AFM, Media Convergence and Performance Rights, Pt. 3

April 5, 2016

Ray Hair  -  AFM International President

In part three of this series, we discuss how revolutionary systems in digital media production and distribution have converged, disrupting existing business models. (Part One and Part Two).

New Media—Game Changer for Capital, Consumption

For as long as there have been cameras and photographs, phonographs and recordings, movie screens, radio and television broadcasts, entertainment lovers the world over have consumed media. From the earliest displays of public media, the AFM set employment standards and conditions by negotiating constructive agreements covering the work of professional musicians in the production and use of film and phono recordings, and for radio and TV broadcasting.

From the invention of the phonograph in the 1870s, until the introduction of digital media in the late 1970s, traditional media production and distribution were mostly separate, expensive endeavors. Production required extensive capital investment in technology to record and manufacture audio and video recordings. System and network costs for broadcast, distribution, and sale of recordings were steep. It was practically impossible for a musician or artist to bear the financial burden of self-producing and distributing their works.

From the start, the media industry was a tightly controlled affair, with production and distribution monopolized by a few companies, some exerting enormous influence across several mediums. Columbia Records, founded in 1887, is the oldest name in recorded music. It established the Columbia Broadcasting System in 1927, eventually dominating the business of production and distribution in records, radio, and television, and also in film with Columbia Pictures.

Technological advances in the 1970s, 1980s and 1990s reduced the costs of media production and distribution. In 1975, IBM released the first computers made for consumers. Two years later, Apple offered its first computer to the public. In August 1991, the Internet and World Wide Web became publicly available, forming the basis of the Internet we use today. By the early 2000s, increased access to networks with greater bandwidth and protocol standardization promoted the commercialization of the Internet. These advances, together with powerful home computers and efficient operating systems, made digital media production and streaming distribution practical and affordable for the consumer.

Musicians and artists, many wishing to avoid predatory practices prevalent in the industry, took full advantage of these new technological efficiencies. Social media sites became the preferred platform for user-generated content. Friends Reunited, the first social media site, debuted in 1999, followed by Myspace, Facebook, YouTube, and Twitter. By 2015, Facebook had 1.59 billion active users. About 4.9 billion videos are viewed on YouTube daily, and monthly, YouTube viewers watch 3.25 billion hours of video.

The media industry and AFM emerged simultaneously in the late 19th century. Since that time, media consumption has increased infinitely. Recordings evolved from little wax cylinders to vinyl LPs, compact discs, and videotapes broadcast over the air. Today, in the early 21st century, we consume media primarily through digital streaming, where high-definition “content” (a new word for a program or recording) can be captured and transmitted anywhere instantaneously to reach a global audience.

Convergence, Connectivity, Conflict, and Disruption

In the world of new media, we live in a time of convergence—the intersection of content production and distribution. It is a phenomenon where digitization and transmission technology have blurred the lines between broadcasting and other media across all elements of consumption. Technological convergence certainly afforded new opportunity, but disruption inevitably emerged.

Together, the innovative and disruptive forces of convergence are revolutionizing the media business and society. Per-person media consumption in the US reached 63 gigabytes daily in 2015. That’s 15.5 hours per day, or nine DVDs worth. Online content availability is increasing everywhere. Fifty-two percent of Internet households now have streaming-ready TV sets—six million more homes than a year ago.

Flexibility in how, where, and when media is consumed has driven an increasing array of connectivity. Anywhere there is a screen or “device”—a smart phone, iPad, Apple Watch, or in-car dashboard Wi-Fi—viewers can surf the Internet and be instantly and simultaneously connected to broadcasters, news organizations, and social media sites.

Originally a computer hardware firm, Apple has become a digital distributor with iTunes and Apple Music. Other digitally-based firms have come to dominate content production and distribution. Google, a web search engine in its humble beginnings, acquired YouTube for $1.65 billion in 2006. Microsoft, originally a developer of computer software and operating systems, is a video game publisher and owner of Skype, which it bought in 2011 for $8.5 billion.

Some say this rapid surge of technological, organizational, and managerial innovations in media production and distribution has produced a new techno-economic paradigm, disruptive to existing business and industry models, organizational frameworks, and the institutional and social status quo. Convergence and assimilation have produced turbulence and conflict. Established processes become outdated and inefficient. Winners and losers are the result.

A film entitled Tangerine, which premiered at the Sundance Film Festival in 2015, was shot on three iPhone 5 smartphones on a budget of $100,000.  Running a respectable 88 minutes, it was released theatrically and grossed $800,000 at the box office.

Profits from convergence in digital technology have disrupted and lowered existing labor-economic standards. The winners were the producers, with an eight to one box office return. Union members and their hard-fought standards were the losers—the film had no union actors, production crew, musicians, or film score. The conflicts are obvious—union-busting through technology.

Answering Conflict with
Collective Bargaining

In our 120-year history, the Federation, our locals, and our members, have experienced first-hand the dawn of the media industry, the rise of technology, and the disruptive effects upon employment opportunities.

In eras past, when paradigm techno-economic shifts and unemployment blowback shook the foundations of the union, solutions were achieved through collective bargaining.

In 1926, when Warner released the first talking picture The Jazz Singer, 22,000 musicians were employed in theater pits. Two years later, 2,000 theaters were wired for sound. By 1930, only 5,000 theater jobs remained. At the same time, the movie studios needed musicians to record the elaborate orchestral scores that were to be fixed in the films. Early AFM agreements with Hollywood producers—the first industry-wide agreements in the labor movement—covered only 300 jobs. But the pay was astronomical for the times—up to $500 per week, an amount worth more than $6,500 today. Annually, first call Hollywood studio musicians in 1928 could earn $25,000—more than $333,000 today.

New opportunities for musicians also arose in the 1920s with the development of radio. As AFM locals organized the broadcasters and improved the livelihood of on-air musicians, producers sought to offset higher program costs with recordings. RCA Victor’s “orthophonic high-fidelity” recordings were introduced and viewed as an alternative to music supplied by radio station house bands.

Unemployment concerns from the use of recordings on radio were eventually addressed by two strikes against the record companies in 1942 and 1947. AFM President Petrillo’s target was not the recording companies, but the broadcasting industry. He advised the record labels that the AFM would gladly continue to record, if the products could be confined to home use. The settlements created the Music Performance Trust Funds (MPTF), a royalty from sales that provided funds to AFM locals for the purpose of presenting admission-free live concerts for public enjoyment. Throughout the 20th century, MPTF, a collectively bargained solution to a techno-economic paradigm shift, was the glue that held the Federation together.

Today, more than 80 years since its creation, MPTF’s legacy continues. MPTF was reapportioned in the late 1950s to form the AFM’s pension fund and the Sound Recording Special Payments Fund. Nearly all of the AFM’s residual and re-use payments originated as MPTF royalties. MPTF is still alive, but severely diminished. Its income flows from the sales of CDs and vinyl records only, which have declined against an increase in consumption of digital streaming.

Despite inherent conflicts and turbulence, the AFM is well-positioned in the new age of global media. We are negotiating smart, progressive agreements with the media industry. We can restore MTPF and its offspring—our pension fund and residual funds. When one door closes, another door opens—the billion-dollar chase for performance rights.

Next month, we explore the AFM’s unique position in digital performance rights distribution, and its partnerships with SoundExchange and SAG-AFTRA.

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