How to Monetize Cover Songs on YouTube like a Boss in 2020

YouTube offers a lot of monetization possibilities; one of them is monetizing cover songs. A close friend of mine who is also a singer asked me to discover the strategy on how to monetize cover songs on YouTube. This is what I found.

  • You don’t need special permission to cover a song
  • Be faithful to the original recording
  • You must notify the song creator
  • You must pay a royalty rate per sale
  • You need a mechanical license for streaming and CD
  • A SYNC license for video is necessary
  • You need an ISRC number
  • You own the master recording

YouTube is a (Billion) per year company; let’s see how musicians can benefit from this large company using cover songs.

Let’s start with No1.

1) The Monetizing Cover Songs Strategy: You Don’t Need Special Permission to Cover a Song

Like many others, I used to believe that you had to obtain a special license if you wanted to cover a song. This is not true.

In reality (at least in the US), this process is much simpler thanks to “compulsory licensing.” 

  • Compulsory licensing means that If you want to cover a track, the owner of the song can’t stop you from releasing your own interpretation. To achieve that there are only two things that you have to do:

A) Notify the song creator. You do this not because you’re asking for permission but because through informing them, they know what is happening with their song. 

B) You must pay a specific royalty rate per sale/ digital download. Currently, the royalty rate for one sale/download is set at 9.1 cents for songs under 5 minutes and 1.75 cents per sale for songs that exceed the 5-minute mark.

  • Do you want to sell physical copies of the cover you created?

To be able to sell the cover you created through physical or digital means you need a mechanical license. This license gives you the right to reproduce and distribute your cover song.

Also, if you plan to record and monetize cover songs legally, you should do the following:

2) The Monetizing Cover Songs Strategy: You Need a Mechanical License for Streaming and Cd’s

If you decide to release the cover song at an online streaming service (such as Spotify or Napster), as a physical format (CD, tape vinyl), or as a digital download, you absolutely need a mechanical license.

The copyright owner issues the appropriate mechanical license; you can contact them directly or use an agency to help you. Many places can help you obtain mechanical licenses, but one of the most reliable ways is through Fox Agency (HFA).

How Much Do Mechanical Licenses Cost?

Keep in mind that with Harry Fox Agency you must pay upfront for the total amount of physical sales or permanent digital downloads. Therefore you should try and calculate how many sales you anticipate. 

Let’s say you expect to sell 2000 copies/downloads at 9.1 Cents per royalty; then, you would have to pay about $182. This is a reasonably realistic estimate.

I should note that once you reach or exceed the expected number of sales, you are required to buy more mechanical licenses for the appropriate cost.

You Can Also Use Easy Song Licencing

Sometimes it can be hard obtaining a mechanical license. The copyright owner might not be open to licensing any of his songs. In this case, I recommended a different service called EasySongLicencing.

EasySongLicencing will ACTIVELY help you get the rights you want to obtain. Keep in mind that in addition to the standard royalty rate per sale that you have to pay, you also have to pay a fee to EasySongLicencing for assisting you.

We are moving on to number three.

3) The Monetizing Cover Songs Strategy: Be faithful to the original recording

One thing you must make sure of is that you remain faithful to the original composition, meaning you should not alter the lyrics, meaning, or music. Please pay attention to this one; I don’t want you to get legal issues!

4) The Monetizing Cover Songs Strategy: You Need a Sync License for Video

Here is a direct quote by 

“Whenever you release a recording of a song that someone else wrote in a video format, even if it’s just a small portion of the song, you need a synchronization licenseSynchronization licenses are most commonly used for YouTube videos, cover song videos, wedding videos, and commercial and corporate videos.”

If you decide to upload the cover song on YouTube or other video streaming platforms, then you will need and synchronization license, also known as a SYNC license. You can get a SYNC license from either the publisher or the songwriter(s) of that particular song.

Synch Licenses Can Be Expensive

I should mention that SYNC licenses can be quite expensive and hard to obtain. You must submit a formal request and get quoted a licensing fee to use the song. These fees are not cheap.

Content ID and YouTube

Furthermore, because YouTube was to protect the content creators, they have created a system that identifies if the song is used without proper copyright. The system is called Content ID.

If you want to know more about content ID, how to apply for one and what to watch out for check this article @@@@@@@ I wrote.

5) The Monetizing Cover Songs Strategy: You Need to Purchase an ISRC Number

The next step is to purchase an ISRC number. This number is necessary for YouTube and other services to identify and distinguish cover songs from the original song. 

Moreover, each version of the cover song needs its own unique ISRC number. This means that if you decide to upload a studio cover and a live cover the same song, you should obtain two separate ISRC numbers.

  • Who uses an ISRC number?

Almost every service that distributes music online (think of Spotify or iTunes) demands you provide them with an ISRC number. If you DIY everything, you must apply for an ISRC number by your self. I believe that each number costs about $2.

  • You don’t need an ISRC number if you use a distribution service

Of course, if you decide to use a music distribution service such as CD Baby TuneCore or Distrokid, you don’t have to worry about these things since they arrange such matters for you.

