SoundExchange
Encyclopedia
SoundExchange is a non-profit performance rights organization that collects royalties
on the behalf of sound recording copyright owners (SRCOs — record label
s, generally) and featured artist
s for non-interactive digital transmissions, including satellite
and Internet radio
.
did not have a performance right; that is, recording companies and performing artists were not entitled to receive payment for the public performance of their sound recordings.
The Digital Performance Right in Sound Recordings Act
of 1995 and the Digital Millennium Copyright Act
of 1998 together granted a performance right for sound recordings. As a result, copyright law now requires that users of music pay the copyright owner of the sound recording for the public performance of that music via certain kinds of digital transmissions.
A small administrative fee is deducted from royalties before they are distributed, with remainder being divided between the performing artists on a given recording, and the copyright owner of that recording.
SoundExchange is also a membership organization, representing over 31,000 featured artists and 3,500 record labels, as of October 2008. Members are able to be awarded royalties from other countries that have reciprocal agreements with SoundExchange for eligible international performances. SoundExchange membership offers other benefits, as well.
SoundExchange collects and distributes royalties for all artists and copyright owners covered under the statutory licenses; these parties do not need to be members of SoundExchange for royalties to be collected on their behalf and distributed to them.
For example, SoundExchange came to an agreement with certain large webcasters regarding the minimum fees that were modified by a determination of the Copyright Royalty Board (CRB) on May 1, 2007. While the CRB's decision imposed a $500 per station or channel minimum fee for all webcasters, certain webcasters represented through DiMA negotiated a $50,000 "cap" on those fees. SoundExchange also offered alternative rates and terms to certain eligible small webcasters, allowing them to calculate their royalties as a percentage of their revenue or expenses, instead of at a per performance rate. As of October 2007, half of the services that had been paying at similar rates and terms in the past had signed on to these alternative rates and terms.
to also distribute the collected royalties to copyright owners and performers entitled under and pursuant to 17 U.S.C. § 114(g)(2).
SoundExchange claims to operate, in part, pursuant to Copyright Office regulations set forth in 37 C.F.R. Parts 260, 261, 262, 263 and 270.
SoundExchange is controlled by a Board of Directors comprising equal numbers of representatives of recording artists and sound recording copyright owners. This Board oversees all operations of SoundExchange, and approves such things as the distribution methodology and administrative expenses. The board is composed of 18 members.
Major record labels
Independent labels
Artist representatives
Others
, believing that the proposed legislation would unjustly hurt the interests of performing artists, musicians, and copyright owners as it would significantly decrease the amount of royalties distributed to them. At one time, SoundExchange was accused of violating the laws that created the nonprofit collective by contributing to musicFIRST, which is lobbying to create a performance royalty for terrestrial radio. Currently, terrestrial radio only pays a musical work royalty (usually to composers and songwriters). SoundExchange maintained that its contributions to musicFIRST are a legal function of the membership agreements signed by its members, and that no money is being deducted from the non-member royalties. The SoundExchange Designation and Authorization Agreement (which only members sign) authorizes any costs to be deducted from member royalties as authorized by the SoundExchange Board of Directors on their behalf.
announced that it may have to cease operations, citing SoundExchange's much higher royalty fee on Internet compared to satellite broadcast. By 2010, Internet radio stations like Pandora will be expected to pay an estimated 2.91 cents per hour per listener, while satellite radio would pay a much lower 1.6 cents, and terrestrial radio would pay nothing. With Pandora's current profit model, the fees which SoundExchange levy would amount to 70 percent of its revenue, making the service unprofitable. In comparison, satellite radio pays about nine percent of its revenue, as defined by their contract with SoundExchange, and terrestrial radio does not pay any of those fees, although it does pay royalties to other organizations.
However, the Copyright Royalty Board assigned different rates and terms for satellite radio and Internet radio. They both have extremely different business models, and the methodology for creating rates and terms are based on completely different approaches. The rate for Internet radio under the CRB ruling is not derived by assessing the revenue or expenses; it is derived on a "per performance" basis. The rate for satellite radio, on the other hand, is derived by a percentage of revenue. The discussions as to why these differences occurred can be found in the decisions themselves.
