If you're a music producer or artist who has collaborated on a recording, there's a specific document you may be missing — and it's costing you money right now.
It's called a Letter of Direction (LOD), and most independent artists and producers have never heard of it. This guide explains what it is, why it matters, and what happens when you don't have one.
What Is a Letter of Direction?
A Letter of Direction (LOD) is a document that instructs SoundExchange — the organization that collects digital performance royalties for master recordings — on how to divide royalty payments between the rights holders of a sound recording.
SoundExchange collects royalties whenever a song is played on digital radio and streaming platforms like Pandora, SiriusXM, iHeartRadio, and other non-interactive services. These royalties come from the master recording side of a song (not the publishing side, which is handled by PROs like ASCAP and BMI).
By default, SoundExchange pays the featured artist listed on the account. Everyone else with a stake in the master — producers, co-featured artists, session musicians who negotiated a points deal — gets nothing unless there's an LOD on file directing SoundExchange to split the payment differently.
Why Producers Especially Need an LOD
Producers frequently own a percentage of the master recording — often 20–50% depending on the arrangement. When an artist releases the song, they typically register it with SoundExchange under their own account. Without an LOD, all SoundExchange royalties go to the artist, regardless of what the actual ownership split is.
This isn't a bug. It's the system working exactly as designed — for the person who did the paperwork.
If you produced a track that gets significant digital radio airplay and there's no LOD in place, you have missed those royalties permanently. SoundExchange does not retroactively pay for airplay that occurred before an LOD was filed.
How an LOD Works
An LOD tells SoundExchange: “For this recording, pay X% to this person and Y% to this other person.” Once filed, SoundExchange honors those instructions going forward.
The key elements of an LOD are:
- The name of the sound recording (the song title)
- The ISRC code (which uniquely identifies the specific recorded version)
- Each rights holder's name, contact information, and SoundExchange account information
- Each rights holder's percentage of master ownership
- Signatures from all parties
The LOD must be signed by all parties with a stake in the recording. Once submitted, SoundExchange will route future payments accordingly.
LOD vs. Split Sheet: What's the Difference?
A split sheet and a Letter of Direction solve related but different problems:
- Split sheet: Documents the agreed-upon ownership percentages for both the publishing (composition) and the master recording. It's a general-purpose ownership record signed by all collaborators.
- Letter of Direction: A specific instruction to SoundExchange directing how to divide master-side royalty payments. It's the document that actually gets SoundExchange to pay the right people.
You need both. The split sheet establishes what everyone agreed to. The LOD operationalizes that agreement on the SoundExchange side.
What Platforms Are Covered by SoundExchange?
SoundExchange collects royalties from non-interactive digital audio services — platforms where the listener can't choose exactly what plays next. This includes:
- Pandora (streaming radio)
- SiriusXM satellite radio
- iHeartRadio
- Amazon Music (non-interactive stations)
- Apple Music Radio
- Digital cable music channels
- Webcasters and internet radio stations
On-demand streaming platforms like Spotify, Apple Music (on-demand), and Tidal operate under a different royalty structure. Those royalties flow through distribution agreements and are not collected by SoundExchange.
How to File an LOD
You can submit a Letter of Direction directly to SoundExchange. Both the featured artist and the producer (or any other master rights holder) need accounts with SoundExchange. The LOD is submitted referencing the ISRC code of the recording.
SoundExchange provides its own LOD template on their website, but any properly formatted document with the required information and signatures will be accepted.
Get Your LOD With Your Split Sheet
At musicsplitsheets.com, the $5 bundle generates both a split sheet and a Letter of Direction together. You fill out one form with your song details, collaborator names, and master split percentages — and you get both documents as a downloadable PDF.
If you've released music with collaborators and haven't filed an LOD, there may be royalties sitting at SoundExchange that haven't been claimed or split correctly. The fix takes two minutes.