks in advance for your support!

Licensing Your Music 101 – Mechanical Licenses

by | Music Business | 4 comments

If you’re an aspiring musical artist or band, it’s likely that your main goal is to sign with a record label that will get your music out to the masses!

I know – I played in a band for 5 years around the LA area, and we were obsessed with having record company A&R people come out to hear us.

We eventually did meet with Warner Bros Records who were briefly interested but ended up passing on us…

The dream was that we would hit the jackpot with a hit record and the money would just come rolling in!

But where was this money to come from?

How artists actually make money from record sales involves receiving per-unit royalties from their record label that are paid to their publishing companies.

This process requires licensing their music to the record label through a mechanical license.

Licensing your musical works requires a knowledge of copyright; for a short guide see this article: Music Business 101: How to Copyright Your Music (For Composers & Songwriters).

What Is A Mechanical Royalty?

Starting back to the 1920s, a mechanical royalty originally was the amount paid to a music publishing company for the right to mechanically reproduce a song or musical composition on a player piano roll.

The publishing company would issue a mechanical license and collect royalties from the manufacturers of the piano rolls. Player pianos mechanically reproduced the underlying musical composition using these rolls, hence the term mechanical.

Today, mechanical royalties are paid by the record company or record label to the publisher(s) of the song or music composition, or through the collection services of a mechanical rights agency such as the Harry Fox Agency.

How Does A Mechanical License Work?

A record company, of course, cannot release copyrighted material with having the proper paperwork in place.

A songwriter’s publishing company must agree to have the label distribute his or her music publically. This is done through a mechanical license issued to the record label.

The mechanical license gives the record company the right to use the copyrighted, non-dramatic musical works in the making of phonorecords (CDs, records, and digital downloads) for distribution to the public.

All mechanical royalties are paid to the publisher(s) of the work. The publisher(s) then distribute to the songwriter(s) their portion of royalties as defined by their music contract.

First Release Rights

A mechanical license only covers the first release of the song or composition. The copyright laws give the owner of a musical composition the exclusive right to determine who will be the licensee of the first phonorecord containing the composition to be released.

A publisher does not have to issue a mechanical license – the copyright laws give them the right to grant the license or not.

Compulsory Mechanical License

But once a mechanical license has been issued, a compulsory mechanical license is available to anyone else who wants to record and distribute the work.

This license is mandatory and is available to anyone wanting to re-record the musical composition.

Statutory Rate

However, the license is contingent upon the payment of license fees at the statutory rate. The statutory rate is determined by law and is currently 9.1 cents for songs 5 minutes in length or less, or 1.75 cents per minute or fraction thereof for songs over 5 minutes.

A new recording may not change the basic melody or fundamental character of the composition.

If changes are made, the “new” version would be considered a “derivative work” which would require the music publisher’s approval.

The ¾ Royalty Rate

Many times, if the writer is also the recording artist or if the record is sold through record clubs, the record label obtains a reduction in the mechanical royalty rate.

This reduction is applied to songs that are considered controlled compositions or compositions that the artist writes or has ownership or control of.

Commonly the artist and publisher will only be paid a 3/4 rate or 75% of the statutory rate.

Unfortunately, although accepting a rate less than the statutory rate is technically done by choice, most record company contracts include this 3/4 rate as non-negotiable. It benefits the record company, not the artists or songwriters.

Sample Mechanical Licensing Agreement

Following is a sample of a mechanical licensing agreement.

Note: This sample license is provided for educational purposes only and is not intended to be used as a valid legal document. Please consult a qualified music attorney if you are in need of a mechanical license.


This Agreement made and entered into this ______ day of 20__, by and between _____________  (Publisher) (hereinafter referred to as the “Owner”) and __________________(Record Label) (hereinafter referred to as the “Licensee”).

Owner hereby grants to Licensee the right to record, reproduce, market and sell the musical composition now entitled:


(hereinafter referred to as the “Composition” or “Musical Composition”)  under the following terms and conditions:

  1. Owner warrants and represents that it is the sole and exclusive proprietor of a valid copyright or license in the musical composition composed by:


, and that Owner has the right to grant the license herein contained.

  1. Owner grants to Licensee the non-exclusive right, privilege and license, during the term of the copyright of said Composition and all renewals and extensions thereof, to use the Composition, and to make and/or use arrangements thereof, in the manufacture and sale of parts of instruments serving to reproduce the Composition in the United States.
  1. Licensee shall pay to Owner royalties at the following rates on all copies containing the above-named musical Compositions manufactured, sold and paid for in the United States during the term of the Composition’s copyright and all renewals and extensions thereof:

For each phonorecord manufactured, sold, and paid for, the royalty shall be the statutory rate in effect at the time the phonorecord is made (and any royalty stated in terms of a percentage of the statutory rate shall apply to the statutory rate at such time.

The term “phonorecord(s)” or “records”, as used herein, means any and all methods of mechanically reproducing the musical Composition including, but not limited to, phonograph records, cassette tapes, digital audio tape, compact disc and any and all methods of reproducing the Composition, now known or to later come into existence.

  1. Licensee agrees to render to Owner quarterly statements, and payments herefore, of all royalties payable hereunder, within 45 days after March 31st, June 30, September 30, and December 31, for each quarter for which any such royalties accrue pursuant to the terms hereof.
  1. (a) As to records manufactured in the United States and sold by Licensee for export to other countries, royalties shall be payable pursuant to this contract, except with respect to records exported to countries which require the payment of copyright royalties in connection with the import or sale of such records, in which event no royalties shall be payable hereunder.

(b) As to all mechanical devices (such as masters, mothers, and stampers) which are exported by Licensee to companies in other countries for use by such companies for the manufacture and sale of records, a royalty of ONE HALF the United States royalty rate shall be payable to the Owner.

  1. Owner indemnifies, and shall hold harmless, Licensee from loss or damage (a) arising out of or connected with any claim by a third party or parties which are inconsistent with any of Owner’s warranties in paragraph 1 hereof, or (b) by reason of any adjudication invalidating the copyright of the Composition.
  1. This contract is assignable by either party as long as the royalty rate herein stated is paid to Owner and shall be binding upon the heirs, legal representatives, successors, and assigns of the parties hereto.

AGREED TO and entered into by the parties hereto.










Up Next: Making Money In Music: Performance Royalties And ASCAP, BMI And SESAC