SoundExchange

Last updated
SoundExchange
SoundExchange logo.png
FoundedSeptember 22, 2003
Type Non-profit
760742496
Location
Area served
International
Services Royalty distribution
Members
155,000
Key people
Michael Huppe
(President and CEO) [1]
Revenue
---
Website www.soundexchange.com

SoundExchange is a non-profit collective rights management organization. It is the sole organization designated by the U.S. Congress to collect and distribute digital performance royalties for sound recordings. It pays featured and non-featured artists and master rights owners for the non-interactive use of sound recordings under the statutory licenses set forth in 17 U.S.C.   § 112 and 17 U.S.C.   § 114. [2] [3]

Contents

Overseen by a board of directors composed of artists, artist representatives, and sound recording copyright owners, SoundExchange is also an advocate for music licensing reform. [3] As of 2020 it had paid more than $6 billion to recording artists and rights owners. [4] [5]

History

SoundExchange was created as a division of the RIAA in 2000. In 2001, major record labels and artists agreed on a standard for paying royalties earned from cable and satellite music services, and SoundExchange made its first payment, distributing $5.2 million in royalties to recording artists and labels. [6] In 2002, four years after the Digital Millennium Copyright Act granted webcasters an automatic license to play copyrighted music provided that a royalty was paid, a lengthy arbitration process was concluded, and a royalty rate was set. SoundExchange was spun off from the RIAA and became an independent non-profit corporation in 2003. [7] [8]

SoundExchange's first executive director was John Simson, a musician, attorney, and artist manager. [9] Simson left the organization in 2011 and was replaced by Michael Huppe. In 2018 it was announced that the organization had extended his contract through 2021. [10] [4] He also serves as the chairman of the board of SXWorks, a subsidiary created by SoundExchange following its acquisition of the Canadian Musical Reproduction Rights Association (CMRRA). SXWorks provides administration and back office services to publishers to support multiple licensing configurations. [11]

In 2012, the company announced that it had paid over $1 billion in royalties since 2003. [12] As of 2018, it had paid more than $5 billion, [5] with recording artists and rights holders paid $884 million in 2016 alone. [4] [11]

Purpose

SoundExchange exists to administer statutory licenses for sound recording copyrights, primarily through the collection and distribution of royalties for sound recording performances occurring under the jurisdiction of federal law. SoundExchange handles the following duties with respect to statutory licenses:

An administrative fee is deducted from royalties before they are distributed, with the remainder divided between the performing artists on a given recording, and the copyright owner of that recording. SoundExchange collects and distributes royalties for all artists and copyright owners covered under the statutory licenses. It has collection agreements with more than 40 international performance rights organizations around the world, [13] allowing it to collect and pay royalties to recording artists and rights owners when their music is played in those countries. In 2017, SoundExchange expanded into music publisher administration with its acquisition of Canadian mechanical rights society Canadian Musical Reproduction Rights Agency (CMRRA). [14]

Authority and structure

SoundExchange is designated by the Librarian of Congress as the sole organization authorized to collect royalties paid by services making ephemeral phonorecords or digital audio transmissions of sound recordings, or both, under the statutory licenses set forth in 17 U.S.C. § 112 and 17 U.S.C. § 114. As of January 1, 2003, SoundExchange is designated by the United States Copyright Office to also distribute the collected royalties to copyright owners and performers entitled under and pursuant to 17 U.S.C. § 114(g)(2). Incorporated in the State of Delaware, SoundExchange is exempt from taxation under Section 501(c)(6) of the Internal Revenue Code. It operates, in part, pursuant to Copyright Office regulations set forth in 37 C.F.R. Parts 370, 380, 382, 383 and 384. [15]

