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December 1, 2013Ray Hair - AFM International President
by Gail Kruvand, AFM Local 802 Executive Board
The following article was reprinted from the November 2013 issue of Allegro, the magazine of AFM Local 802 (New York City). For more information, visit: Local802afm.org.
For this interview, President Hair spoke with Local 802 member and bassist Gail Kruvand, who serves on the Local 802 Executive Board and also serves as secretary-treasurer of the New York chapter of the Recording Musicians Association. Kruvand has been a member of Local 802 since 1979. She’s a member of the American Composers Orchestra, Riverside Symphony, Opera Orchestra of New York and Brooklyn Philharmonic. She’s played on numerous motion picture soundtracks, recording dates, and other studio sessions.
It’s immediately clear that President Hair is both a big picture person and a detail man. As part of his duties, he negotiates the Federation’s international agreements with the record labels and movie and TV producers. A professional musician who has performed all styles of popular music for over 45 years, Mr. Hair earned degrees in music from the University of Southern Mississippi and the University of North Texas, where he taught drum set and percussion from 1975 through 1983.
Ray Hair was elected president of the AFM in 2010 and won re-election this year for another three-year term. Previously, he had served as president-secretary of former AFM Local 72 (Fort Worth, TX). In 1991, he facilitated a merger of the Fort Worth and Dallas locals, creating AFM Local 72-147, the largest entertainment union in the southwest, now headquartered in Arlington. Mr. Hair is co-chair of the AFM Pension Fund and also sits on the board of SoundExchange.
Gail Kruvand: What do you see as the future of media consumption?
Ray Hair: Consumption will be wireless, primarily. Content will be streamed on-demand, available all the time across all platforms and no one will own physical product. If you want to hear or see something, you will stream it.
GK: As you say, people are buying fewer downloads. They are using streaming services such as Pandora and Spotify. Does the AFM have a position on these services?
RH: The AFM bargained a royalty position with the record labels on income from exclusive licensing on interactive streaming and tethered downloads. Also, AFM and SAG-AFTRA are designated in US copyright law as the administrators of certain nonfeatured artist digital performance rights royalties to ensure that musicians who perform and create the content are adequately compensated.
GK: Pandora is right now actively trying to reduce compensation to musicians.
RH: Yes, but Pandora has very little support for its legislative efforts to minimize musicians’ royalties, and has effectively abandoned those efforts. Musicians who make recordings receive royalties on digital radio and streaming in two ways. Royalties from digital radio and webcasters like Pandora are paid in accordance with the statutory license requirements of section 114 of the Digital Millennium Copyright Act of 1998, which provides royalties for both featured artists and nonfeatured artists. These royalties are paid through SoundExchange, an organization established by the recording industry to distribute royalties to copyright owners and to the featured artists. SoundExchange has distributed over $1.5 billion in royalties over the past 10 years. Nonfeatured artists—the session musicians and background singers—receive their digital royalties through the AFM/SAG-AFTRA Fund. Again, this is from digital radio services such as Sirius XM, and from noninteractive webcasters like Pandora. But when you get into interactive on-demand streaming like Spotify and Rhapsody, where you can select particular songs and create playlists, the license is exclusive to the copyright owner, which in most cases is the record company, and is not subject to the statutory royalty obligation. The record companies can charge whatever they want. In the exclusive license realm, AFM and SAG-AFTRA split a 1% royalty position on all receipts and revenue received by the record companies. The AFM share is paid into the pension fund.
GK: How long has this 1% deal been in effect?
RH: Since 1994. But it really never amounted to much money until four to five years ago. The amount of money per individual is minimal. The cost to distribute the pro-rata share per musician of a particular stream far exceeds the amount distributable, when you’re talking about only a penny or two per stream payable by the streaming service. We saw that it would be better to just roll the money into the pension fund, which would be a good thing for the fund and help strengthen it. We did that two years ago. We’ve got revenue being paid in every direction in streaming and on digital radio. What we don’t have is a performance rights for terrestrial broadcasts.
GK: There was legislation before Congress regarding terrestrial radio. What has happened with that effort?
RH: Well, we got close in 2010 in the Performance Rights Act, introduced by Senator John Conyers. A new performance rights bill has been introduced, but it has some problems. We have been working with the sponsor, Mel Watt (D-NC), to try to solve them. The bill creates a terrestrial performance right, but doesn’t include the compulsory statutory licensing feature. A compulsory license means that everyone has the right to use the content, but you must pay the creators. It is compulsory that the creator must allow the use, and it’s compulsory that the user has to pay, based on the copyright law and a system of judicial review. But since there’s no compulsory license aspect to this new bill this means that the copyright owners can say, “No you can’t use this. You have to come to us and get a license first.” That then puts the copyright owners, which are the big record companies, in a position to control the world of analog and digital distribution, which might not be a great place to be.
