How Do Musicians Get Paid on Streaming?

May 1, 2022

Ray Hair  -  AFM International President

Musicians are entitled to streaming payments in two distinct ways: through statutory licensing for the digital distribution of sound recordings and through collective bargaining where negotiated streaming payment obligations appear in contracts with record labels, film and television producers, and other entertainment industry employers. The Federation has also established payment standards for the streaming of live local engagements, including performances that are captured and archived for later streamed distribution.

Sound Recordings

In 1995, the US Congress adopted the Digital Performance Right in Sound Recordings Act (DPRA). At the insistence of AFM and AFTRA (now SAG-AFTRA), DPRA included a compulsory license for noninteractive transmissions of sound recordings and required performers be allocated 50% of proceeds. SoundExchange was created to perform functions made necessary by DRPA.

DRPA established a system where the rates paid by noninteractive digital music services are set either by negotiation (which never occurs) or by litigation before the US Copyright Royalty Board (CRB). DRPA permits copyright owners (the labels) to negotiate and litigate as a group through an agent. SoundExchange is that agent, negotiating rates with noninteractive webcasters, satellite radio, and music channels on satellite and cable television.

SoundExchange is also the collective management organization (CMO) that collects the revenue from noninteractive digital services providers (like SiriusXM, Pandora, Music Choice) according to rates set by the CRB. It distributes those collections in accordance with the distribution split established by law—50% to the copyright owner of the sound recording (label), 45% to featured artists, and 5% to nonfeatured artists (session musicians and singers).

The AFM & SAG-AFTRA Fund is the CMO that distributes noninteractive performance royalties to nonfeatured performers. In 2021, SoundExchange collected and distributed $1 billion in digital performance rights royalties to sound recording copyright owners and featured artists, while the AFM & SAG-AFTRA Fund distributed $60 million to nonfeatured performers. Please visit www.soundexchange.com and www.afmandsagaftrafund.com for further information.

There is no statutory compulsory license for interactive streamed transmissions of sound recordings, where users may select what they want to listen to on subscription-based services like Spotify and Apple Music, or on advertiser-based or user-generated content interactive streaming platforms like YouTube. This contrasts with the noninteractive streaming discussed above, which is like an online radio service where you cannot choose what is played next.

The major and independent labels license their copyrighted content on a catalogue basis to interactive digital services and receive large negotiated advance payments. If the featured artist is also the label and owns the copyright in the recording, a per-stream payment is paid to the featured artist’s label. Otherwise, the featured artist receives the negotiated per-stream payment per their deal with the label (usually next to nothing). Nonfeatured artists—the session musicians and singers—get nothing. The US unions (AFM and SAG-AFTRA), as a result of collective bargaining negotiations with the recording industry, receive 1.1% of the labels’ noninteractive streaming revenue. The AFM’s share is split between the AFM Pension Fund, the Music Performance Trust Fund, and the Sound Recording Special Payments Fund.

Audiovisual Streaming of Live Television, Motion Picture, and Television Film Programs

There is no US statutory regulation covering the streaming of audiovisual content embodying the services of musicians, despite the Beijing Treaty on Audio Visual Performances of 2012, which has not been ratified by the US Congress. The entertainment unions are thus left to negotiate with audiovisual content producers (TV networks and film studios) for a share of residual revenue generated by live or filmed television programs and motion pictures that are streamed either on advertiser-supported video-on-demand (AVOD) or subscription-based video-on-demand (SVOD) platforms.

The AFM’s agreement with network television producers provides for additional residual payments to musicians, if programs initially exhibited on traditional broadcast television are made available in whole or in part on AVOD or SVOD platforms. After the expiration of a 30-day free streaming window, a program or excerpt (clip) posted on an AVOD platform (like YouTube) triggers a payment per musician of 2% of the original program rate per 26 weeks of exhibition. After two 26-week cycles (52 weeks), 1.2% of advertiser revenue from the content is split among the musicians. If a program is released to an SVOD platform (like Disney Plus), 1% of the distributors’ gross receipts from that program is payable to musicians who performed in the program.

The Federation’s agreement with film producers provides for an additional residual payment of 1% of distributors’ gross receipts, shared by musicians pro-rata, if a theatrical or television motion picture is exhibited on a consumer pay (SVOD) streaming platform (like Netflix, Amazon, or Disney Plus) or an AVOD free-to-consumer platform (like IMDB, Peacock, or TUBI).

Streaming of Local Live Engagements

The AFM has developed addendums for use with live engagement contracts permitting capture and streaming upon additional payments to each musician, based on local scale as follows: a) 10% overscale for live, noncaptured streaming; b) 20% overscale for capture and internet exhibition for up to 30 days and 30% overscale for capture and internet exhibition for up to three months.

The Federation has also developed an addendum for use where a local union has a collective bargaining agreement (CBA) with a local theatrical producer. The addendum covers the streaming of locally produced live theatrical productions, providing a 25% additional one-time payment per musician, based on the CBA scale, with a run of show streaming window on the local producer’s website only. Third party licensing is prohibited.

Who Makes All the Money?

We’ve shown how musicians are paid by statute for noninteractive streaming of sound recordings and also paid according to provisions contained in Federation collective bargaining agreements and via addendums to local live engagement agreements. But what about the rest of the streaming business? The global entertainment industry generated $2 trillion in 2020 and is expected to reach $2.6 trillion in 2025, rebounding from the pandemic thanks to streaming.

Next month, we will look at where the money is being made as the industry morphed from a retail sales-based economy to online consumption through the explosion of subscriber-based and user-generated streaming platforms. Musicians and artists who make the music will not receive their fair share of streaming revenue as long as copyright laws do not cover the streaming of interactive, audiovisual, and user-generated content.

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