Understanding how royalties are collected and calculated is crucial for musicians. SoundExchange, a key player in this arena, specializes in collecting and distributing digital performance royalties. This course aims to demystify how SoundExchange operates, how it collects royalties from various digital platforms, and the process behind the calculation of these royalties, offering musicians a clearer picture of their digital revenue streams.
Table of Contents
What is SoundExchange?
SoundExchange is a non-profit performance rights organization that collects and distributes digital performance royalties on behalf of recording artists, copyright owners of sound recordings, and featured and non-featured musicians. Unlike traditional PROs (Performing Rights Organizations) that collect royalties for the composition, SoundExchange focuses on the recording itself.
How SoundExchange Collects Royalties
1. Digital Platforms
- SoundExchange collects royalties from digital platforms that provide non-interactive streaming services. This includes satellite radio (like SiriusXM), internet radio (like Pandora), and cable TV music channels, where listeners don’t control the specific songs being played.
2. Licensing
- These services are required to obtain a statutory license to play music and, in return, pay royalty fees. SoundExchange administers these licenses and collects the fees on behalf of the artists and rights holders.
3. Data Tracking
- SoundExchange uses advanced digital monitoring and data tracking to identify when and where music is played on these platforms. This technology ensures accurate and efficient royalty collection.
How Royalties Are Calculated
The calculation of royalties in the digital realm is a complex process, influenced by several factors:
1. Revenue Pool
- The total royalty amount available for distribution is based on the revenue generated by each service from subscriptions, advertising, and other sources.
- This forms a “revenue pool,” which is the source of the royalties to be distributed.
2. Allocation Formula
- SoundExchange uses a formula to allocate royalties from this pool. The formula takes into account the frequency of a track’s play and its proportion to the total number of tracks played on the service.
- This means the more your track is played on these services, the larger your share of the revenue pool.
3. Distribution of Royalties
- The distributed royalties are split between the rights owners (50%), featured artists (45%), and non-featured artists (5%).
- For instance, if you’re an independent artist who owns your recordings, you could receive both the rights owner’s and the featured artist’s shares.
4. International Royalties
- Through reciprocal agreements with similar organizations in other countries, SoundExchange also collects and distributes royalties for international streams of your music.
Maximizing Your Digital Royalties with SoundExchange
- Registration: Ensure you are registered with SoundExchange to collect your digital performance royalties.
- Accurate Metadata: Provide SoundExchange with detailed and accurate metadata for your recordings to facilitate precise tracking and collection.
- Regular Updates: Keep your catalog up-to-date with SoundExchange to include all your latest releases.
Conclusion
SoundExchange plays a pivotal role in the digital music ecosystem, acting as a bridge between digital platforms and artists/rights owners for the collection and distribution of royalties. For musicians, understanding how SoundExchange operates and how digital royalties are calculated is essential to ensure they receive the compensation they are entitled to in the streaming era. Embracing this knowledge empowers artists to navigate the digital landscape more effectively, turning their creative output into a sustainable income source.
