Here's what usually happens: you release a track, it gets picked up by Pandora, SiriusXM, or a college radio station streaming online, and somewhere in the back of your mind you know there's money being generated. But where does it go? Who's collecting it? And why does it feel like you need to sign up for four different organizations just to get paid?
The short answer is that SoundExchange, ASCAP, and BMI are doing three different jobs. They're not competitors — they're collecting different types of royalties on your behalf. The problem is that most independent artists don't realize this until after they've already left money on the table.
Let's break it down clearly.
Two Different Royalties, Two Different Systems
When your music is played publicly — on the radio, at a bar, on a streaming platform — two separate royalties can be generated for the same song:
Performance royalties are paid to the songwriter and the music publisher. These cover the underlying composition: the melody, the lyrics, the song itself. ASCAP, BMI, and SESAC collect these.
Digital performance royalties are paid to the featured artist and the rights holder of the master recording. These cover the actual sound recording when it's broadcast on digital radio and non-interactive streaming platforms. SoundExchange collects these.
If you wrote a song, recorded it yourself, and own both the composition and the master — that same track generates both types of royalties. But they flow through two completely different channels. Miss one and you don't collect it, end of story.
What ASCAP and BMI Actually Do
ASCAP and BMI are Performing Rights Organizations — PROs. When your song is played publicly on broadcast radio, at a venue, or on interactive streaming services like Spotify and Apple Music, those platforms pay licensing fees to PROs. The PROs then distribute that money to registered songwriters and publishers.
You join one PRO as a songwriter (ASCAP, BMI, or SESAC — here's a full breakdown of the differences). Once you register your songs, the PRO tracks performances and sends you royalty payments based on how often and where your music is played.
The critical thing to understand here: ASCAP and BMI represent your rights as a songwriter. They're tied to the composition, not the recording. Spotify pays performance royalties through your PRO. It does not pay SoundExchange for Spotify streams — that's a different royalty type entirely.
What SoundExchange Does — and Why It's a Separate System
SoundExchange was created because of a specific section of the Digital Millennium Copyright Act, which established a separate royalty for non-interactive digital audio transmissions. These are services where the listener can't choose exactly what plays next — Pandora, SiriusXM, iHeart Radio, internet radio stations, and similar platforms.
When your song plays on Pandora, SoundExchange collects a royalty and splits it like this:
- 45% goes directly to the featured artist
- 5% goes into a fund for non-featured session musicians and vocalists
- 50% goes to the master rights holder
If you're an independent artist who owns your masters, you're entitled to both the featured artist share and the rights holder share — but you have to register in both categories to collect them. SoundExchange won't combine them automatically just because you're the same person.
For a deeper look at how the platform works and where to sign up, see our guide on what SoundExchange is and how to get paid.
Why You Need Both — Even for the Same Song
Here's the practical reality. Take a song that gets broadcast on SiriusXM:
- SiriusXM pays SoundExchange for the right to broadcast the sound recording
- SoundExchange sends 50% to the master rights holder and 45% to the featured artist
- SiriusXM also has a separate blanket license with ASCAP and BMI for the songwriting royalties
- Your PRO sends those songwriter royalties to you separately
Same broadcast. Two separate payment streams. Two separate organizations. If you registered with your PRO but skipped SoundExchange, you're only collecting half of what you're owed. And vice versa.
One more thing worth knowing: interactive streaming (Spotify, Apple Music, Tidal) works differently. Those platforms don't pay SoundExchange at all. They pay mechanical royalties through the Mechanical Licensing Collective, and performance royalties through PROs. SoundExchange is specifically for non-interactive digital radio and broadcast platforms.
The Letter of Direction: How SoundExchange Splits Payments Between Collaborators
This is where things get more complicated — especially for artists who make music with other people.
Say you co-produced a track with someone else and you both have a share of the master recording. SoundExchange is going to send money to the rights holders — but how do they know how to divide it between two people? Who gets what percentage?
That's exactly what a Letter of Direction (LOD) handles. It's a document you file with SoundExchange that tells them precisely how to split the sound recording royalties among everyone who has a stake in the master. Without one, payments can stall, go to the wrong account, or end up sitting in an unmatched royalties pool that never reaches anyone.
An LOD is different from a music split sheet, but the two work together. The split sheet is what you and your collaborators sign upfront to document who owns what. The LOD is what you actually submit to SoundExchange to make the payment routing happen. One is your internal agreement; the other is your instruction to the payer.
At musicsplitsheets.com, you can generate a custom split sheet and a Letter of Direction together for $5. It takes a couple of minutes and gives you both documents — the one you keep on file and the one you send to SoundExchange.
Setting Up Your Digital Royalty Collection: The Practical Steps
Here's the short version of what you actually need to do:
1. Join a PRO as a songwriter. Choose ASCAP or BMI (or SESAC). Register your songs in your PRO account so performance royalties have somewhere to land.
2. Register with SoundExchange — twice. Once as a featured artist, and once as a master rights holder if you own your recording. Both registrations live in the same SoundExchange account, but they need to be done separately. Our step-by-step walkthrough covers exactly how to register with SoundExchange.
3. Get a split sheet done before you release anything collaborative. What percentage of the master does each person own? Get it agreed on and documented before the track goes live. Here's how to fill out a music split sheet.
4. File a Letter of Direction with SoundExchange if you have collaborators on the master. The LOD tells SoundExchange how to route your digital performance royalties. Skip this and the money either goes entirely to whoever registered first or sits in limbo.
5. Register with the MLC for your mechanical royalties. Spotify and Apple Music mechanicals run through the Mechanical Licensing Collective, not SoundExchange. That's a separate registration — you can read about how to register with the MLC in another post.
The Bottom Line
SoundExchange, ASCAP, and BMI aren't interchangeable. They're collecting different money, from different platforms, for different rights. If you wrote the song and recorded it yourself, you need to be registered with all three systems. If you made the record with collaborators, you also need a Letter of Direction so SoundExchange knows how to divide what they're holding.
The whole system is more manageable than it looks once you know what each organization actually does. The expensive part isn't the registrations — it's not knowing you need them until after money has already gone uncollected.
If you're putting out music with someone else on the master, start at musicsplitsheets.com/pages/create. A split sheet and a Letter of Direction, together, for $5. Get those in order before you hit publish on the release.