SoundExchange is controlled by a board of directors composed of recording artists, representatives of recording artists and sound recording copyright owners. As of 2017, the board was composed of Duncan Crabtree-Ireland (SAG-AFTRA), Jay L. Cooper (attorney), Andrea Finkelstein (Sony Music Entertainment, Inc.), Ray Hair (American Federation of Musicians), Jeff Harleston (Universal Music Group), Michael Hausman (artist manager), Steve Marks (RIAA), David Byrne (artist), Kendall Minter (attorney), Richard Burgess (American Association of Independent Music), Patrick Rains (artist manager, PRA Records), Martha Reeves (artist), Perry Resnick (RZO Royalty Management), Paul Robinson (Warner Music Group), Cary Sherman (RIAA), Darius Van Arman (Secretly Group), Ron Wilcox (Warner Music Group) and Victor Zaraya (Razor & Tie). [16]

Royalty rate setting

As required by 17 U.S.C.   § 112 and 17 U.S.C.   § 114, SoundExchange, along with other interested parties, participates in each periodic rate-making proceedings to establish rates that compensate copyright owners and performers for the use of copyrighted sound recordings. Such rate setting proceedings may be resolved through proceedings through the Copyright Royalty Board (CRB). [17]

Satellite radio

In December 2017, the Copyright Royalty Board (CRB) increased the Sirius XM royalty rate from 11.5% of revenue to 15.5% of revenue through 2022. [1] The CRB also rendered a decision on royalty rates paid by Muzak and Music Choice in December 2017, reducing the royalty rates paid by those services from 8.5% of revenue to 7.5% of revenue. [18]

In 2015 SoundExchange sued Muzak for underpayments of royalties to artists and rights holders. Because its royalty rate was established before the DMCA was enacted, Muzak's streaming services to Dish Network subscribers was allowed a grandfathered rate standard that resulted in lower royalty rates. The SoundExchange lawsuit sought to implement the standard royalty rate for new subscriptions on Muzak's streaming services to other cable/satellite TV providers. [19]

Webcasting

The CRB judges established webcasting rates (per song, per listener) on December 16, 2015, for the 2016–2020 term – $0.0017 for non-subscription performances and $0.0020 for subscription performances for commercial webcasters in 2017, with rates for each subsequent year adjusted upward or downward, according to the Consumer Price Index for the year. As of 2018, webcasting rates were $0.0018 for non-subscription services and $0.0023 for subscription services. [20]

Advocacy efforts

SoundExchange is an advocate for the reform of U.S. music licensing laws, seeking to ensure that music creators earn fair market value for their work when it is used on any music platform. During the 115th Congress, SoundExchange actively supported the Fair Play Fair Pay Act of 2017 (H.R.1836) and the CLASSICS Act (H.R.3301). It is a founding member of musicFIRST, a coalition of organizations representing musicians, recording artists, managers, music businesses, and performance rights advocates. [21] [22] [23] [24]

Projects and initiatives

In March 2016 SoundExchange introduced an online service to allow music services to locate metadata for 20 million sound recordings in its database. The service allows users to search SoundExchange's database of international standard recording rates, unique identifiers for sound recordings. [25] [26]

In January 2018 the SoundExchange subsidiary SXWorks launched NOI (Notice of Intention) Lookup. It allows songwriters and publishers to search a U.S. copyright database which indexes "Address Unknown" notices, the term used when a music service files an intention to use a musical work, but claims that they cannot locate the copyright owner. A free tool, it allows copyright owners to identify their work. In 2017, an average of 2.5 million monthly address unknown NOI filings were submitted to the US Copyright Office by music services. [27]

Criticism

A 2007 royalty rate increase was reported as establishing a rate that would "render Internet radio unsustainable, or at the very least, more ad-laden than terrestrial radio." [28] Critics charged that in negotiating the royalty, SoundExchange was concerned primarily with major labels and their artists. [29] Thousands of internet broadcasters participated in a "day of silence" protest by cancelling their programming on June 26, 2007. [30]

See also

Related Research Articles

Copyrights can either be licensed or assigned by the owner of the copyright. A copyright collective is a non-governmental body created by copyright law or private agreement which licenses copyrighted works on behalf of the authors and engages in collective rights management. Copyright societies track all the events and venues where copyrighted works are used and ensure that the copyright holders listed with the society are remunerated for such usage. The copyright society publishes its own tariff scheme on its websites and collects a nominal administrative fee on every transaction.

