On December 10th, changes to our CD Baby Member Agreement take effect that will allow us to administer on your behalf any unclaimed Digital Performance Royalties being held by SoundExchange, a not-for-profit entity that has the exclusive right to collect and distribute non-interactive royalties.
* If you’re already claiming your own royalties directly from SoundExchange, these changes will NOT affect you; SoundExchange will still pay you directly. Our Terms of Service is being amended so we can help artists that haven’t yet registered with SoundExchange. We don’t want them to miss out on collecting revenue that their music has generated.
* If you’re NOT claiming royalties directly from SoundExchange, but do NOT want CD Baby to collect them for you, simply opt out within your CD Baby members account dashboard.
Why would artists miss out on royalties?
Well, after three years, SoundExchange releases any unclaimed royalties into the sunset, which basically means that money gets scooped up by the major labels.
We don’t want your royalties getting paid to some major label that had nothing to do with the creation of your tracks. That’s why we’re changing our Terms, to make sure you don’t lose out on YOUR money.
Can’t artists get these directly from SoundExchange?
Yes you can, and many artists do. If you want to go direct to SoundExchange, by all means do so. However, we have found that the SoundExchange registration process can be confusing and tends to trip up artists. Therefore many CD Baby artists have never registered to collect these royalties. We’re stepping up now and informing SoundExchange who the rights holder is, and collecting on behalf of unregistered artists the royalties we can.
So what does all this mean in layman’s terms?
OK, first let’s talk about Digital Performance Royalties. These are royalties owed to the artists who performed on a song and the owner of the sound recording any time that track is played via non-interactive streaming (meaning someone did NOT click to hear a specific song) on services such as Pandora, Sirius XM, and cable TV radio stations.
It’s important to note that Digital Performance Royalties aren’t related to publishing rights, so no portion of this royalty is owed to publishers or songwriters. With Digital Performance Royalties, it’s all about the recording, not the underlying song/composition. Performing Rights Organizations such as ASCAP and BMI do NOT collect Digital Performance Royalties. Instead, they’re collected by SoundExchange, which holds the funds until the appropriate parties register with them to claim the money.
These “non-interactive” royalties are divided into halves:
Sound Recording Share: 50%
This amount is paid to the label, rights owner or royalty administrator.
Featured and Non-Featured Artist Share: 45%/5% respectively
This amount is paid directly to the performing artists and backing musicians.
What happens to your unclaimed royalties being held by SoundExchange?
There are a significant amount of unclaimed Sound Recording royalties sitting at SoundExchange that have accumulated over the years. As I mentioned above, this unclaimed money sits there for up to 3 years, then goes poof, getting distributed to major labels and popular artists based on their market share.
Periodically, we share our distribution catalog data with SoundExchange and alert any artists who are owed money. This has helped many artists register directly with SoundExchange, but there’s still a significant number of CD Baby members who have unclaimed royalties just sitting there. To make sure that money doesn’t go “poof,” we’re now taking the next step to make sure our members get what is theirs before it’s too late.
Previously unmatched SoundExchange royalties owed to CD Baby members will now get paid via CD Baby. Again, this will only affect CD Baby members who have unclaimed royalties sitting at SoundExchange, and not those who’ve already registered directly.
How will members get paid?
If we do identify unclaimed royalties on a member’s behalf, we will remit 91% of the Sound Recording royalty (commonly referred to as the “label” share) we collect into their member account. The Featured and Non-Featured Artist share of the royalty (the other 50%) will not be collected by CD Baby. You can claim that directly by registering with SoundExchange as an artist.
Does this affect the ownership of masters or publishing?
No. As with our distribution services, our terms say we are only authorized to collect and administer income on our members’ behalf. You still own and control your copyrights.
Can I opt-out of this, even if I am not already a member of SoundExchange?
Yes. If you don’t want CD Baby to collect unclaimed royalties from SoundExchange, simply opt out from your CD Baby Members dashboard.
How is this different from income from Spotify or other streaming services?
Spotify is an interactive service and negotiates its rates directly with labels or their distributors and pays them directly. We get paid on your behalf by companies like Spotify. Our Terms of Service changes do not affect interactive streaming.
Rates for non-interactive streams (like Pandora) are set by the government and paid to SoundExchange or negotiated directly with the distributor. Our Terms of Service changes will now allow us to collect these royalties from SoundExchange on your behalf.
There is more money for the Artists
I know I just mentioned it above, but CD Baby is only collecting and distributing the Sound Recording Share of the royalties collected by SoundExchange. If you’re also the performing artist, there is another 50% for Featured and Non-Featured artists that you can claim by going to SoundExchange.com and registering as an artist.
For more details, please read the revised Member Agreement here.
These changes go into effect on December 10th, and no action is needed on your part. Your continued use of the service following the effective date will constitute your agreement to the revised Member Agreement. Once the new terms are in effect, any income we collect for you will be deposited in your CD Baby Member account as soon as it is received.
Again, if you do not want us to collect your royalties from SoundExchange, you can opt out now from your CD Baby Members account dashboard.