SoundExchange Royalties
Definition
SoundExchange royalties are digital performance royalties collected and distributed in the United States for certain uses of sound recordings, especially non-interactive digital radio, satellite radio, and similar statutory-license uses. They are separate from publishing royalties and are paid to featured artists, rights owners, and non-featured performers under statutory allocation rules.
Why it matters
Music royalty investments can own different slices of rights. SoundExchange income belongs to the sound recording side, not the publishing side, and its cash-flow behavior differs from mechanical, performance, sync, and streaming platform royalties. Investors need to know whether a catalog purchase includes SoundExchange rights, whether payments are assignable, and how statements reconcile to the offering model.
Common misconceptions
- •SoundExchange royalties are not the same as Spotify master royalties paid through a distributor or label.
- •They are not publishing royalties and do not flow through ASCAP, BMI, SESAC, or GMR.
- •The artist share and rights-owner share may have different transferability and collection mechanics.
Technical details
Who gets paid
Statutory allocations generally split royalties among the sound recording copyright owner, featured artists, and non-featured musicians or vocalists.
A catalog investor must verify which income stream is being acquired: label/rightsholder share, featured artist share, or another contractual participation.
Assignments, letters of direction, or payment account changes may be required before cash flows reach the buyer or SPV.
Where it appears in diligence
Look for SoundExchange statements, label agreements, artist agreements, catalog purchase agreements, letters of direction, and historical royalty summaries.
Reconcile reported SoundExchange income to track-level usage, release ownership, and payee identity. Payment history alone does not prove clean transferability.
Investor diligence questions
Which party owns the payable share, and can it be assigned?
Are non-featured performer allocations excluded from the purchase?
Do historical statements separate SoundExchange from other digital master income?