Royalty-free music commonly refers to stock or 'library music' licensed for a single fee, without the need to pay any subsequent royalties.
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There are many applications for which music must be licensed, such as for use in video and multimedia production, but the traditional payment structure (in which a royalty is charged for each usage) would be cumbersome or more costly. Royalty-free music libraries originally addressed this by offering music that could be purchased for (in most cases) a one-time fee and then be used by the purchaser as many times as needed. [1]
For example: If a piece of royalty-free music were purchased to be used on a multimedia CD project, it would not matter if one CD or 100,000 CDs were produced - the purchase fee would be exactly the same.
However, users of royalty-free music have found this is now often not the case. Several independent libraries were bought out by larger businesses that have altered the basic meaning of the term. For example the royalty-free music license at SmartSound states "You must obtain a "mechanical" license for replication of quantities in excess of 10,000 units."[2]
A number of companies sharply restrict the number of copies that may be manufactured without additional fees coming due, generally under five thousand units [3]. Some allow "free" usage only for productions that will be aired on broadcast stations that pay BMI/ASCAP/SESAC royalty fees, and the producer is required to regularly file cue sheets reporting the broadcasts. Productions aired on outlets not signatory to such agreements, or shown in public performance (such as motion pictures in theaters) may be required to pay other additional fees.
Precise details of the payment structure and the extent of the rights granted vary from library to library, as specified in a license agreement.
Although royalty free music is royalty free to the purchaser, producers/composers may still receive royalties from broadcasting radio or television stations via their Performance Rights Organization, for example, the PRS in the UK or ASCAP or BMI in the USA.
Some royalty-free music libraries use a microstock model in which individual composers retain their copyright and are paid a portion of each sale, while others, like Getty Images, buy the copyright directly from the composers for a flat fee, and then resell the tracks as their own.