How digital performance royalties really work
The music industry keeps changing, so it’s important to stay up to date on how the system works, especially when it comes to getting paid. Here’s a guide to digital performance royalties for beginners.
by Chris Huff of Disc Makers Blog
As time keeps on slipping into the future and the music landscape continues to shift and change, it can be hard to know where all your possible income streams are as an independent musician or recording artist — especially if you are just starting out! In fact, digital performance royalties are one income stream that many are not aware even exists.
Separate from the other royalties one might collect from the standard streaming services, these royalties are collected from non-interactive streaming services like Pandora and paid exclusively through SoundExchange . Being aware of this can open your music to new avenues of discovery and possibly additional income sources.
What are digital performance royalties?
Digital performance royalties are generated from a streaming platform or service where you can’t choose individual songs (e.g. satellite radio). Many are algorithmically programmed and, like any traditional radio station, you will only hear what is being broadcast selected by the algorithm or DJ. These services are considered “non-interactive” and include Pandora, iHeartRadio, SiriusXM, and many other web-based radio streamers.
Differences between digital performance and other music royalties
In understanding the distinction between digital performance royalties and other types of music royalties , it’s important to first understand the difference between performance royalties and mechanical royalties.
Performance royalties are generated when recorded music is played publicly, which includes over the radio, in restaurants, and on interactive streaming services. They are paid to the songwriter and music publisher. In all countries except the US, the performing artist of the recording is also paid a performance royalty.
Mechanical royalties were initially royalties paid on the sale of a physical record (“mechanically” reproduced sound), but now have come to include songs streamed on interactive streaming services as well. These are paid to the music publisher or record label alone. Interactive services like Spotify and Apple Music generate bothperformance and mechanical royalties.
But there is a peculiar third thing: digital performance royalties! These are paid every time a sound recording is streamed on one of the non-interactive platforms. They pay per-play or per-stream, which differs from interactive services; those pay based on self-created ratios and share of net revenue. Also, digital performance royalties pay a percentage to the performing artists and musicians on the recordings, unlike standard US performance royalties, which only pay to the songwriters and publishers.
The mechanics of digital performance royalties
In 2021 the digital performance royalty rate for commercial subscription services was $0.0026 per performance, and for commercial non-subscription services was $0.0021 per performance. This rate is set by law and fluctuates based on the CPI-U (Consumer Price Index for All Urban Consumers). Digital performance royalties are collected by SoundExchange (and SoundExchange only!) and are distributed in the following percentages: 45 percent to the featured recording artist, 5 percent to non-featured artists (backup musicians), and 50 percent to the rights owner of the recording.
Collecting your digital performance royalties
You must be registered with SoundExchange to receive your digital performance royalties, as they are the only organization that collects them. It doesn’t matter if you are already registered with ASCAP, BMI, or any other performance rights organization; they do not collect these royalties. Registration and membership are free; there is a small administrative fee deducted from any royalties they pay you.
Performance royalties from interactive streaming services like Spotify and Apple Music are collected by the PROs (ASCAP, BMI, SESAC) so you will also need to be registered with one of them to collect those. They are only paid to the publisher and songwriter, though, not the performing artist.
Maximizing your earnings from digital streams
If you’re looking to increase your digital performance royalties, you’ll want to submit your music to as many of the non-interactive platforms as possible. You’ll need to have a digital distributor for this; CD Baby, Tunecore, and Distrokid are three of the main digital distributors who submit to platforms like Pandora and iHeartMusic.
Submitting your music to SiriusXM is a bit trickier but not impossible; they have a general address for you to send recordings to, but most artists and music industry players recommend finding a specific show or channel you believe fits with your music and reaching out directly to that channel’s DJs and program directors.
The future of digital royalties in the music industry
Hopefully, as things progress, not only will the United States catch up to other countries and start paying performance royalties for radio play, but lawmakers will increase the streaming platform rates for both interactive and non-interactive services to something tangible to help independent artists.
While some of the latest trends have gone in the other direction (like Spotify shifting income away from smaller artists this year), we are overdue for a market correction in favor of the artists. Whatever happens, it’s important to be aware of where the income streams are and make sure that you are registered with the appropriate organizations collecting them.
Chris Huff has been a professional singer, multi-instrumentalist, songwriter, and producer for over 25 years. He has worked as a sideman with Peter Yarrow (Peter, Paul, and Mary), Echo and the Bunnymen, Chuck Hammer (David Bowie, Lou Reed), and Tom Kitt (Broadway composer of Next To Normal). Chris also wrote liner notes for David Bowie’s Live And WellCD, and his full-length album, ’bout Time is available on iTunes.
