SoundExchange and Non-Interactive Royalties: What Artists Need to Know

There are royalty streams that belong to recording artists by law, paid regardless of whether the artist has a label deal, a publisher, or a manager. Non-interactive digital performance royalties are one of the most frequently overlooked of these, and the fix is straightforward: register with SoundExchange.

Understanding why this royalty exists, who pays it, how it is split, and what non-interactive means in this context helps independent artists make sure they are collecting what the law requires be paid to them.

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#### What Non-Interactive Means

Interactive streaming means a listener chooses specifically what to play and when. Spotify, Apple Music, and Tidal are interactive platforms. The listener controls the queue.

Non-interactive streaming means the listener does not control the specific song selection. Think Pandora's radio mode, SiriusXM, internet webcasters, and similar services. The listener may choose a station, genre, or mood, but the platform decides what plays next.

This distinction is legally significant. Non-interactive digital services operate under a different statutory license, the Section 114 license, administered exclusively by SoundExchange, the only organization designated by the U.S. government for this purpose (SoundExchange). Interactive services negotiate mechanical and performance royalties through separate licensing structures.

The royalties SoundExchange collects are digital performance royalties for sound recordings, paid on the master recording, not the underlying composition. See master recording and performance royalties for definitions. These are distinct from the mechanical royalties The MLC administers and distinct from the performance royalties ASCAP, BMI, and SESAC collect for the underlying song. For context on how the performance royalty organizations work, see ASCAP and BMI: What They Actually Do.

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#### How the Royalty Is Split

Under the law, digital performance royalties collected under the Section 114 license are divided into three parts (SoundExchange):

• 45 percent goes directly to the featured artist or artists on the recording.
• 5 percent goes to a fund for non-featured artists, session musicians and background vocalists.
• 50 percent goes to the sound recording rights owner, typically the label, or the artist if they own their master.

The 45 percent direct-to-featured-artist allocation is a statutory right. It does not pass through a label deal. Even if a label owns the master and receives the 50 percent rights-owner share, the featured artist's 45 percent is paid directly by SoundExchange to the featured artist, assuming the artist has registered.

For independent artists who own their masters, this structure means SoundExchange pays them in two capacities: 45 percent as the featured performer and 50 percent as the rights owner of the sound recording. That is the full 95 percent of the non-featured-artist fund, with the remaining 5 percent going to the non-featured artists fund regardless.

For artists in label deals, the rights-owner share (50 percent) goes to the label unless negotiated otherwise. Understanding how advances and recoupment affect royalty flows in that context is covered in Advances, Recoupment, and the Math Artists Need Before They Sign.

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#### What Platforms Are Covered

SoundExchange collects digital performance royalties from over 3,600 digital services (SoundExchange). The most prominent non-interactive platforms include:

• Pandora (radio mode)
• SiriusXM
• iHeartRadio
• Internet webcasters and digital cable music channels

Interactive streaming platforms like Spotify and Apple Music are not covered by SoundExchange's Section 114 license. Those platforms have separate licensing arrangements. SoundExchange specifically handles the non-interactive, broadcast-style digital services.

SoundExchange distributes approximately $1 billion in royalties each year to featured performers and rights owners. The organization, formed independently in 2003, has paid over $9 billion in distributions to date across its history of administration.

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#### Why Registration Is Required

Recording artists and sound recording rights owners must register with SoundExchange to receive digital performance royalties (SoundExchange register page). SoundExchange collects the royalties whether or not an artist is registered, the money comes in from the platforms regardless. But unregistered artists cannot receive payment.

Registration is free. SoundExchange describes the process as simple and fast, available at register.soundexchange.com. After registering, artists can access SoundExchange Direct, a free account management service available via the website and mobile app, to claim recordings, review royalty payment details, and manage their catalog.

The practical risk of not registering is straightforward: royalties accumulate, but they cannot be distributed to someone who has not registered. While SoundExchange works to identify and locate rights holders, the most reliable path to payment is self-initiated registration.

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#### What to Do After Registering

Once registered, artists should:

1. Verify that their name, address, and tax information are current. Royalties cannot be paid without accurate payment information on file. 2. Use SoundExchange Direct's Search and Claim tool to find and claim recordings associated with their name. Both performers and copyright owners can search and claim. 3. If recordings are not found through the Search and Claim tool, submit ISRCs to SoundExchange's ISRC database. Accurate ISRC data is how SoundExchange matches usage reports from 3,600 or more services to specific recordings.

The ISRC, the International Standard Recording Code, is the identifier attached to each sound recording. When non-interactive services report usage to SoundExchange, they report by ISRC. If the ISRC connected to a usage event is not claimed in SoundExchange's system, that royalty goes uncollected.

This is structurally the same data problem described for The MLC's unmatched mechanical royalties, the money exists, the usage is reported, but the data connection to the right owner has not been completed. Registration and accurate ISRCs close that gap.

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#### A Note on the Total Distribution Figure

SoundExchange's published pages state different cumulative distribution totals in different locations, figures ranging from over $9 billion to over $13 billion appear across various pages and appear to reflect updates made at different times. This article cites the over $9 billion figure as a documented floor; the current total as of the time you read this may be higher. For the most current figure, check SoundExchange's homepage directly at soundexchange.com.