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
on the behalf of sound recording copyright owners (SRCOs — record label
Record label
In the music industry, a record label is a brand and a trademark associated with the marketing of music recordings and music videos. Most commonly, a record label is the company that manages such brands and trademarks, coordinates the production, manufacture, distribution, marketing and promotion,...
s, generally) and featured artist
Artist
An artist is a person engaged in one or more of any of a broad spectrum of activities related to creating art, practicing the arts and/or demonstrating an art. The common usage in both everyday speech and academic discourse is a practitioner in the visual arts only...
s for non-interactive digital transmissions, including satellite
Satellite radio
Satellite radio is an analogue or digital radio signal that is relayed through one or more satellites and thus can be received in a much wider geographical area than terrestrial FM radio stations...
and Internet radio
Internet radio
Internet radio is an audio service transmitted via the Internet...
.
History
Prior to 1995, SRCOs in the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
did not have a performance right; that is, recording companies and performing artists were not entitled to receive payment for the public performance of their sound recordings.
The Digital Performance Right in Sound Recordings Act
Digital Performance Right in Sound Recordings Act
The Digital Performance Right in Sound Recordings Act of 1995 is a United States Copyright law that grants owners of a copyright in sound recordings an exclusive right “to perform the copyrighted work publicly by means of a digital audio transmission.” The DPRA was enacted in response to the...
of 1995 and the Digital Millennium Copyright Act
Digital Millennium Copyright Act
The Digital Millennium Copyright Act is a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization . It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures that control access to...
of 1998 together granted a performance right for sound recordings. As a result, copyright law now requires that users of music pay the copyright owner of the sound recording for the public performance of that music via certain kinds of digital transmissions.
Purpose
SoundExchange exists to administer statutory licenses for sound recording copyrights, primarily through the collection and distribution of royalties for sound recording performances occurring under the jurisdiction of U.S. law. SoundExchange handles the following duties with respect to statutory licenses:- Collects performance royalties from the statutory licensees;
- Collects and processes all data associated with the performance of the sound recordings;
- Allocates royalties for the performance of the sound recording based on all of the data collected and processed;
- Distributes the featured artist's share directly to the artist;
- Distributes the Sound Recording Copyright Owners' share directly to the copyright owner;
- Distributes the non-featured artist's share to AFTRAAmerican Federation of Television and Radio ArtistsThe American Federation of Television and Radio Artists is a performers' union that represents a wide variety of talent, including actors in radio and television, as well as radio and television announcers and newspersons, singers and recording artists , promo and voice-over announcers and other...
and AFMAmerican Federation of MusiciansThe American Federation of Musicians of the United States and Canada is a labor union of professional musicians in the United States and Canada...
's Intellectual Property Rights Distribution Fund; and - Provides detailed reports summarizing the titles, featured artists and royalty amounts for each of the sound recordings performed by the statutory licensees.
A small administrative fee is deducted from royalties before they are distributed, with remainder being divided between the performing artists on a given recording, and the copyright owner of that recording.
SoundExchange is also a membership organization, representing over 31,000 featured artists and 3,500 record labels, as of October 2008. Members are able to be awarded royalties from other countries that have reciprocal agreements with SoundExchange for eligible international performances. SoundExchange membership offers other benefits, as well.
SoundExchange collects and distributes royalties for all artists and copyright owners covered under the statutory licenses; these parties do not need to be members of SoundExchange for royalties to be collected on their behalf and distributed to them.
