Digital royalties are the payments owed to songwriters, publishers, recording artists, and sound recording owners whenever their work is streamed, downloaded, or transmitted over internet and satellite radio. Federal copyright law treats the song and the recording of it as two separate properties, so a single play on Spotify or Pandora can generate several different royalties that flow to different people through different organizations. Getting paid means knowing which royalties your work earns, registering with the organization that collects each one, and keeping your metadata clean enough for the money to find you.
Two Copyrights in Every Recording
Every piece of recorded music carries at least two copyrights. The first is the musical composition: the melody, harmony, and lyrics. The second is the sound recording: the specific performance captured in the studio. A cover version creates a new sound recording but doesn’t touch the composition copyright. That split is why one stream can produce several checks, and why a songwriter who also performs needs to be registered in more than one place.
For sound recordings, 17 U.S.C. § 114 creates a digital performance right that applies when recordings are transmitted over non-interactive services like internet and satellite radio.1Office of the Law Revision Counsel. 17 U.S.C. 114 – Scope of Exclusive Rights in Sound Recordings For compositions, 17 U.S.C. § 115 governs mechanical royalties, owed whenever a song is reproduced or distributed, including through interactive streaming and digital downloads.2Office of the Law Revision Counsel. 17 U.S. Code 115 – Compulsory License for Making and Distributing Phonorecords The Music Modernization Act of 2018 built a blanket license on top of § 115 and designated The Mechanical Licensing Collective to collect and distribute those mechanical royalties.3U.S. Copyright Office. The Music Modernization Act
The Four Royalty Streams and Who Collects Them
Different platforms owe different royalties, and different organizations collect each type.
Non-interactive services like SiriusXM, Pandora’s radio stations, and internet webcasters pay a statutory royalty for the sound recording under § 114. SoundExchange collects those payments and distributes them.4SoundExchange. SoundExchange Registration
Interactive streaming services like Spotify, Apple Music, and Amazon Music let listeners pick exact tracks on demand. The statutory § 114 license doesn’t cover on-demand listening, so these platforms negotiate directly with labels for the sound recording side. On the composition side, they owe mechanical royalties collected by The MLC, plus public performance royalties collected by a performance rights organization, meaning ASCAP, BMI, or SESAC.5ASCAP. ASCAP Music Licensing FAQs
Permanent downloads from online storefronts generate mechanical royalties per copy sold, the digital equivalent of CD sales. Short-form video uses on TikTok, YouTube Shorts, and Instagram Reels are covered by licensing agreements the platforms sign with labels and publishers; individual payouts are small, but the volume can matter for catalog owners.
PROs only handle the composition’s public performance right. They don’t collect mechanicals and they don’t collect for sound recordings. A songwriter who records their own material needs three registrations: a PRO for composition performance royalties, The MLC for mechanicals, and SoundExchange for sound recording royalties from non-interactive services. Skip any one and that stream of income sits uncollected.
How the Sound Recording Money Gets Split
For non-interactive digital transmissions, the statute dictates the division. Under 17 U.S.C. § 114(g)(2), receipts from the statutory license are split four ways:6Office of the Law Revision Counsel. 17 U.S.C. 114 – Scope of Exclusive Rights in Sound Recordings
- 50% to the sound recording copyright owner, usually the label, or the artist if they own their masters.
- 45% to the featured recording artist.
- 2.5% into an escrow fund for nonfeatured musicians, administered with the American Federation of Musicians.
- 2.5% into a separate fund for nonfeatured vocalists, administered with SAG-AFTRA.
Featured artists can direct part of their 45% share to producers, engineers, and mixers by filing a Letter of Direction with SoundExchange.7SoundExchange. Letters of Direction
Compositions don’t have a federally mandated split. The division between songwriter and publisher comes from whatever deal they signed, which is why publishing contracts vary so widely. Mechanicals from interactive streaming reach songwriters and publishers through The MLC’s database; performance royalties flow through the PRO.
Registering and Claiming Your Royalties
Registration is free at both SoundExchange and The MLC, but it isn’t automatic. No one sends a check just because a song shows up on Pandora. You have to claim the works.
Before you register, gather the identifiers your catalog will need:
- ISRC (International Standard Recording Code): a 12-character identifier assigned to each version of a sound recording, used by platforms to track plays of that specific recording.8The Mechanical Licensing Collective. Know Your Identifiers
- ISWC (International Standard Musical Work Code): an 11-character identifier for the underlying composition, used by PROs and The MLC regardless of who recorded the song.9ASCAP. All About ISWCs and How They Can Help You Get Paid
- IPI number: a 9-to-11-digit identifier assigned to songwriters and publishers when they join a PRO, linking them to their compositions across collecting societies worldwide.
