SoundExchange: A Deep Dive Into Digital Royalties

As the music industry has shifted toward digital streaming, new types of royalties have emerged that many artists don’t fully understand. One of the most important organizations in this space is SoundExchange. For a simple definition, the Sound Stock glossary explains what SoundExchange is.

SoundExchange is a nonprofit organization that collects and distributes digital performance royalties for sound recordings. It focuses specifically on the “master” side of music — meaning the actual recording — rather than the songwriting or publishing side.

These royalties are generated when music is played on non-interactive digital platforms. This includes services like internet radio, satellite radio, and certain streaming channels where the listener does not choose the exact song being played.

When a track is streamed on one of these platforms, the service is required by law to pay royalties. SoundExchange collects these payments and distributes them directly to featured artists and sound recording copyright owners, such as record labels.

One key distinction is that SoundExchange does not pay songwriters or publishers. Those royalties are handled by performance rights organizations like ASCAP or BMI. Instead, SoundExchange ensures that the performers and recording owners receive compensation for the use of their recordings.

Another important aspect of SoundExchange is its role as the official organization designated to handle these royalties in the United States. It operates under statutory licenses, meaning the royalty system is defined by law rather than negotiated individually for each use.

For artists, this creates an additional revenue stream that many overlook. Even if a track is not being actively sold or streamed on traditional platforms, it may still generate income through digital radio plays and similar services.

As streaming continues to dominate music consumption, understanding how royalties are collected and distributed is more important than ever. SoundExchange represents a critical piece of that system, helping ensure that artists and rights holders are paid for the use of their recordings in the digital landscape.