The Ins and Outs of Digital Performance Royalties: How SoundExchange Can Help

September 2, 2014

SoundExchange is quickly becoming one of the most important names within the music industry. The nonprofit performance rights organization collects royalty payments from more than 2,500 digital radio services—like Pandora, iHeartRadio, SiriusXM, and Music Choice—and distributes money to recording artists and record labels. To date, the organization has paid more than $2 billion in royalties to the recording artists, record labels, and master rights holders that it represents.

When sound recordings are played on certain noninteractive digital radio services, such as satellite radio, Internet radio, cable TV channels, or streamed as background music in some restaurants or stores, the artist who performed on that recording earns a royalty. So does the sound recording copyright owner, which may be a label, or an independent artist who owns his own masters.

Digital radio services rely on SoundExchange and the statutory license it administers as a “one-stop shop” for the rights to any commercially available sound recording—effectively enabling these digital radio services to run their businesses. As the sole administrator of the statutory license, SoundExchange ensures that recording artists who perform a song, and the record labels who invest in them, whether large or small, are properly compensated for their contributions to digital radio platforms. In 2013 alone, the royalty payments distributed by SoundExchange totaled a record setting $590 million.

SoundExchange also advocates on Capitol Hill as a top priority. In 2014, SoundExchange launched Project72, a campaign to ensure equal treatment from digital radio for musicians and rights holders with sound recordings made prior to 1972, in conjunction with the introduction of The RESPECT Act. In addition, SoundExchange supports legislation for a performance right on AM/FM radio, which does not currently exist. SoundExchange President and CEO Michael Huppe succinctly summed up the issue before Congress when he testified at the music licensing hearing saying, “All creators should receive fair pay, on all platforms, whenever their music is used.”

SoundExchange ensures that artists participate directly in the stream of royalties generated by the digital performance right. Under the statutory license, 45% of the performance royalties are paid directly to featured artists, whether or not they are “recouped”—or still owe money to their record labels. In addition, through SoundExchange, 5% of performance royalties are paid to a fund for distribution to nonfeatured artists and 50% to the rights owner and/or record label. Therefore, if you are the featured artist and own your own label/copyright, you will directly receive 95% of the performance royalties.

So what does this mean for you?

If you are a recording artist, master copyright owner, or run your own label, and believe you have had a recording played on digital radio, you should register with SoundExchange. Registration is simple and free. While royalties for songwriting, publishing, and composition are covered by organizations such as ASCAP, BMI, and SESAC, SoundExchange covers a completely different right. So, you can be a member of one of these organizations and SoundExchange.

As we help the music and creative community thrive in the digital age, it’s SoundExchange’s mission to support, protect, and propel the music industry forward in the years to come. To start collecting your digital performance royalties or to learn more about the work SoundExchange is doing to protect the long-term value of music, visit www.soundexchange.com.

Note: Musicians working under collective bargaining agreements in the symphony, opera, or ballet industry, who have performed on recordings within their respective orchestras, should contact AFM Director of Symphonic Electronic Media Deborah Newmark at: 212-869-1330 ext. 1-225 or dnewmark@afm.org, for instructions on how SoundExchange works for that industry. They should not register individually, unless they have worked on recordings outside the symphony, opera, or ballet world.