The ISRC code is embedded in the metadata of your cover song, meaning that when your song gets downloaded or released in physical format, the ISRC is connected to the recording.

2020 UPDATE: CD Baby lo longer offers the option of releasing cover songs. If you still want to use a distributor, you can check out Distrokid or TuneCore.

6) The Monetizing Cover Songs Strategy: You Own the Master Recording

You may not own the rights to the original composition, but you do own the master sound recording of the cover song. You own the ownership of the master sound recording because you created a cover of that song. 

learn How to Create an Income from Your Cover Songs

You need to own the master sound recordings if you want to make money from your cover songs. This type of income can be generated from the following places:

  • A) Use streaming services to create an income from your cover songs

Every time a song gets streamed, streaming services pay a master use royalty to the distributor who then, in turn, pays the cover creator. If you wish, you could release your songs without the use of a distributor, but the easiest and fastest way is using a professional service such as TuneCore or Distrokid.

  • B) Use permanent digital downloads & Physical sales to create an income from your cover songs

You can also earn an income from physical sales and permanent digital downloads such as iTunes. Again the distributor passes on to you the income generated from each sale.

  • C) Use non-interactive streaming services to create an income from your cover songs

We also have non-interactive streaming royalties services such as Pandora or SiriusXM. These services provide limited functionality and don’t allow the end-user to pick their own songs and are more similar to radio-style broadcasting.

Learn How Non-Interactive Streaming Services Pay You

Non-interactive streaming services must pay royalties for the digital performance of songs to a service called SoundExchange.

  • The job of the guys at SoundExchange is to divide and pay: 
  1. SoundExchange pays 45% of the total royalties to the performers on that recording. That is the original creator of the song.
  2. Then they pay 50% of the royalties to the one who holds the rights to the master recording. In our case, that’s you!
  3. Lastly, the remaining 5% royalty share goes to a fund for session musicians and background vocalists.

As I mentioned before, you MUST register an account of the SoundExchange if you want to receive your royalty share!

  • D) Use sync fees to create an income from your cover songs

Last but not least, you can also receive an income from the master use for Sync fees. This happens if your cover song gets used in a movie, a TV show, a commercial, or another audiovisual medium.

Beware that if you want to license your cover song on the media, we just covered the publisher of the song must grant you a Sync license. This is because even if you own the rights of the cover song recording, the original songwriter and his publisher own the composition rights. They must give their permission for the cover to be used.

If you want to obtain the sync license, it’s likely that you’ll have to negotiate with the songwriter and publisher of the song as well with the producer of the audiovisual content. 

You should note that the producer of the audiovisual content is the one who must pay the sync license fee to the songwriter. He must also pay the cover artist (that’s you) for using the masters.

A YouTube 2020 UPDATE: 

There have been a few recent updates regarding making covers and placing ads on them for monetization purposes.

  • YouTube started treating separately authorship rights from recording rights accepting different policies to each one of them even for the same song. 
  • It is a fact that most big record labels don’t really want to negotiate with small YouTube creators. and most likely, you will have a hard time convincing a label to permit the use of a song. 
  • Artists, on the other hand, are more easily persuaded and interested in allowing their song to be used and covered, but only if you create a cover. Thus you can’t use the original recording of that song.

Why There Is No Need for a SYNC License Anymore & What Is Shared Revenue?

The recent biggest change YouTube made is that if for your cover you create your own version and don’t use any of the original recordings (meaning you recreate every part of the song); you might be able to get what is called “shared revenue” with the original author of the song. 

Shared revenue means that you will now share profits with the original creator. Yes, with shared revenue, you will get a portion and not all of the money but the good news is that now you don’t have to apply for a SYNC license anymore, at least not for YouTube. Other video platforms still require a sync license.

Getting a SYNC License Is Tough

However, if you do decide to get a SYNC license, be prepared to be rejected, and if you do get approved, you will have to pay a rather high fee for the right to use the license.

Why Is It Hard to Get a SYNC Licence?

Several contributing factors come into play when it comes to obtaining a SYNC licence, explained it beautifully. Here is the link to the original article.

“Note that synchronization licensing can be challenging because, by law, synchronization rights holders maintain total control of their works when it comes to video. This means they can set any fee, take all the time they need, and reject the license outright. Many factors affect the response, including budget, use, and even the current workload of the copyright holder’s processing department. For this reason, it is important to temper expectations when requesting a synchronization license.

This is the link to the original source for the above information.

The shared revenue approach may be less profitable compared to obtaining a SYNC license. But as I already mentioned getting a SYNC license can be difficult and expensive.

I will keep an eye on the matter and update this post if something changes. If you’re not sure, you can always contact youtube and ask them if a SYNC license is required.

I hope you enjoyed this article and learned a lot! Good luck with your cover songs, if you do upload them, send me a link (you can contact me through here). I will be thrilled to hear what you’ve made!

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