system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: How can bands play cover versions of older songs & make money doing it, without penalty? Do they have to pay licensing beforehand?
gpt
A mechanical license is all that's usually required (in the USA). You can cover any song you want for $0.091 per copy that you sell, paid directly to the owner of the song (whoever legally owns the rights to the song, almost always the publisher). The person who owns the rights doesn't have any say in the matter.

You usually have to pay this fee upfront based on an estimate of how much you'll sell. If you think you'll sell a thousand copies, you'll pay $91 upfront.

If you're streaming on YouTube or Twitch or whatever, you'll need a synchronization license instead. For a synch license, you need permission upfront and they can charge whatever they want to charge for it.

For live covers, if you aren't recording the event it should be fine, but if you're playing a really big gig/recording it for sale you'll need to get in touch with either ASCAP, BMI, or SESAC to obtain public performance rights and pay public performance royalties.

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Finally, there is the strange case of music copyright that allows you to play any unpublished song you want without issue. An unpublished song is one that hasn't been recorded and released for sale. For example, the Mountain Goats had an album called Hail and Farewell, Gothenburg that was never released (until it leaked), but they'd occasionally play songs from the album live. Because it was never released for sale, anyone could cover those songs absolutely free, because they didn't have legal rights. Only published songs have legal protection.