There is this uninformed misconception that people have in the music business about mechanical royalties and digital downloads.
When we say “digital downloads” we are talking specifically about a scenario were music is sold on digital platforms such as iTunes, Amazon Music, Google Play Music and so forth. We are not talking of on-demand music streaming which is another story altogether.
With that said, the moral of story all comes down to the stipulations of your record contract and in correspondence to whether your record label recognizes digital downloads as either a “SALE INCOME” or a case of “LICENSING INCOME”.
Music Digital Downloads as Sales Income
For example, if you sign a record deal were a record company perceives digital downloads as “sales income” rather than a “licensing income” this means that a recording company will pay statutory mechanical royalties owed to you per-unit sold, including a sales percentage which can be roughly between 12% or 20%.
Music Digital Downloads as Licensing Income
Alternatively, if the record contract clearly states that the music distributed and sold on platforms such as iTunes or Amazon Music is to be treated strictly as “licensing income” this means as an artist you will most likely be entitled to 50% of the money from the music sold instead of the standard 12% agreement.
NOTE: As an artist it’s in your best interest to make provisions of what you think will work in your best interests in the long run. It’s also advised that you understand how a record company will treat your music digital downloads in order to avoid conflicts of interest.