What is a letter of direction and why do you need one?

If you're an independent musician, producer, or artist navigating the music industry, chances are you're wearing a lot of hats: writer, performer, manager, marketer, and maybe even accountant. But there’s one hat many creatives don’t realize they need to wear (or at least understand): the legal one.

One of the simplest, yet most powerful, legal tools in your toolbox is something called a Letter of Direction, often referred to as a LOD. Don’t worry, this isn’t a heavy legal document meant to intimidate you. In fact, once you understand what it is and how it works, you’ll see why having a Letter of Direction can save you a lot of time, stress, and even money. Let’s break it all down.

So, what is a letter of direction?

A Letter of Direction is a written authorization that tells a third party (usually someone who’s holding or distributing your money) to send that money somewhere else, or to someone else, on your behalf.

It’s basically a way of saying, ‘I’m the rights holder here, but I want this person or company to collect my royalties, payments, or assets for me.’

In the music world, LODs are commonly used to:

• Redirect royalty payments to a manager, publisher, or distributor.
  
  
• Authorize someone to collect or administer your royalties.
  
  
• Transfer revenue rights from one party to another, like when you co-write a song with a producer and want to split the earnings.

Think of it as a simple, but legally binding memo that tells companies like PROs (Performing Rights Organizations), distributors, publishers, and royalty collection agencies what to do with your money.

Who uses letters of direction in the music industry?

A lot of people, actually. Letters of Direction are used by:

• Independent artists who hire managers or business partners to collect royalties.
  
  
• Producers who want to collect a percentage of earnings from tracks they worked on.
  
  
• Songwriters who’ve made split agreements with collaborators.
  
  
• Managers or labels who’ve negotiated backend royalty percentages.
  
  
• Publishers, when they take over royalty administration for an artist.

Basically, anyone involved in the creation of music who has a financial stake in it might find themselves needing a Letter of Direction.

Why would I need a letter of direction?

As an independent or emerging artist, you might be wondering: Why can’t I just tell someone verbally? Isn’t that enough? Unfortunately, no.

Music money flows through multiple systems, like streaming platforms, PROs, distributors, mechanical royalty agencies, sync licensing companies, and more. These systems don’t operate on trust or casual conversation—they need documentation. And that’s where your LOD comes in.

Here’s why you absolutely need one:

To get paid (accurately and on time)

If your music generates income—and it will, even if it’s a small amount—you need a way to make sure the money goes to the right place. Whether it’s a royalty split, a commission, or a contract you’ve made with a collaborator, a Letter of Direction ensures there’s no confusion.

Without it, you risk:

• Delays in payment.
  
  
• Payments being sent to the wrong person.
  
  
• Your royalties getting stuck in limbo.

To split royalties with collaborators

Let’s say you co-write a track with a friend and decide to do a 50/50 split. If you’re using a distributor like DistroKid or TuneCore, they may not split payments automatically. Instead, they’ll send it all to one person, unless otherwise directed. That’s where an LOD comes in—you use it to officially tell the distributor, ‘Split this revenue according to this agreement.’

To work with a manager, label, or publisher

If you sign with a manager or publisher and they’re entitled to a percentage of your earnings, they’ll need an LOD from you so they can legally collect that share. Otherwise, they have no way to receive what they’re owed, and that could mean broken deals, lawsuits, or just plain frustration.

To maintain control and transparency

A Letter of Direction doesn’t give away your rights, it clarifies them. You still own what you own; you’re just giving someone permission to act on your behalf. And because it’s in writing, it holds everyone accountable and keeps things clean.

What does a letter of direction look like?

Most LODs are pretty straightforward and include the following details:

• Your name and contact info
  
  
• The recipient’s name (usually a distributor, PRO, or publisher)
  
  
• The name of the person/company you’re authorizing
  
  
• Details of what you’re authorizing them to do (e.g. collect royalties, administer rights)
  
  
• Effective dates
  
  
• Signatures from all parties
  
  

Here’s a super-simplified example:

Letter of Direction

To: [Distributor / Royalty Collection Agency]
From: [Artist Name]
Re: Authorization to Collect Royalties

I, [Artist Name], authorize [Manager/Label/Company Name] to collect 20% of my royalties from the following works:

• [Track Name 1]
  
  
• [Track Name 2]
  
  

This agreement is effective from [Start Date] and will remain in place until [End Date] or written notice.

Signed,
[Artist Signature]
[Manager Signature]

How do you set one up?

Setting up a Letter of Direction is surprisingly easy. You don’t necessarily need a lawyer (though having one double-check your wording never hurts). Here’s how to do it in 4 steps:

Step 1: Agree on the terms

Make sure you and the person you’re authorizing are on the same page—especially regarding percentages, time frames, and what’s being authorized.

Step 2: Draft the letter

You can write it yourself or use a simple template. Just make sure it’s clear and includes everything needed.

Step 3: Sign it

Both parties should sign and date the document. Electronic signatures are usually accepted these days, especially for PROs or distributors.

Step 4: Send it to the right place

Once signed, you need to send the LOD to the appropriate third party—your distributor, PRO, sync agent, etc., so they can put it into effect.

Common mistakes to avoid

Letters of Direction are pretty simple, but that doesn’t mean they can’t go wrong. Here are some pitfalls to watch out for:

• Being too vague: Be specific about what you're authorizing and for how long.
  
  
• Not listing the correct works: Always include a list of the songs or catalogs involved.
  
  
• Forgetting signatures: An unsigned LOD is just a piece of paper—it’s not enforceable.
  
  
• Not keeping a copy: Always save your own copy for your records.
  
  
• Sending it to the wrong place: If the LOD never reaches the right person, it’s useless.
  
  

Final thoughts: don’t skip the paperwork

As an emerging artist, legal documents might seem boring or intimidating. But Letters of Direction are one of the easiest and most important tools you can use to protect yourself, get paid correctly, and keep your music career running smoothly.

Whether you’re collaborating with a producer, working with a manager, or trying to sort out who gets what from a viral hit, a simple Letter of Direction could save you from a lot of headaches.