CD Baby Begins Collecting Label Share of Digital Performance Royalties

When music is played on a non-interactive digital service like Pandora, Sirius XM, or cable radio, payment for the sound recording copyright is collected and distributed by SoundExchange, a non-profit performance rights organization. As we detail in our handy “Music and How the Money Flows” chart, this revenue is divided up in a standard formula: 45% goes to the featured artist, 50% goes to the sound recording copyright owner (usually a label), and 5% goes to the AFM/SAG-AFTRA Intellectual Property Rights Distrbution Fund, for distribution to backing players, session musicians, and backing vocalists.  We’re fond of this system because it treats all artists equally, ensuring direct payment that can’t be held against recoupable debt to a label, with equitable splits.

But what happens if you’re a self-released artist who doesn’t work with a label, but owns the copyrights to your sound recordings? You are entitled to collect both the artist share and the label share yourself.  Unfortunately, many artists don’t know this, and end up missing out on money they ought to be collecting, because they’ve only registered for the artist share.  Other artists haven’t registered with SoundExchange at all.

CD Baby,  a popular distribution service with a large userbase of mostly self-released artists, recently announced a change to their terms of service that allows them to collect the label share from SoundExchange for their roster of distributed artists. This move was met with some minor controversy, as indeed, artists are entitled to collect that money themselves directly from SoundExchange, without the administrative cut that CD Baby charges.  We decided to go directly to the source: CD Baby CEO Tracy Maddux answered our questions this week via email.

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