Appendix B – Glossary of Royalty Types
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Advance
A payment made to a producer (or other rights-holder) before the recording or exploitation begins. Advances are recoupable against future royalties, meaning the producer does not receive backend royalties until the advance is fully recouped from their share of royalties. Advances help cover upfront costs (e.g., studio time, equipment) but create a recoupment obligation.
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Direct Monies (a.k.a. “Third-Party Revenues”)
Income streams paid directly to rights-holders without involving the label as intermediary. Examples include sync fees (placement in film/TV), micro-licensing, YouTube Content ID payouts, SoundExchange digital performance royalties, and other one-off licensing payments. Under many standards, producers share in Direct Monies at the same percentage as their Net Master Revenue share.
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Gross Receipts
Total revenue generated from exploitation of a master recording before deductions. This may include streaming revenue, digital downloads, physical sales, sync fees, performance royalties, and other income. Gross Receipts form the starting point for computing Net Master Revenue after allowable deductions.
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Master Use License
A license granting permission to use a specific master recording (the sound recording itself) in a given context, such as synchronization in film/TV or advertising. Fees from a master use license typically go to the owner(s) of the master (artist, label, producers if so negotiated). Producers may receive a share of master use license fees according to their royalty percentage or Direct Monies share.
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Mechanical Royalties
Payments made to songwriters and publishers (and in some contexts, sound recording rights-holders) whenever a musical composition is reproduced or “mechanically” rendered. This includes physical formats (CDs, vinyl), digital downloads, and on-demand interactive streaming (where each stream triggers a mechanical royalty to the composition rights). Mechanical royalties relate to the composition copyright rather than the sound recording, but are part of the broader royalty ecosystem.
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Net Master Revenue (NMR)
The revenue actually earned by exploiting a master recording after deducting allowable third-party fees (e.g., distribution fees up to a cap, transaction processing fees). Marketing, overhead, or label advances are not deducted. NMR is the “Royalty Base” for producer shares under the PMPAC Standard: e.g., 15–25 % of NMR.
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Neighboring Rights
Public performance royalties due to the owner(s) of the sound recording (performers, labels) when a master recording is publicly performed or broadcast. These “related rights” sit alongside performance rights for compositions. Collection and payment vary by territory (e.g., paid in Canada/EU for radio/TV/public performance; paid in the U.S. only for digital platforms via SoundExchange).
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Performance Royalties
Royalties paid to composers, songwriters, and publishers when a musical composition (the underlying song) is publicly performed or broadcast (e.g., on radio, TV, live venues, streaming interactive performances). Collected by performing rights organizations (PROs). Note: These relate to composition copyrights, distinct from neighboring rights for sound recordings.
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PPD (Published Price to Dealer)
A wholesale price reference used for physical product royalty calculations. Under older models, producer royalties on physical formats were computed as a percentage of PPD. Under modern standards, physical-format royalties calculated on PPD must convert to an equal or higher monetary return than the Net Master Revenue method.
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Sync (Synchronization) Fees
Payments for the right to synchronize (pair) a master recording and/or composition with visual media (film, TV, advertising, video games). Sync fees are a form of Direct Monies when paid directly to rights-holders. Under producer standards, producers receive a share of sync fees proportional to their royalty percentage of NMR.
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Transaction Processing Fees
Fees charged by payment processors, digital service providers, or distribution platforms for handling transactions (e.g., streaming payouts, download sales). These fees are deducted from gross receipts when calculating Net Master Revenue. Typical caps may apply (e.g., ≤15 % distribution fees), but marketing or overhead costs are not deducted from NMR.
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Digital Performance Royalties
Royalties paid to sound recording rights-holders (performers, labels) when recordings are streamed or broadcast via digital platforms (e.g., Pandora, SiriusXM, webcasters). In the U.S., these are collected by SoundExchange; in other territories, neighboring rights organizations handle similar collections. Separate from composition performance royalties collected by PROs.
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Examples in Context
Under the PMPAC Standard, a producer’s share is computed as a percentage (e.g., 20 %) of Net Master Revenue, meaning after deducting distribution and transaction fees from Gross Receipts but before deducting advances or overhead. The producer also receives 20 % of Direct Monies (e.g., sync fees) and 20 % of neighboring rights collections in territories that pay them.
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Notes and Cross-References
• Mechanical vs. Performance vs. Neighboring Rights:
Mechanical royalties relate to reproduction of compositions; performance royalties relate to public performance of compositions; neighboring rights relate to public performance of recordings.
 
• Advance Recoupment: Advances are recouped from the producer’s share of NMR-based royalties; Direct Monies (e.g., sync fees) may bypass recoupment if the Standard so provides (or may be subject to separate recoupment rules as negotiated).
• PPD vs. NMR: For physical formats, the legacy PPD-based rate must convert to at least the same monetary return as if computed on NMR. This ensures producers are not disadvantaged by older models in the streaming era.
 
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How to Use This Glossary
• Refer to these definitions when drafting or reviewing producer agreements, to ensure clarity on which revenue streams apply and how deductions are handled.
• Cross-reference with the PMPAC Standard sections on “Royalty Base & Calculation” and “Advance, Recoupment & Direct Monies” for precise clause wording.
• Consult local collection societies or legal counsel for territory-specific rules (e.g., neighboring rights collections differ by country).