What are mechanical licenses and royalties?

A mechanical license is permission to reproduce and distribute a musical work in the form of a physical or digital phonorecord. An example of a physical phonorecord is a sound recording on a CD or vinyl record. Examples of digital phonorecords are sound recordings delivered as interactive streams, limited downloads, or permanent downloads. If a musical work is protected by copyright law, its unauthorized reproduction and distribution is copyright infringement. 

A mechanical license may be obtained through a voluntarily negotiated license between the party requesting the license and the party granting it, or through the use of a “compulsory” license. Section 115 of the U.S. Copyright Act establishes a compulsory license (sometime also called a “statutory license”), and if certain conditions are met, it means that the party wishing to obtain a license is granted one as a matter of law, regardless of what the copyright owner wants, so long as they comply with the rules set forth in the law regarding the operation of the license. The law establishes eligibility requirements and obligations.

Mechanical licenses require the payment of mechanical royalties to the copyright owner or administrator of a musical work. In the case of a voluntarily negotiated license, the royalty rate is negotiated. In the case of a compulsory license, the rate is set by the Copyright Royalty Board (known as the CRB), a three-judge panel within the U.S. Library of Congress.

For more information on the compulsory mechanical license for making and distributing physical phonorecords, read the Copyright Office circular found at https://www.copyright.gov/circs/circ73a.pdf.