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March 1, 2022Ray Hair - AFM International President
On February 2, 2022, the House Judiciary Committee, chaired by Jerrold Nadler (D-NY), held a hearing on the American Music Fairness Act (AMFA). Co-sponsored by Ted Deutch (D-FL) and Darrell Issa (R-CA), AMFA is vigorously endorsed and supported by your union.
Mirroring legislation introduced in previous congresses, AMFA would correct the inequity that has existed for a century that has permitted US radio broadcasters to avoid paying session musicians, singers, and featured artists when their recordings are heard over terrestrial AM/FM radio. AMFA would end the 100-year free ride enjoyed by broadcasters and ensure that terrestrial radio is treated the same as digital radio, when it comes to royalty payment requirements.
Among artists and advocates invited to testify at the hearing was AFM International Executive Board member and Local 257 (Nashville, TN) President David Pomeroy. “Incredibly, the United States is the only industrialized nation besides North Korea and Iran that does not pay a broadcast performance royalty for sound recordings. That means we not only fail to get paid by US broadcasters, but adding insult to injury, foreign nations refuse to pay us the estimated $200-million-plus they collect each year from playing American music,” he testified. “This huge trade imbalance needs to be addressed so this systemic injustice can finally come to an end.”
Among other witnesses invited to appear before the committee was music industry economist Barry M. Massarsky, a 40-year veteran in the study of music use trends on commercial radio. He’s an expert on the status of the sound recording exemption for US terrestrial radio and the industry’s dependence on it for its revenue.
Massarsky’s written and oral testimony effectively rebutted claims by the National Association of Broadcasters that AMFA would jeopardize the “mutually beneficial relationship between performers and radio—free airplay for free promotion—that serves the public interest.” He also debunked allegations that payment of sound recording royalties would be “financially unsustainable for broadcasters and would lead to less music airplay.”
US radio stations generated $10 billion in advertising revenue in 2020 and will reach $12.7 billion in 2022, according to BIA Advisory Services, a recognized authority for market research in the US radio broadcast industry.
Summarized here are four conclusions submitted by Massarsky in sworn testimony before Chairman Nadler and Judiciary Committee members:
1) “It is clear and irrefutable that music formatted radio programming generates the lion’s share of station revenue for the terrestrial radio marketplace. Broadcast radio consistently depends on sound recordings to generate local advertising revenue. Eighty percent of overall revenues are sourced from radio stations that provide music as its staple programming format [Source: BIA Kelsey]. Music stations naturally and unsurprisingly promote the fact that they are a source of music, making that fact central to how they market themselves to their listening audience.”
2) “It is also clear that the huge majority of that revenue is generated by established “hit” recordings—recordings that already have a demonstrated value to audiences (and therefore broadcasters)—and not by exposing audiences to new recordings or artists. Historically, many broadcasters have argued that they deserve a special exemption from paying sound recording royalties due to the so-called “promotional value” of radio. Specifically, they argue that radio promotes new artists and songs unfamiliar to a record buying audience and therefore helps sell records for the benefit of the entire music industry ecosystem. That premise is largely false. The music industry is no longer a sales-based economy but rather a subscription/rental business through the explosion of digital streaming services such as Spotify, Apple, Amazon, and Pandora.”
3) “Radio stations rely upon time-tested, non-current sound recordings to draw audience attention. Radio doesn’t focus on new music; rather, the majority of airplay is dedicated to established hits. (And new music is chosen based in significant part on success on streaming platforms.) Nearly 53% of all airplay is gold—i.e., established hits—and therefore not of any promotional value to the music business. Only 36% of airplay is deemed current (as tracked by Nielsen Music’s Broadcast Data Service).”
4) “To the extent someone argues that radio stations “deserve” a special exemption from paying sound recording performance royalties due to promotional value, that argument is based on a false premise. This is a clear and unfair paradox in the law, which radically subsidizes broadcasters for their chief input (music) for the programming associated with the majority of their revenue. Utilizing Nielsen BDS, and crossing formats for samplings of per song time, I learned that an average song length was three minutes and 21 seconds and there were 12 songs on average played on an hour of broadcast time. On a 60-minute clock basis, that amounts to 67% of time. Only 4.2% of the stations’ operating costs relate to this 67% chief input value. (Those costs are for the licensing of the musical works and are solely relatable to agreements on the composition or work side of the copyright as represented by ASCAP, BMI, SESAC and GMR.)”
Amen, Mr. Massarsky. What an illuminating view of the dependence by American broadcasters upon the unlimited and royalty-free use of recordings by session musicians, singers, and featured artists. From this analysis, we can see that of the industry’s $10 billion in income in 2020, $6.7 billion was directly attributable to music, at a cost of only $4.2 million, and paid exclusively to the songwriters and publishers without a single cent to those who made the music.
The broadcasters will fight tooth and nail to retain this unfair business model—one that depends on our talent to reap billions in profits by paying nothing for it. The American Federation of Musicians and its coalition partners will continue to ask US lawmakers to do the right thing and enact the American Music Fairness Act so that musicians, singers, and featured artists can receive royalties when their recordings are heard on terrestrial radio.