SoundExchange is dedicated to making the business of music more efficient so that creators can focus on doing what they love. We even make it easy for artists to redirect a share of their royalties to the producers, mixers, or engineers who collaborated on the recording, should they so choose.
Through SoundExchange’s Letters of Direction (LOD) Program, artists can redirect royalties to the party(ies) of their designation.
Please review the guide to Letters of Direction here, or download our Letters of Direction packet.
A SoundExchange Featured Artist Letter of Direction (LOD) is a document (found on the How To Guides & Useful Links page here) by which a Featured Artist directs SoundExchange to pay a portion of the Featured Artist’s sound recording performance royalties to a participant involved in the creative process – producers, engineers, mixers, re-mixers, etc. (hereafter referred to as “Creative Participants”).
The term “Featured Artist” generally refers to the individual(s) or group(s) most prominently featured on a track or album. Non-featured Artists, such as session musicians or backup singers, do not receive royalties directly from SoundExchange.
SoundExchange will honor an LOD for Creative Participants who are not the featured artist on the sound recording or studio musicians or background singers
If there is any question whether an individual is eligible to receive Featured Artist royalties via an LOD, SoundExchange will reach out to the party who submitted the LOD to clarify the role of the Creative Participant listed on the LOD.
LODs are not used for one Featured Artist to pay another Featured Artist for a sound recording on which they collaborated (e.g., if a sound recording is released as “Artist A featuring Artist B,” Artist A would not execute an LOD to pay Artist B). Rather, SoundExchange would treat such a sound recording as a collaboration and allocate the Featured Artist royalties 50/50 between Artist A and Artist B (unless Artist A and Artist B inform SoundExchange of an alternative allocation).
An LOD can only be used by Featured Artists to direct payments to Creative Participants. LODs cannot be used to direct payments to other third parties, including record labels, lenders, royalty advance companies, or any person or entity not directly involved in the creative process.
It depends, but please be aware that SoundExchange does not pay Creative Participants “off the top,” i.e., prior to allocating royalties to the Featured Artist(s). Therefore, if a Creative Participant is seeking payment for a sound recording with multiple Featured Artists, the Creative Participant must secure an LOD from each Featured Artist on that sound recording.
For example: Sound Recording X is performed by “Artist A featuring Artist B.” SoundExchange would treat Sound Recording X as a collaboration and allocate the Featured Artist royalties 50/50 between Artist A and Artist B (unless Artist A and Artist B inform SoundExchange of an alternative allocation). If the Creative Participant is seeking to receive payment on all royalties allocated to Artist A and Artist B for Sound Recording X, the Creative Participant would need to obtain LODs from both Artist A and Artist B. If, on the other hand, the Creative Participant is only seeking payment from Artist A but not Artist B, then the Creative Participant would only need to procure an LOD from Artist A.
However, the specified percentage on the LOD payable to the Creative Participant would only apply to Artist A’s allocation of the royalties and not to Artist B’s allocation of the royalties.
SoundExchange requires the following completed documents:
1) A COMPLETED AND SIGNED SOUNDEXCHANGE LETTER OF DIRECTION FORM (AVAILABLE HERE), WHICH INCLUDES:
*The Authorized Signatory is the authorized contact for the Featured Artist performer(s) on file with SoundExchange. Please see item 3 below if this signature is presented electronically.
2) A COMPLETED LETTER OF DIRECTION REPERTOIRE CHART (AVAILABLE HERE) OF RECORDINGS COVERED, WHICH INCLUDES:
3) THE DOCUSIGN CERTIFICATE OF COMPLETION (OR EQUIVALENT DOCUMENT) IF THE SIGNATURE ON BEHALF OF THE PERFORMER OR AUTHORIZED LOD SIGNATORY IS PRESENTED ELECTRONICALLY.
If any of these documents are missing or incomplete, SoundExchange will contact the person who submitted the LOD or the Featured Artist’s authorized contact to complete the information. This will delay activation of the LOD.
For additional how-to guides and useful links for managing your SoundExchange account, visit HERE.
LODs must be signed by the performer or their Authorized Signatory with the following types of signatures:
In situations where the signature of the performer or their Authorized Signatory is presented electronically, the DocuSign Certificate of Completion (or equivalent document if another electronic signature service is used) must be included with the LOD submission. Failure to include this certificate will delay activation of the LOD.
The LOD form and Repertoire Chart can be downloaded from the SoundExchange website or through your SoundExchange Direct account at https://sxdirect.soundexchange.com.
Completed and fully executed LODs and the Repertoire Chart should be submitted to SoundExchange via email at [email protected] or through your SoundExchange Direct account at https://sxdirect.soundexchange.com. You may also submit hardcopy forms via fax or postal mail to SoundExchange, but this may delay processing. SoundExchange’s address and fax number can be found at the bottom of this document.
Yes. An LOD directs SoundExchange to pay a portion of a specific Featured Artist’s royalties for one or more sound recordings to a specific Creative Participant. An LOD can include multiple sound recordings (or multiple albums) by the same Featured Artist, but cannot include multiple sound recordings by multiple Featured Artists. Please note that the LOD will apply to a given sound recording regardless of the album it appears on. In other words, if a specific sound recording appears on multiple releases, the LOD will be applied to all instances of the specific sound recording on all releases.
You will receive a notification of confirmation when SoundExchange receives your LOD application. The authorized contacts of the Featured Artist, the Creative Participant, and the person who submitted the LOD will receive further notification when the LOD is processed and becomes active.
Note: An LOD takes a minimum of two weeks to process, assuming the application is complete and valid. A SoundExchange representative will contact you if any required elements are missing or incomplete.
Creative Participants will begin receiving payments from SoundExchange the next pay period in which their account reaches a distributable amount (either the following month or the following quarter depending upon the structure of their account) after the valid LOD becomes active with a couple caveats listed below.
As of January 1, 2020, both Featured Artists and Creative Participants will be subject to backup withholding unless they have provided SoundExchange with a Taxpayer Identification Number (TIN). SoundExchange will handle the withholding and reporting of payments made to Creative Participants directly with the IRS, and the artist will no longer need to 1099/1042 the Creative Participants themselves.
Prior to January 1, 2020, Featured Artists were required to report payments made to Creative Participants to the IRS and to provide a Form 1099 or 1042 to Creative Participants each year as needed.
SoundExchange does not provide any tax advice, and no information contained herein should be construed as tax advice.