Royalty rate setting
As required by and , SoundExchange, along with other interested parties, participates in each periodic rate-making proceedings to establish rates that compensate copyright owners and performers for the use of copyrighted sound recordings. Such rate setting proceedings may be resolved through arbitration proceedings or through voluntary multi-party settlements.For example, SoundExchange came to an agreement with certain large webcasters regarding the minimum fees that were modified by a determination of the Copyright Royalty Board (CRB) on May 1, 2007. While the CRB's decision imposed a $500 per station or channel minimum fee for all webcasters, certain webcasters represented through DiMA negotiated a $50,000 "cap" on those fees. SoundExchange also offered alternative rates and terms to certain eligible small webcasters, allowing them to calculate their royalties as a percentage of their revenue or expenses, instead of at a per performance rate. As of October 2007, half of the services that had been paying at similar rates and terms in the past had signed on to these alternative rates and terms.
Authority
SoundExchange is designated by the Librarian of Congress as the sole organization authorized to collect royalties paid by services making ephemeral phonorecords or digital audio transmissions of sound recordings, or both, under the statutory licenses set forth in and . As of January 1, 2003, SoundExchange is designated by the United States Copyright OfficeUnited States Copyright Office
The United States Copyright Office, a part of the Library of Congress, is the official U.S. government body that maintains records of copyright registration in the United States. It is used by copyright title searchers who are attempting to clear a chain of title for copyrighted works.The head of...
to also distribute the collected royalties to copyright owners and performers entitled under and pursuant to 17 U.S.C. § 114(g)(2).
Business structure and oversight
SoundExchange was created in 2000 as an unincorporated division of the RIAA. In September 2003, SoundExchange was spun off as an independent and non-profit organization, incorporated in the State of Delaware. SoundExchange is exempt from taxation under Section 501(c)(6) of the Internal Revenue Code.SoundExchange claims to operate, in part, pursuant to Copyright Office regulations set forth in 37 C.F.R. Parts 260, 261, 262, 263 and 270.
SoundExchange is controlled by a Board of Directors comprising equal numbers of representatives of recording artists and sound recording copyright owners. This Board oversees all operations of SoundExchange, and approves such things as the distribution methodology and administrative expenses. The board is composed of 18 members.
Major record labels
- Alasdair McMullan, EMIEMIThe EMI Group, also known as EMI Music or simply EMI, is a multinational music company headquartered in London, United Kingdom. It is the fourth-largest business group and family of record labels in the recording industry and one of the "big four" record companies. EMI Group also has a major...
Music Group - Andrea Finkelstein, Sony BMG Music Entertainment
- Michael Ostroff, Universal Music GroupUniversal Music GroupUniversal Music Group is an American music group, the largest of the "big four" record companies by its commanding market share and its multitude of global operations...
- Paul Robinson, Warner Music GroupWarner Music GroupWarner Music Group is the third largest business group and family of record labels in the recording industry, making it one of the big four record companies...
Independent labels
Independent record label
An independent record label is a record label operating without the funding of or outside the organizations of the major record labels. A great number of bands and musical acts begin on independent labels.-Overview:...
- Tom Silverman, Tommy Boy RecordsTommy Boy RecordsTommy Boy Entertainment is an independent record label started in 1981 by Tom Silverman.-History:...
- Dick Huey, Matador RecordsMatador RecordsMatador Records is an independent record label, with a roster of indie rock artists and bands.-History:Matador was started by Chris Lombardi in 1989 in his New York City apartment. The following year, Lombardi was joined by former Homestead Records manager Gerard Cosloy, and the two of them have...
- Richard Bengloff, American Association of Independent Music
Artist representatives
- Jay L. Cooper, Esq., Recording Artists' CoalitionRecording Artists' CoalitionThe Recording Artists' Coalition is an American music industry organization that represents recording artists, and attempts to defend their rights and interests. Compare and contrast with the RIAA, which represents the recording industry...
- Kim Roberts Hedgpeth, AFTRAAmerican Federation of Television and Radio ArtistsThe American Federation of Television and Radio Artists is a performers' union that represents a wide variety of talent, including actors in radio and television, as well as radio and television announcers and newspersons, singers and recording artists , promo and voice-over announcers and other...
