There are a lot of misunderstanding and misconception about how copyrights and royalty fees word in favour of musicians in the industry. As a short way of explaining, can say copyright fees are the the funds you are supposed to receive any time your music, composition, lyrics, etc, is being used, played or performed in any sort of public form.
Here I break down the copyrights in a simple way.
In general, we have 2 type of copyright regulations. One is "Reproduction Rights" and other one is "Performance Rights". Before we go through them, note that as the creator of a piece of music, you must register your work with the copyrights protection societies be get the benefits below.
Any music or in general any form of recorded piece of sound (now onwards we will refer to it as "master copy") which is being used in any sort of public display, including performances, commercials, printed CD or tapes, or any other way, is carrying its own unique ID. Just like fingerprints, for each sound, that ID is unique and there are copyrights that have to be cleared for using that specific master copy. The rights usually belong to either record company or publishing company which published the master copy of the audio. Sometimes the artists manage to keep the right to themselves but it is depending to the type of agreement between the artist and the record company or publishing company.
Reproduction Rights should be settled when a third party is going to reproduce that production which in case of music it can be either printing the CDs again or any form of online selling of the products. Or even remixing or sampling the sounds! As long as this sound still carries that unique ID we mentioned earlier, the third party have to settle the reproduction rights with the rights owner(s).
The lyrics and composition of each song is being registered under the name of one or more author(s) and composer(s). For any sort of public performances of the piece, there is a performance rights that should be settled. The public performances are not necessarily only performing the track live, but it also includes cover versions, remixes, being played for any public displays such as TV or radio commercials, playing it in public lounges, malls, etc. All these are under Performance Rights.
These were the most basics of copyrights in simplest way possible! Don't hesitate to contact me for more.