GK: The major record companies are suing Sirius XM Radio on pre-1972 recordings. SoundExchange is suing as well. What are the implications for AFM members if those lawsuits are successful?
RH: We get a lot more money. There is a little quirk in the law—sound recordings weren’t brought under the umbrella of federal copyright protection until 1972—and Sirius XM woke up one day and thought “here’s a way out” and just quit paying royalties on pre-1972 recordings. Pandora quit paying as well. Instead of trying to settle with us about it, they just ignored us. That led to SoundExchange filing a lawsuit under the common law copyright provisions established by some states to cover pre-1972 recordings. SoundExchange is looking for $50 million to $100 million on that. If we win, it will be more money for the record companies, and also for featured and nonfeatured artists. If the record companies prevail on their individual lawsuits for the failure of interactive webcasters to pay on nonstatutory pre-1972 use, then whatever they get, a part of that goes to the featured artists, with 1% going to us. But the artists are always in debt to the record companies and may not see on the exclusive license royalties what they could see under the statutory royalty. Anytime you sign to a record company, you get a little royalty from what the record company collects, but you are still in debt to them for all of the expenses incurred in the making and sale of the recording.
GK: It’s possible that both of these lawsuits will be successful?
RH: I believe they will be settled. I don’t think that either of the lawsuits will go to trial.
GK: Outsourcing of motion picture recording has been an ongoing issue for musicians from coast to coast. What are some of the efforts on the part of the AFM to get that work back for our members, and is there a legislative approach that is a part of that effort?
RH: We want to point out that US musicians are the ones left behind when films are shot in the US, but the soundtracks are scored overseas. Everyone else working on the motion picture is working under a union agreement. When that picture films overseas, the SAG-AFTRA contracts follow the work overseas, the union contracts covering the stagehands and the directors follow overseas. After the photography is finished, the film goes into post-production where the soundtrack is recorded, and we’re the ones getting left behind. We’ve begun campaigning against Marvel and Lionsgate concerning their offshoring of soundtrack recordings on their US films made with millions in state tax incentive money, and we’re going to ramp these campaigns up. It’s not fair for film producers to receive taxpayer subsidies, and then use that taxpayer money to outsource our jobs overseas.
This is a theme that really resonates in Congress. It is a theme that resonates all the way through the AFL-CIO. There are labor-friendly lawmakers who understand this issue and there are 42 states that offer motion picture tax incentives. The companies can apply for millions in cash incentives, depending on how much they spend in production in a respective state. There are also federal incentives that exist, particularly provision 181 of the US tax code, where film companies can apply for a share of $400 million to offset production costs. That law was supposed to promote spending on production in the US. It’s really not fair for them to get that tax benefit when they go overseas for post-production soundtrack recordings. We have a legislative fix we think may help us if that provision can be amended. Or we can attempt to eliminate that provision and say, “Hey lawmakers, here’s a $400 million savings that can go back into the US budget.” Tino Gagliardi and I met one of Senator Schumer’s staffers who authored provision 181 to explain the problem. The government should end corporate welfare and repeal laws that threaten US jobs and the ability of Americans to raise families.
GK: I’ve heard you talk about capital versus labor on a number of occasions. How does this play out in the music business in general and especially in the electronic media world?
RH: Everything that is made, is made by human hands. We’re the ones who sit down and blow a horn or pick up a bow or pick up a set of drumsticks or plug into an amplifier. We’re the ones who create the music. We’re the ones who do the work. Every dollar that is made by capital is created initially by us, but the companies own the copyright on the content—the product that generates the money. You’ve heard me say a million times that we’re the ones who make the music, but everybody else makes all the money. We are the labor side of the equation, and our challenge is to find ways to unite everyone and get everybody to wake up and stand together so that we receive our fair share. The recent AFL-CIO Convention used the slogan “Stronger Together.” No one person, no band, no orchestra can take on this juggernaut of billions and billions of dollars of capital by themselves. One orchestra can’t do it alone against a management that’s trying to destroy them. It has to be every orchestra standing together, with every member of every union, with every musician in this country standing together. How we get everyone involved and working together is our challenge.
GK: What does the Federation need from us, the rank and file membership?
RH: We need new spirit and participation, and that depends on the Federation, our locals and our members developing and implementing new plans that motivate our members and every other musician to become involved in activities that will improve the lives of professional musicians. That’s the challenge.
Editor’s Note: AFM members should check the SoundExchange website to see if there’s money waiting for them: www.soundexchange.com/artist-copyright-owner/does-soundexchange-have-royalties-for-you/.