A letter of direction is a short document, signed by the recording artist, that instructs the record label to calculate and pay the producer's royalties directly to the producer instead of through the artist. It puts the label on notice of the producer's points from the producer agreement. For a producer with an unpaid placement, getting the LOD executed is usually the single highest-value fix available.
Why the LOD Exists
Your producer agreement is a contract between you and the artist (or the artist's company). The label is not a party to it. Left alone, the label pays the artist, and you are supposed to be paid out of the artist's royalties, which means waiting on the artist's accounting, the artist's recoupment position, and the artist's willingness to cut a check. The LOD short-circuits that: the artist directs the label to account to you directly for your points. Your money stops depending on someone else's bookkeeping.
What an LOD Contains
- The track(s) and project covered
- Your royalty rate and the terms, referencing the producer agreement
- Your payment information and where statements go
- The artist's signature, and the label's acknowledgment
It is typically one to three pages. The producer agreement usually obligates the artist to sign it, which is one more reason the agreement has to be executed, not sitting in drafts.
LOD Template: The Core Language
People search for a letter of direction template, and the truth is the document is short enough to outline in full. Every workable LOD says five things, usually in this order:
- Identification. "Re: [Artist Name], [Track Title(s)] from the album [Project Title], released on [Label]." Date the letter and address it to the label's Business Affairs or Royalty Accounting department.
- The instruction. "You are hereby authorized and directed to account to and pay [Producer Name / Producer's loan-out company] the royalties described below, which would otherwise be payable to me."
- The terms. The producer's royalty rate and the key terms, stated as set forth in the producer agreement dated [date], which is referenced rather than restated.
- Payment details. Where checks and statements go: name, address, and payment information for the producer or their company.
- Signatures. The artist (or the artist's furnishing entity) signs; the label countersigns or acknowledges receipt.
Do not treat a template as a substitute for the producer agreement it references. The LOD routes money; the agreement is what defines the money. If your underlying deal terms were never papered, that is the document to fix first, and it is worth real counsel. Whetstone drafts and shepherds both for clients as standard deal work.
The SoundExchange LOD
There is a second, separate letter of direction for SoundExchange, which collects recording royalties from non-interactive digital radio. Producers are customarily paid a portion of the featured artist's SoundExchange share, and that only happens if the artist files a SoundExchange LOD naming you. Ask for both LODs at the same time; artists sign them together far more readily than separately.
How to Get an LOD Executed
- Put it in the producer agreement. The obligation to execute an LOD should be a term of the deal, agreed while everyone still needs each other.
- Send it with the agreement. Deliver the LOD for signature alongside the producer agreement, not months later.
- Follow up with the label. The signed LOD has to reach the label's royalty department and be acknowledged. Confirm it landed; ask for written confirmation.
- If the record is already out and there is no LOD, start now. Labels process LODs on released records all the time, and royalties can be accounted from the next statement period. The older the record, the messier the retroactive math, so speed matters.
Business Affairs, Not A&R
One practical note: the A&R who signed the record cannot fix your royalties. LODs live with Business Affairs, and statements live with Royalty Accounting. Aim your follow-up at the right department and the process moves much faster.