Earlier today I bought into some posts I was reading on how SoundExchange collects money on behalf of artists without their consent. Well, this is kind of true, but not in an extortionist kind of way. Since my post earlier, I have emailed back and forth with John Simson, the Executive Director of SoundExchange. He explained how SoundExchange works to me. for the sake of completeness (and perhaps a little laziness) I will simply include the email exchange below (with John’s kind permission).
In response to my original email, John replied:
Please give me a call so I can explain to you how this works. You don’t need to “opt out” of SoundExchange – but you are free to direct license any service you want at whatever price you want. That is and has always been your right. What you will find is that most webcasters want to make one single payment for everything they play – and we facilitate that. As the webcasters wanted to make one payment and provide data about what they were playing to one entity, we were designated by the Copyright Office to be that entity.
I responded with:
Thanks for getting back to me so quickly. I would love to speak with you about this as it’s clear there is a lot of potentially inaccurate info in the web/media on this topic. I am simply reacting to what I have read.
So, is it correct that a “flat fee” is collected from the webcaster and each artist played is entitled to a portion of that whole? If so, what happens to the portion that goes unclaimed? Is it the webcaster that would need to opt-out of the system, and play only freely available music? I’m trying to get a handle on what I can tell webcasters who come to me. I guess in order to avoid paying anything on music of ours that has been played, they would just not report airplay of our music. They would still pay the same fees, but no portion of that would come to us, via Sound Exchange. Is that accurate?
John replied:
It depends upon the service. The 40 or so blue screen channels that play music over your cable tv or directv or dishnet pay us 7.25% of the revenue they collect and provide us with complete census data on every channel. We match the money to the performances and distribute. Satellite radio (XM and Sirius) also give us census data for all performances and we match their payments to performances and pay out accordingly. Webcasters, if they are non-comms (college, religious, community) for the most part pay a $500 annual fee. They do not provide data – so there is no data to match against their payments. We have tried to work with them to create a technology solution since getting data from them is important to me – so we can pay the right artists and labels.
Large commercial webcasters (who pay in 95% of webcasting royalties) are now required to report 2 weeks per quarter. If you show up in that survey, you get paid. Those payments would be made on the basis of audience size. In 2005 the rates for large commercial webcasters was .0762 cents per stream. So, if 100 people were listening to a song, the label and artist would receive approximately 7.6 cents for that performance. If 10,000 people were listening it would be $7.60.
What happens to unclaimed money, as in every performing rights organization is that we hold it for a minimum of 3 years (Copyright Office regulations) and if we can’t locate the person and they haven’t come forward to claim, the money is redistributed to all other SoundExchange royalty recipients.
Let me know if you have any other questions.
This is all good info. John is very open to conversation on this stuff, so I encourage anyone concerned (particularly webcasters) to contact him directly with questions. You can find his contact info on the SoundExchange contact page.
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