The emergence of the Internet as an important distribution channel for music in various forms has challenged long standing copyright law. One example is the debate about whether mechanical royalties should be applied to downloads from iTunes since music sold in that format is digitally reproduced instead of mechanically reproduced like records or CD’s.

Record companies are now including separate sections in their recording contracts covering royalty payments on digital or new media sales that are part of the overall contract negotiation.

The Digital Performance Rights in Sound Recordings Act of 1995 and The Digital Millennium Copyright Act of 1998 allow the sound recording copyright owners to license digital public performances of their works. This right covers interactive services, digital cable audio services, satellite music services, and commercial online music providers.

SoundExchange was formed to collect digital performance royalties on a pay per play basis and distribute them to sound recording copyright holders (usually the record company) and recording artists.