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Everything You Need to Know About SoundExchange

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What is SoundExchange you might be asking?

A 2015 report published by the Berklee College of Music estimated that 20-50 percent of music payments do not get paid to the rightful owners of the money. 

That same year, Kobalt, a music publisher in London that tracks music on digital outlets, shared some interesting findings. 

Highlighting a track from an artist that they represent, they reported statistics of streams for the  song which yielded only eight dollars in payments from 2,400 streams.

What is SoundExchange - Everything You Need To Know

Streaming can be an intimidating area for artists especially when you look at how things are calculated and accounted for. Once you figure it out, it may seem like an insurmountable mountain to climb to achieve a real income from it when you look at how much a stream is worth. 

This doesn’t mean you should ignore it though as there is money to be made.

With literally thousands of sources of income for a song, digital streaming can easily get lost in the noise of reporting and statistics. To fix that, SoundExchange entered the scene.

What is SoundExchange?

SoundExchange provides royalty collection services to artists and labels in the US. It tracks and collects digital sound-recording royalties for performances on non-interactive media, like Sirius and other digital radio stations, where you can’t pick your song. You hear the songs these stations play in the order they play them.

On his blog, Ari’s Take, Ari sums it up like this:

SoundExchange = digital sound-recording royalties for non-interactive plays in the U.S.

David Andrew Wiebe, in his post for MusicEntrepreneurHQ, describes SoundExchange as:

“. . . a Performance Rights Organization for digital radio.

And SoundExchange says of itself, “SoundExchange is the independent nonprofit collective management organization that collects and distributes digital performance royalties to featured artists and copyright holders.

>>> Related Reading: 6 Benefits of Music Licensing Explained

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Background and History of SoundExchange

In the days before the Digital Performance in Sound Recordings Act of 1995 (DRPA), no digital royalty rights existed for US artists and copyright owners. The DRPA tried to fix this by establishing a subscription-based statutory licensing fee for non-interactive digital audio performances. But technology quickly outpaced the act, leading to the enactment of the Digital Millennium Copyright Act in 1998, which expanded rights to include non-subscription, non-interactive digital performances.

Sound Exchange came along as a division of the Recording Industry Association of America (RIAA) in 2000, working as an intermediary to collect these royalties. In its RIAA days, SoundExchange negotiated payment structures with webcasters and distributed collections to the designated agents, SoundExchange and a company called Royalty Logic.

The Library of Congress decided in 2002 that this system “added expense and administrative burdens to a process meant for prompt, efficient, and fair payments to copyright owners and performers with a minimum of expense.” They kept the two-tiered receiving agent/designated agent structure but deleted Royalty Logic as a recognized designated agent. This left SoundExchange as the sole agent, but with two roles.

In 2007, the Copyright Royalty Board (CRB) did away with the two-tiered system, making SoundExchange a single entity responsible for both collection and payment of royalties to artists and copyright owners.

The company spun away from the RIAA in 2003 and today represents more than 199,000 recording artists and rights owners and collects royalties for all sound recordings played on non-interactive digital radio, including those of actors and comedians. It has paid out more than $5 Billion in royalties since its inception.

How Does SoundExchange Work?

SoundExchange issues statutory licenses that allow streaming services to play artistic content for a fixed rate per play. It then distributes these royalties to featured artists and rights owners.

To make sure the right royalties get to the right people, a Data Management Team within the company combs through millions of lines of data from service providers to ensure information correctly matches the information in its expansive database. A dedicated Claims Department makes sure rights are claimed properly by artists and labels.

As of 2020, the company collects 1.8 cents per performance for non-subscription transmissions and 2.4 cents per performance for subscription plays. It keeps 4.5% of collections as an administrative fee, paying out the rest according to the Rules of US Title 17, section 114, using the following schedule:

45% to featured artists

5% to the non-featured artist fund

50% to the rights owners

SoundExchange partners with counterpart organizations around the world to collect and pay earned royalties from foreign performances. It does this without fee, withholding only the applicable US taxes.

The benefits and importance of SoundExchange to you

SoundExchange picks up where professional rights organizations (PROs) like ASCAP and BMI leave off. According to Ari Herstand of Ari’s Take, PROs only collect royalties for songwriters and publishers.

Publishers represent Songwriters. Not Artists. Record labels represent Artists. Not Songwriters. I know you may be both and that these terms seem the same, but they’re not. And there are TOTALLY different royalties for “songwriters” and “artists.” So, you need to differentiate.

SoundExchange represents featured artists and copyright owners. It costs nothing to join. With the lowest administrative fee in the industry, 4.5%, and no other charges, SoundExchange will:

  1. Maximize your revenue through foreign royalty collections. SoundExchange has more than 46 collection agreements with counterparts in 35 countries worldwide. When your music is played in their territory, they send your royalties to SX, and SX sends it to you.
  2. Join the effort to fight for the long-term value of music. Hundreds of artists, and thousands of other companies and record labels are working with SoundExchange to fight for your performance rights.
  3. Provide Conference and Equipment Discounts. SoundExchange has started to offer discounts to conferences and equipment exclusively for its members.

All this in addition to monitoring, collecting, and paying your US royalties!

Interactive vs. Non-Interactive Streaming

Interactive streaming means you get to choose what you want to listen to and what songs you hear. Interactive digital streaming services include Spotify and Apple Music for example.

Non-interactive streaming, the kind SoundExchange collects for, means you cannot choose your songs. It is basically an online radio station. You tune in to your preferred music style and hear what they play. Think of Pandora’s original business model.

Should I sign up for SoundExchange?

Without a doubt! It costs nothing to join and has the lowest administrative fee around, but Ari provides the best reason:

I encouraged Ari’s Take reader and children’s musician Andy Mason to sign up for SoundExchange, and the first check he got was for $14,000! Apparently, Pandora had his songs included on all the most popular children’s music radio stations, and he had no idea.

And SoundExchange will look back three years for money owed to you!

How do I get started?

US-based artists can go to SoundExchange.com and click “Register” under artist and copyright owner.  Select “Both” when asked if you are the performer and the owner of the sound recording. Keep in mind that this service is primarily for US based artists. If you reside in other countries you will want to seek out your countries Neighbouring Rights Organization.

For example in Canada that would be the Musicians’ Rights Organization Canada (MROC) or for the United Kingdom this would be the PPL International.

Wrapping It Up

If you hold rights as a featured artist or as the copyright owner of a sound recording, you should look to register with a company like SoundExchange. It will monitor, collect, and distribute digital sound-recording royalties for performances on non-interactive media, like Sirius and other digital radio stations. Its team will even look back three years to find money owed to you.

With no sign-up or upfront fees, and the lowest administrative fee in the industry, its really a no brainer to join. The main time consuming aspect may be uploading all the information or metadata associated with your tracks but it would be smart to make this a part of your process when releasing new music.

For more breakdowns on similar music industry services check out the articles below:

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>>> Related Reading: Everything You Need to Know About Easy Song Licensing

>>> Related Reading: Everything You Need To Know About The Harry Fox Agency

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