PRS for Music British music rights society

PRS for Music Limited is a British music copyright collective, made up of two collection societies: the Mechanical-Copyright Protection Society (MCPS) and the Performing Right Society (PRS). It undertakes collective rights management for musical works on behalf of its 140,000 members. PRS for Music was formed in 1997 following the MCPS-PRS Alliance. In 2009, PRS and MCPS-PRS Alliance realigned their brands and became PRS for Music.

A royalty is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

A compulsory license provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of adjudication or arbitration. In essence, under a compulsory license, an individual or company seeking to use another's intellectual property can do so without seeking the rights holder's consent, and pays the rights holder a set fee for the license. This is an exception to the general rule under intellectual property laws that the intellectual property owner enjoys exclusive rights that it may license – or decline to license – to others.

APRA AMCOS consists of Australasian Performing Right Association (APRA) and Australasian Mechanical Copyright Owners Society (AMCOS), both copyright management organisations or copyright collectives which jointly represent over 100,000 songwriters, composers and music publishers in Australia and New Zealand. The two organisations work together to license public performances and administer performance, communication and reproduction rights on behalf of their members, who are creators of musical works, aiming to ensure fair payments to members and to defend their rights under the Australian Copyright Act (1968).

Christian Copyright Licensing International (CCLI) is a privately owned company that was founded in the US in 1988 by Howard Rachinski. CCLI was launched after being developed by Rachinski for 3½ years while he was a music minister at a large church in Portland, Oregon. This prototype, called Starpraise Ministries, began in May 1985. CCLI offers copyright licensing of songs and other resource materials for use in Christian worship.

Music licensing is the licensed use of copyrighted music. Music licensing is intended to ensure that the owners of copyrights on musical works are compensated for certain uses of their work. A purchaser has limited rights to use the work without a separate agreement.

Harry Fox Agency

The Harry Fox Agency (HFA) is a provider of rights management and collector and distributor of mechanical license fees on behalf of music publishers in the United States. HFA has over 48,000 music publishing clients and issues the largest number of licenses for physical and digital formats of music. It was founded in 1927 by the National Music Publishers Association. The agency was sold to performing rights organization SESAC in 2015, which was itself acquired by The Blackstone Group in 2017.

Phonographic Performance Limited British music licensing company

Phonographic Performance Limited (PPL) is a British music copyright collective. It is a private limited company that is registered in the UK. PPL was founded by Decca Records and EMI and incorporated on 12 May 1934, and undertakes collective rights management of sound recordings on behalf of its record-company members, and distributes the fees collected to both its record company members and performer members. As of 2019, PPL collected royalties for over 110,000 performers and recording rightsholders.

Public domain music is music to which no exclusive intellectual property rights apply. There are several ways that a piece of music can be in the public domain:

A music synchronization license, or "sync" for short, is a music license granted by the holder of the copyright of a particular composition, allowing the licensee to synchronize ("sync") music with some kind of visual media output.

Production music is recorded music that can be licensed to customers for use in film, television, radio and other media. Often, the music is produced and owned by production music libraries.

The Copyright Royalty Board (CRB) is a U.S. system of three copyright royalty judges who determine rates and terms for copyright statutory licenses and make determinations on distribution of statutory license royalties collected by the U.S. Copyright Office of the Library of Congress. The board, made up of three permanent copyright royalty judges, was created under the Copyright Royalty and Distribution Reform Act of 2004, which became effective on May 31, 2005, when the Copyright Arbitration Royalty Panel system was phased out. These administrative judges are appointed by the Librarian of Congress.

