Sound Advice

I heard that I could get paid for having my songs played on Internet radio stations. How does this work?

Digital music distribution is becoming more popular with programming available on Internet radio stations and many cable TV systems. Lately, there have also been high-profile advertising campaigns for satellite radio stations, Sirius and XM Radio. These stations offer a network of formatted, pay-radio stations that you can pick up in your car, home or office anywhere in the country. Many new model cars, including rental cars, are now being equipped with special receivers for satellite broadcasting. Unlike the limited playlists of normal radio stations, digital broadcasters tend to offer niche-oriented programming playing more obscure and independent songs.

Since 1995, additions to the federal Copyright Act have provided that the owners of sound recordings may obtain compensation for the digital broadcasting of their copyrighted sound recordings. The passage of various laws, including the Digital Performance Rights Act of 1995, have been called one of the major artist victories of all time, as previously sound recording owners were not paid for airplay of their music. Only the owners of the song compositions (songwriters and publishing companies) got paid for public performance of their tunes through performing rights organizations (PROs) such as ASCAP, BMI and SESAC. However, these organizations only track and collect money for public performances of song compositions, not sound recordings

SoundExchange was started by the RIAA, the Recording Industry Association of America, an organization set up to protect the rights of all the major record labels. Now an independent, non-profit company, SoundExchange licenses, collects, and distributes public performance revenue for sound recording copyrights broadcast in digital media. In accordance with the new laws, SoundExchange tracks plays of sound recordings on satellite radio stations (XM RADIO, Sirius), digital cable music networks (DMX, Music Choice, Muzak), and Internet radio stations, for the owners of the sound recordings, typically either an artist or their record company. Over 3000 labels and thousands of independent artists use SoundExchange and the company is in the process of compiling a database of every performer on every track ever made commercially available or played in the U.S. track airplay on TV or radio.

Another key difference between SoundExchange and the traditional PROs is that the PROs only occasionally sample radio station playlists to track airplay and calculate payments. However, using playlist logs provided by digital broadcasters, SoundExchange precisely tracks each time a song is played digitally and accounts for every performance. Note that SoundExchange only applies to “non-interactive” performances, so the company does not deal with music downloads for sale or on-demand listening.

SoundExchange then checks the digital media logs against its list of sound recordings registered by its members to compute payments. Payments per song play are very small and very from year to year, as the rate is re-negotiated periodically with the government and industry groups. But basically, anytime a song gets played in a digital broadcast format, the artist and record company gets paid. For the typical artist, royalty payments are only made once a year and are not likely to be gigantic. The standard breakdown is that 50% of the royalty goes to the copyright holder (usually the record company or the artist themselves); 45% to the “Featured Artist”; and 5% to “non-featured artists”. Royalties are paid directly to the artist and not through their record companies, so income is not subject to any deductions for funds owed to the company by the artist.

Signing up: It is free to join SoundExchange, but like ASCAP and BMI, the company skims off a small percentage of each dollar collected from digital broadcasters to “license” the use of your music. Record companies and artists must register their recordings with the company and will have to complete contracts that allow the company to collect and process payments for the copyright holder and / or the artists featured on the recording. Dealing on your SoundExchange registration may be a hassle but there is no reason to let this source of revenue go untapped, especially as digital performance revenue is likely to grow in the future.

The Bottom Line: Digital music transmissions are becoming more and more popular. Getting paid for digital “airplay” is a reality that all musicians should be aware of. Check SoundExchange out at soundexchange.com.

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Disclaimer: The advice and opinions offered in this column are meant to be educational only and should not be relied upon as legal advice. Every situation is different and you are cautioned to seek advice from qualified counsel regarding the specific facts of your matter. Neither the attorney nor Music Liberation Project accepts any responsibility for any reader’s reliance on the contents of this article.