Establishment of MPTF Led to the Formation of AFM’s Pension and Residual Funds

November 1, 2022

Ray Hair  -  AFM International President

The Music Performance Trust Fund (MPTF) will celebrate its 75th Anniversary in 2023. This article explores the establishment of the MPTF, which led to the formation of the AFM’s pension and residual funds.

If you receive benefit payments from the American Federation of Musicians and Employers’ Pension Fund, residual distributions from the Sound Recording Special Payments Fund and Film Musicians Supplemental Markets Fund, or new use, reuse or other residual payments from work covered by Federation media agreements, you may be surprised that funding for those payments originated from two epic strikes in 1944 and 1948 between the AFM and US record labels. Federation proposals, accepted by the recording industry, ended those strikes and created what we know today as the MPTF, the ancestor of all AFM pension and residual funds.

The strike actions followed technological advances and legal challenges throughout the 1920s and 1930s that resulted in dramatic job loss suffered by musicians working in motion picture theaters, on radio networks, and on local radio stations. The unresolved conflict between the AFM and the broadcasters, record labels, and film companies dated from the earliest days of recording and sound reproduction technology because there were never any performance rights for musicians. There were only limited performance rights reserved for composers at the beginning of the 20th century.

Musicians were left out of the 1909 US Copyright Act, which created the first compulsory mechanical license permitting anyone to make a mechanical reproduction—a phono record, phonogram, tape, compact disc, or other audio file—of a musical composition without the consent of the composer who owned the copyright. But in 1909, no one dreamed the reproduction of music would reach the level of audio fidelity and worldwide popularity enjoyed today.

The 1909 Act memorialized the composer as the owner of a mechanical performance right, but left professional musicians, who bring the composer’s ideas to life, without a right in the reproduction of their recordings. As technology vastly improved the fidelity and popularity of recordings, the AFM was left to bargain restrictions with the early users—the radio broadcasters and the film industry—over the use of member recordings.

With the sound recording industry, the Federation sought to negotiate a royalty on record sales to account for the fact that radio promotion and airplay generated enormous revenue for broadcasters, record companies, and for the composers, but provided no additional money for musicians.

From its beginnings, the AFM grappled with technology in much the same way we do today. We strive to maintain a level of control over what we do as musicians, as we attempt to retain a measure of ownership and control over what we have created. We seek to participate in the revenue streams that continue to enrich those who exploit our music long after we have created it.

The AFM eventually applied its considerable leverage to establish a royalty system with the sound record industry. The two strikes in the 1940s, including one during the Second World War, forced the record industry to accept a groundbreaking royalty on its gross sales.

In June 1942, AFM President James Petrillo notified the sound recording industry that musicians would no longer perform recording sessions after existing agreements expired. In September 1942, the AFM called its first strike, which targeted radio broadcasters, not recording companies. Broadcasters needed new recordings for programs. Because of a war-related vinyl shellac shortage and musicians’ refusal to record, the record companies could not supply records. As a result, employment for musicians on live network and local radio programs increased.

The record labels anticipated a work stoppage in the production of recordings and had been stockpiling master discs produced prior to the strike. The labels also sought, unsuccessfully, to break the strike by using musicians and recording studio facilities in Cuba and Mexico. By the summer of 1943, the sound recording industry was in free fall.

That same year, Petrillo proposed a royalty system that would require the labels to pay into a trust fund located within the AFM’s treasury. In September 1943, Decca Records became the first record company to settle with the Federation. That settlement provided a 2.5% royalty payment into the AFM’s trust fund, based on annual gross sales.

By June 1944, all but RCA Victor and Columbia Records had capitulated. The parent firms that owned them—National Broadcasting Company (NBC) and Columbia Broadcasting System (CBS)—were concerned that any such royalty arrangement would spread to their broadcast divisions, a premonition that would later become reality.

In October 1944, Petrillo rejected an appeal by US President Franklin D. Roosevelt to end the strike. NBC and CBS had no choice but to settle and sign the Decca deal (2.5% of the labels’ gross revenue). From 1943 to 1947 the royalties accumulated to the tune of $4.5 million, which was distributed among all locals on a per capita basis across the US and Canada to be used for free-to-attend public performances of live music.

Also in 1947, Congress passed the Taft-Hartley Act, which forbade employer payments to unions except for joint health and welfare funds and pension funds. Taft-Hartley made the Federation’s trust fund illegal as originally designed during the 1942-1944 strike resolution.

In January 1948, the Federation called another strike in response to the labels’ refusal to explore legally permissible ways to continue the trust fund. Lasting 11 months, the second strike was resolved when agreement was reached to establish the MPTF as an independent entity, jointly overseen by the Federation and the recording industry.

—Next month, we will examine how MPTF became a royalty feature of all existing Federation media agreements and how it was eventually restructured to create the pension and residual funds we know today.

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