The Internet Radio Equality Act (IREA), originally introduced as H.R. 2060, is proposed legislation by Rep Jay Inslee (D) WA to nullify the May 1, 2007, determination of the Copyright Royalty Board (CRB) modifying the current webcast radio royalties and fees retroactively to January 1, 2006. The previous system charged radio stations a per performance rate of $0.000768, and it was that same rate from 1998-2005. The new system, effective May 1, 2007, increased that per-performance rate to the following levels: 2006=$0.0008, 2007=$0.0011, 2008=$0.0014, 2009=$0.0018, and 2010=$0.0019. This bill was introduced on April 26, 2007 by Rep. Jay Inslee (D-WA) and Rep. Donald Manzullo (R-IL) and has been cosponsored by over 100 members of the Congress. It was introduced in the Senate as S. 1353 on May 10 by Ron Wyden (D-OR) and Sam Brownback (R-KS). The bill's proponents claim that "the majority of webcasters will go bankrupt and silent" when the Copyright Royalty Board's decision takes effect unless the bill passes.

Copyright Act of 1976 United States law

The Copyright Act of 1976 is a United States copyright law and remains the primary basis of copyright law in the United States, as amended by several later enacted copyright provisions. The Act spells out the basic rights of copyright holders, codified the doctrine of "fair use", and for most new copyrights adopted a unitary term based on the date of the author's death rather than the prior scheme of fixed initial and renewal terms. It became Public Law number 94-553 on October 19, 1976 and went into effect on January 1, 1978.

Internet radio Digital audio service transmitted via the Internet

Internet radio is a digital audio service transmitted via the Internet. Broadcasting on the Internet is usually referred to as webcasting since it is not transmitted broadly through wireless means. It can either be used as a stand-alone device running through the internet, or as a software running through a single computer.

Music Reports

Music Reports serves individuals and organizations seeking expertise and solutions in music rights licensing, administration, royalty accounting, and software development and hosting. Music Reports operates the largest registry of worldwide music rights and related business information.

Digital Performance Right in Sound Recordings Act

The Digital Performance Right in Sound Recordings Act of 1995 (DPRA) is a United States Copyright law that grants owners of a copyright in sound recordings an exclusive right “to perform the copyrighted work publicly by means of a digital audio transmission.” The DPRA was enacted in response to the absence of a performance right for sound recordings in the Copyright Act of 1976 and a fear that digital technology would stand in for sales of physical records. The performance right for sound recordings under the DPRA is limited to transmissions over a digital transmission, so it is not as expansive as the performance right for other types of copyrighted works. The Digital Millennium Copyright Act (DMCA), enacted in 1998, modified the DPRA.

Music Modernization Act United States copyright law

The Orrin G. Hatch–Bob Goodlatte Music Modernization Act, or Music Modernization Act or MMA is United States legislation signed into law on October 11, 2018 aimed to modernize copyright-related issues for music and audio recordings due to new forms of technology such as digital streaming. It is a consolidation of three separate bills introduced during the 115th United States Congress.

Michael Huppe is an attorney, Georgetown University adjunct professor of law, and a music industry executive who serves as president and CEO of SoundExchange, a non-profit collective rights management organization. He is best known for his work helping to pass the Music Modernization Act in Congress.

References

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  2. Ingham, Tim (October 19, 2016). "WHAT DOES THE FUTURE HOLD FOR SOUNDEXCHANGE?". Music Business Worldwide. Retrieved 6 December 2017.CS1 maint: discouraged parameter (link)
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  5. 1 2 Variety Staff (2018-03-15). "SoundExchange Passes $5 Billion Mark in Streaming Royalty Distributions". Variety. Retrieved 2018-03-21.
  6. Leeds, Jeff (November 8, 2001). "Record Labels, Artists Reach Services Accord" . Retrieved 2 January 2018.CS1 maint: discouraged parameter (link)
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  18. Flanagan, Andrew (April 3, 2015). "SoundExchange Files Its Second Lawsuit Over Improper Royalties". Billboard. Retrieved 2 January 2018.CS1 maint: discouraged parameter (link)
  19. "BRIEF-Mood media announces update to court proceedings involving its subsidiary MuzakLLC". Reuters. April 26, 2017. Retrieved 2018-01-10.
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