SoundExchange was started 14 years ago as a non-profit (appointed by the US Government) to issue sound-recording performance licenses and collect sound-recording performance royalties from “non-interactive” (you can’t choose the song) digital radio services — like Pandora and SiriusXM. To clarify, these are sound-recording performance royalties for artists and labels (not composition performance royalties, which is what ASCAP, BMI, SESAC collect for songwriters and publishers).
Up until very recently, all the money that Pandora paid out for the sound recording royalties went directly to SoundExchange. SoundExchange then paid 50% of that money to labels and 50% of that money to artists.
For clarity, these sound recording royalties paid out to SoundExchange were drastically higher than the composition royalties paid out to ASCAP, BMI and SESAC (some have put that number at around 10-14x higher). It’s extremely complicated why this is and has a lot to do with consent decrees established by the US Government about 100 years ago for ASCAP and BMI. But that’s neither here nor there.
Pandora now has direct licensing agreements with labels and distributors and is only paying SoundExchange the artist’s share (50%) of the ad-supported radio tier.
Pandora now has 3 tiers: the ad-supported radio service (tier 1), the subscription radio (tier 2) called Pandora Plus, and (tier 3) the new interactive subscription service called Pandora Premium.
Pandora is paying the labels directly for the subscription top 2 tiers AND the label share of tier 1, the ad-supported radio service.
Every DIY artist who signed up with SoundExchange and selected the “Both” option indicating that they are the artist AND the label have now seen their label royalties drop drastically.