- Patricia Polach, AFMAmerican Federation of MusiciansThe American Federation of Musicians of the United States and Canada is a labor union of professional musicians in the United States and Canada...
- Daryl P. Friedman – The Recording AcademyNational Academy of Recording Arts and SciencesThe National Academy of Recording Arts & Sciences, Inc., known variously as The Recording Academy or NARAS, is a U.S. organization of musicians, producers, recording engineers and other recording professionals dedicated to improving the quality of life and cultural condition for music and its...
- Perry Resnick, Music Manager's Forum
- Walter F. McDonough, Esq., Future of Music CoalitionFuture of Music CoalitionFuture of Music Coalition is a U.S. 501 national non-profit organization specializing in education, research and advocacy for musicians with a focus on issues at the intersection of music technology, policy and law.- Background :...
- Michael Hausman, Artist Management
- Patrick Rains, PRA Management
Others
- Larry Kenswil, Recording Industry Association of AmericaRecording Industry Association of AmericaThe Recording Industry Association of America is a trade organization that represents the recording industry distributors in the United States...
- Mitch BainwolMitch BainwolMitch Bainwol has been the chairman and CEO of the Recording Industry Association of America since 2003, succeeding Hilary Rosen. Prior to filling this position, he worked for 25 years in politics and federal policy-making. He and his wife Susan are parents of three children.-Early life and...
, Recording Industry Association of AmericaRecording Industry Association of AmericaThe Recording Industry Association of America is a trade organization that represents the recording industry distributors in the United States... - Kendall Minter, Entertainment industry attorney
Lobbying controversy
As a founding member of the MusicFIRST coalition, SoundExchange does not support the Internet Radio Equality ActInternet Radio Equality Act
The Internet Radio Equality Act, originally introduced as , is proposed legislation by Rep Jay Inslee WA to nullify the May 1, 2007, determination of the Copyright Royalty Board modifying the current webcast radio royalties and fees retroactively to January 1, 2006...
, believing that the proposed legislation would unjustly hurt the interests of performing artists, musicians, and copyright owners as it would significantly decrease the amount of royalties distributed to them. At one time, SoundExchange was accused of violating the laws that created the nonprofit collective by contributing to musicFIRST, which is lobbying to create a performance royalty for terrestrial radio. Currently, terrestrial radio only pays a musical work royalty (usually to composers and songwriters). SoundExchange maintained that its contributions to musicFIRST are a legal function of the membership agreements signed by its members, and that no money is being deducted from the non-member royalties. The SoundExchange Designation and Authorization Agreement (which only members sign) authorizes any costs to be deducted from member royalties as authorized by the SoundExchange Board of Directors on their behalf.
Different royalty rates for Internet and satellite radio
On August 16, 2008, popular Internet broadcaster PandoraPandora (music service)
Pandora Radio is an automated music recommendation service and custodian of the Music Genome Project available only in the United States. The service plays musical selections similar to song suggestions entered by a user...
announced that it may have to cease operations, citing SoundExchange's much higher royalty fee on Internet compared to satellite broadcast. By 2010, Internet radio stations like Pandora will be expected to pay an estimated 2.91 cents per hour per listener, while satellite radio would pay a much lower 1.6 cents, and terrestrial radio would pay nothing. With Pandora's current profit model, the fees which SoundExchange levy would amount to 70 percent of its revenue, making the service unprofitable. In comparison, satellite radio pays about nine percent of its revenue, as defined by their contract with SoundExchange, and terrestrial radio does not pay any of those fees, although it does pay royalties to other organizations.
However, the Copyright Royalty Board assigned different rates and terms for satellite radio and Internet radio. They both have extremely different business models, and the methodology for creating rates and terms are based on completely different approaches. The rate for Internet radio under the CRB ruling is not derived by assessing the revenue or expenses; it is derived on a "per performance" basis. The rate for satellite radio, on the other hand, is derived by a percentage of revenue. The discussions as to why these differences occurred can be found in the decisions themselves.