In news that is probably exciting to very few of you, there’s a new SoundExchange Letter of Direction available on the SoundExchange website (link below). Yes, I’ll wait until the thundering applause dies down.
What is SoundExchange?
SoundExchange is a performance rights organization like ASCAP, BMI, and SESAC, except that they collect and distribute royalties on behalf of sound recording copyright owners and featured artists for non-interactive digital transmissions, i.e., transmissions over satellite and internet radio and cable television music channels. If you’re a sound recording copyright owner, i.e., you own or administer masters, or you’re a featured artist, i.e., a band, a solo act, etc., then – in additional to affiliating with either ASCAP, BMI, or SESAC – you should affiliate with SoundExchange, which is the only entity that is authorized to collect royalties for digital transmissions. SoundExchange is free to join – they retain a portion of the fees that they collect. If you’re curious whether SoundExchange has been collecting royalties for you (and holding them in escrow pending your affiliation), then you can run a quick search for your work in the PLAYS Database.
What is the SoundExchange Letter of Direction?
A letter of direction, or LOD, is a letter instructing SoundExchange to pay a portion of the royalties that it has collected for you, to some other party. The most common situation in which an LOD is used, is for producers. If a producer produces a song and receives “points” on the recording, then the producer is usually also entitled to a portion of the money collected by SoundExchange associated with the track that the producer produced. Because it’s almost always in the best interest of the producer to have entities account to him or her directly, the producer will request that the artist (or the record label) send an LOD to SoundExchange, directing SoundExchange to pay the producer his or her share of the money. SoundExchange provides the template for the letter on its website, which you can download, customize accordingly, and return. The SoundExchange Letter of Direction will also often be attached to the producer agreement as an exhibit.
What’s Different About the New SoundExchange Letter of Direction?
The new SoundExchange Letter of Direction is similar to the old one, except that it now allows the person or entity submitting it to specify on which date the letter is supposed to take effect. You can also now direct SoundExchange to apply the letter retroactively, for example, if a producer is seeking to go back and claim royalties owed to him from a song that was released years ago. This is actually a very useful addition to the LOD, as in many cases the letter is being sent after the song has been released or even years later if the producer didn’t realize at the time that he wasn’t receiving these royalties. Previously, it was a little harder to specify that the payments were intended to be applied retroactively.
In case you were wondering, you can ask SoundExchange to pay a producer (or some other third party) a portion of the featured performer’s share (45%) or the sound recording copyright owner’s share (50%). Oh, and for you math majors out there, yes, 45% plus 50% is only 95%. Where does the rest go? To a fund for non-featured musicians, i.e., session players.
And now, without further ado: