What is SoundExchange?

by | Nov 17, 2016 | Uncategorized

Summary: SoundExchange is essentially a Performance Rights Organization for digital radio. Your PRO is not collecting your royalties on digital radio, so if you’re getting played, you should check to see whether you are owed some money.

Today, music is consumed in a variety of ways, from radio and CDs to streaming sites and vinyl records.

Typically, musicians sign up with Performance Rights Organizations (PROs) such as ASCAP and SOCAN to have royalties collected on their behalf. Artists are paid when their music is played on digital services and radio, but with the industry being as fragmented as it is, there’s no way for them to monitor and capture all the plays independently. That’s what PROs are for.

SoundExchange is kind of like a PRO, except with a different focus – namely digital radio. In their own words:

SoundExchange is the independent nonprofit collective management organization that collects and distributes digital performance royalties to featured artists and copyright holders.

But what does that mean? Well, I’m sure it’ll start to make some sense as we explore their service in more depth.

Why Sign Up with SoundExchange?

If you’re already a member of a PRO, then you’re probably wondering why you would want to – or even need to – sign up with SoundExchange.

According to their FAQ page, while PROs collect and distribute royalties for the songwriter, composer and publisher, SoundExchange collects and distributes royalties for the featured artist and the recording copyright owner. Satellite radio providers and webcasters (Pandora, SeriusXM, Music Choice, etc.) pay SoundExchange when they stream commercially available music, as they are legally required to. Confused yet?

Well, in effect what they’re saying is that they collect a different kind of royalty, specifically for featured artists (basically the artist the song is credited to – not necessarily the songwriter), non-featured artists (session musicians, backup vocalists, etc.), and the rights owner (typically the label, if you are signed).

Royalties are distributed in this way (by law):

  • 45% goes to the featured artist.
  • 50% goes to the rights owner.
  • 5% goes to the non-featured artists.

Digital performance royalty collection

Keep in mind that, for non-featured artists, these royalty payments are entirely separate from the remuneration they received when they were hired on to contribute their talents on the recording. This means they have somewhat of a vested interest in the success of the song and how many plays it gets, because they are rewarded with ongoing royalties.

This does not mean that unsigned acts cannot take advantage of this service. If you’re in a band and you sign up with SoundExchange, each member will receive an equal portion of the royalties by default (in a quartet, that would mean 25% each). You can also split it up in a different way if you so desire (i.e. in a trio, one member could lay claim to 80% for writing and composing the music, while the other two members get 10% each for their contributions – assuming everyone agrees with that arrangement).

So why would you want to sign up with SoundExchange? Well, first, it’s free. There are no fees associated with signup (but they do have a 4.6% administrative fee). Second, they might have royalties stored up for you already. If you’re curious, you can search for the name of your act here and see if you have any money waiting for you.

What are Digital Performance Royalties?

Pandora, SiriusXm, Music Choice, and other webcasters are required, by law, to pay when they stream music content. SoundExchange receives these payments along with complete playlists of all music that was played. This essentially makes SoundExchange an intermediary between the digital radio services and artists, as well as labels.

Per their website, SoundExchange has paid out more than $3.5 billion in royalties since their inception.

Very simply, digital radio services and webcasters first pay SoundExchange for use of musical content on their service. SoundExhange receives the money along with playlists, so they know which songs have been streamed or played. Then, SX distributes the funds to the parties that are owed – featured artists, labels, and non-featured artists.

When you earn digital performance royalties, you’re earning money from your music being played on various digital radio services (of which there are over 2,500 – have a look at their facts & figures page).

Do I Need a PRO or SoundExchange?

Let’s review.

What does a PRO do? It collects and distributes radio and digital service royalties for songwriters, composers, and publishers.

What does SoundExchange do? It collects and distributes digital performance royalties for the featured artist, the recording copyright holder, and non-featured artists.

And even though PROs do collect royalties from radio and digital services (i.e. streaming sites), they aren’t necessarily responsible for tracking plays via satellite radio and webcasts. Remember, some services only pay SoundExchange, so some royalties can only be paid out by them as well.

Do you need a PRO? Yes. Do you need SoundExchange? Yes. You should sign up for both. The only difference is that SX may not be an immediate need.

Are There Any Other Advantages To Joining SoundExchange?

On their FAQ page, they list the following three items as being additional benefits to signing up for their service:

  1. Foreign royalty collection.
  2. Advocacy for performance rights.
  3. Discounts for conferences and equipment, exclusive to members.

What Are Your Thoughts On SoundExchange?

Are you a member of SX? What has your experience been like? Have you been able to collect on royalties that were owed to you?

I don’t have much experience with SX myself, so I can’t speak to the quality of their service. What I do know is that you don’t have many options (there aren’t any, are there?) when it comes to digital performance royalty collection, and you’re likely going to leave cash on the table if you don’t sign up, and know for a fact your music is being played on satellite radio, digital radio, webcasts, and so on.

If you have any questions or thoughts, be sure to leave a comment below.

Final Thoughts

Bottom line, if you’re an active musician, and you’re working hard to get your music out to as many places as possible, you should create an account with SoundExchange. If you want to leave money on the table, no problem, you don’t need to go to the hassle. But I know you, my music entrepreneur friends, don’t want to miss out on an opportunity like this!