Clean metadata matters as much as the codes. Every track needs an accurate song title, artist name, album title, and contributor credits across every platform where it appears. A misspelled name or a missing featured-artist credit is enough to leave royalties unmatched. When you set up accounts with SoundExchange and The MLC, you’ll upload your catalog, match recordings to your profile, provide a Social Security Number or EIN (or a W-8BEN if you’re based outside the U.S.), and enter bank details for direct deposit.10SoundExchange. Heads Up: A New Tax Requirement for Letters of Direction
When Payments Arrive and the Thresholds That Delay Them
The MLC pays monthly, roughly 75 days after the end of each usage month.11The Mechanical Licensing Collective. What Is the Payment Timeline Streams in January show up around mid-April.
SoundExchange works on a different schedule and holds funds until your balance clears a threshold:12SoundExchange. Direct Deposits: One Step to Faster Payments
- Direct deposit, monthly: at least $100.
- Direct deposit, quarterly: at least $10.
- Paper check, quarterly: at least $100, mailed at the end of March, June, September, and December.
Below the applicable threshold the money is held, which for smaller catalogs can mean waiting several quarters. Direct deposit drops the quarterly threshold from $100 to $10 and matters most for independent artists.
Taxes and Withholding
Digital royalties are taxable income. SoundExchange and The MLC require a valid Taxpayer Identification Number before they release funds. Without one, federal law requires 24% backup withholding sent straight to the IRS.13Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
International registrants face a default 30% withholding on all SoundExchange payments unless they file a W-8BEN. If their country has a tax treaty with the United States, the rate may be lower.14SoundExchange. Can I Still Register If I’m Not From the US? Skipping the paperwork doesn’t just delay payment; it withholds money you’ll have to file a return to get back.
Royalties are generally reported on Form 1099-MISC or 1099-NEC, depending on the payer and the type of payment. Independent artists collecting royalties as self-employment income also owe self-employment tax on those earnings.
Unclaimed Royalties
When a platform can’t match a stream to a registered rights holder, the money sits. The MLC has reported that digital service providers transferred roughly $397 million in historical unmatched mechanical royalties to it under the Music Modernization Act. As of early 2026, about $234 million had been matched and paid, leaving over $160 million still unmatched.15The Mechanical Licensing Collective. Historical Royalties
Under the MMA’s rules, royalties that stay unmatched for three years after being categorized as unmatched, and then one year after being turned over to The MLC, become eligible for distribution by market share to publishers, who pass a portion to their songwriters. In practice, the largest publishers absorb most of the unclaimed pool, a bitter outcome for the independent songwriter whose missing metadata caused the problem.
On the sound recording side, SoundExchange publishes searchable lists of artists and labels with unclaimed funds, which you can check before completing registration.16SoundExchange. Artists, Labels and Producers The usual reasons money goes unclaimed are the same across both systems: the artist never registered, the metadata the platform reported doesn’t match the catalog, or only some group members registered.
International Plays and Neighboring Rights
When your music is played outside the U.S., foreign collecting societies owe you royalties under what the industry calls neighboring rights, meaning performance royalties for artists and sound recording owners from radio, television, and public venue plays abroad. Many countries recognize a broader public performance right than U.S. law does. American law limits the digital performance right to digital audio transmissions, while much of Europe, Asia, and South America also pays for terrestrial radio and public venue plays.
SoundExchange has agreements with 74 foreign collecting organizations across 96 territories to pull in those royalties for U.S.-based artists.17SoundExchange. International You opt in by registering with SoundExchange, becoming a member, selecting territories, and submitting your catalog. Without that step, foreign royalties accumulate overseas with no path home.
The 35-Year Termination Right
One of the most consequential provisions in copyright law gives creators a chance to reclaim rights they signed away. Under 17 U.S.C. § 203, if you granted a copyright or exclusive license on or after January 1, 1978, you can terminate that grant during a five-year window that opens 35 years after the deal was signed, so long as the work was not made for hire.18Office of the Law Revision Counsel. 17 U.S.C. 203 – Termination of Transfers and Licenses Granted by the Author
The procedure is strict. You must serve written notice on the current rights holder between two and ten years before the termination date you select, and file a copy with the U.S. Copyright Office before termination takes effect. If the grant covered the right of publication, the window opens at 35 years from publication or 40 years from the signing of the grant, whichever comes first.
The right cannot be waived. Even contract language that promises you’ll never reclaim your rights is overridden by the statute. Artists and songwriters who signed deals in the late 1980s and 1990s are moving through their termination windows now, and the catalogs they can reclaim are often generating substantial streaming revenue. Once terminated, rights revert to the original author, though derivative works created before termination may continue to be used under the old terms.18Office of the Law Revision Counsel. 17 U.S.C. 203 – Termination of Transfers and Licenses Granted by the Author