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AFM Media Convergence and Performance Rights, Part 4

In part four of this series we discuss the AFM’s role in advocating digital performance rights, and its partnerships with Sound-Exchange and SAG-AFTRA in royalty distributions.

Rights for Composers, but None for Musicians

At the beginning of the 20th century, in the early days of recording technology, there were never any performance rights for musicians, only limited performance rights reserved for composers.

The US Copyright Act of 1909 created the first compulsory mechanical license permitting anyone to make a mechanical reproduction—known today as a phonorecord, phonogram, tape, compact disc, audio file, stream, etc.—of a musical composition without the consent of the composer, who owned the copyright, subject to a royalty payment. Musicians were left out. In 1909, no one, including AFM members, ever dreamed sound recordings would reach the level of fidelity and worldwide popularity enjoyed today.

The 1909 Act protected the composer, stipulating that royalty payments be paid by the user of the composer’s work. But the law 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 with broadcasters, record companies, and the film industry over the use of musicians’ recordings and for royalties on sales. Radio promotion and airplay generated enormous revenue for the record companies and composers, but provided no additional money for professional musicians.

From its beginnings, AFM grappled with technology as we still do today—by striving to maintain a level of control over what we do as musicians, by attempting to retain a measure of ownership and control over what we’ve created, and by seeking participation in the revenue streams that continue to enrich those who exploit our music long after we create it.

Leveraging its de facto monopoly in the 1940s with two epic strikes, the AFM established a groundbreaking royalty system with the record industry—the Music Performance Trust Fund.

The Rome Convention—A Performance Right for Musicians

Fast forward 20 years. Concerned that the tape recorder made sound and video recordings easier and cheaper than before, world nations gathered in Rome in 1961 and responded to the ease of sound reproduction by developing an international treaty extending copyright protection—a performance right—to performers (musicians, singers, actors, and dancers) and producers in copyrighted recordings. The Rome Convention required radio broadcasters to pay musicians for the right to air their recordings. AFM was there. We participated in the Rome Convention and supported the treaty. Pressured by US broadcasters, fat and happy from a decades-old diet of free recordings, the US government declined to endorse it. Today, only the US, China, and North Korea have declined to sign the Rome treaty. US musicians and record companies receive no performance royalties from terrestrial AM/FM radio. The Internet and digital distribution changed the game in the 1990s.

DPRA and DMCA—Two Steps Forward

The US Digital Performance Rights Act of 1995 (DPRA) was enacted in response to the absence of a performance right in sound recordings in the 1976 Copyright Act, and a fear that digital technology would eventually replace sales of physical product—records, CDs, and cassette tapes. DPRA granted performance rights to sound recording copyright owners (record labels), featured artists (usually in hock to a label), and background session musicians and vocalists whenever their recordings are transmitted digitally.

DPRA created two tiers of rights payment obligations. First, noninteractive satellite radio and webcasters (Sirius XM, Pandora) would be obligated to pay copyright owners (labels) and performers a statutory per stream rate established by the US Copyright Royalty Board (CRB). Second, interactive streaming services (Spotify, Apple Music) would be required to negotiate an exclusive license with the copyright owners (labels) of the recordings, prior to any use. Terrestrial analog radio broadcasters were exempted and would pay nothing.

Congress adopted the Digital Millennium Copyright Act (DMCA) in 1998 to protect copyright owners and performers from Internet piracy. DMCA criminalizes services intended to circumvent digital performance rights and heightens penalties for Internet copyright infringement.

The 1994 Memorandum of Understanding with the Record Industry

In 1994, prior to US digital rights initiatives, the recording industry sought assurances from AFM and AFTRA (now SAG-AFTRA) that the unions would join the labels to actively lobby and enact DPRA. The unions reached agreement with the labels to split the statutory, noninteractive performance royalties as follows: 50% to copyright owners (labels) and 50% to performers—split 45% to featured artists, and 5% to nonfeatured session musicians and singers. The labels also agreed to pay 1% of all receipts from interactive exclusive licenses (Spotify, Apple Music, etc.), into an AFM and SAG-AFTRA designated fund for distribution purposes.

Neighbouring Rights in Canada

Rights related to the public performance of sound recordings in Canada are generally referred to as Neighbouring Rights. Amendments to the Copyright Act of Canada implemented in 1997 created for performers the right to receive royalties from the broadcast, public performance, or private copying of sound recordings on which they had performed. In Canada, musicians are better protected because royalties are payable by both terrestrial broadcasters and digital service providers and are split 50% to copyright holders (labels), 40% to featured artists, and 10% to session musicians and vocalists.

How do musicians get their share of royalties?

The AFM played a lead role in establishing US digital performance rights, Neighbouring Rights in Canada, and in developing systems for the distribution of performer royalties in both countries. Three AFM-sponsored organizations distribute performance royalties in the US and Canada.

Following the adoption of DPRA, the AFM & SAG-AFTRA Fund was created to administer and distribute the 5% statutory noninteractive digital performance royalties and all receipts from the 1994 MOA. SoundExchange (SX) was established as the organization to collect and distribute the 45% and 50% shares of noninteractive digital performance royalties to featured artists and copyright holders. AFM and SAG-AFTRA each hold institutional seats on the SX board. The Musicians’ Rights Organization of Canada (MROC) is the successor to the Musicians Neighbouring Rights Royalties (MNRR), a collective rights management organization created in 1998 by the AFM to distribute the 10% Canadian nonfeatured royalty share to performers.

To register and claim your share of statutory performance right royalties go to www.SoundExchange.com, www.
AFMSAGAFTRAFund.org, or www.MusiciansRights.ca.

Streaming Spikes, Physical Product Declines

The AFM, left out of the performance rights race in 1909, eventually bargained a royalty on record sales in 1944, establishing MPTF, our pension fund, and other residual funds for sound recordings, film, television, and jingles. Some say MPTF was the glue that held the AFM together for 60 years. As MPTF has diminished with decline of physical sales, so has the membership level of many locals. Where will the revenue come from to restore it?

Media production and distribution have converged in the digital age, disrupting existing models. Free YouTube is a boon to consumers, who used to fork over $15 per CD. Younger viewers watch 2.5 times more Internet video than broadcast and cable TV.

From the early 2000s to date, with consumption racing toward streaming media and away from physical sales and broadcasting, digital performance royalty collections have grown from a trickle to a flood. SoundExchange is now the biggest collective rights management organization in the world for labels and artists. Since 2003, SX has collected and distributed more than $3 billion and will top $1 billion this year. In 2016, the AFM & SAG-AFTRA Fund will distribute more than $50 million to musicians and vocalists. In a $16 billion global music market, the US share is $7 billion, transitioning from physical to digital, with $2.3 billion (34%) earned from streaming.

Of worldwide media consumption, 60% is produced in the US and Canada, primarily under AFM agreements. With so much digital rights money at stake, producers are doing what they’ve always done to deprive musicians pension fund, residual funds, and MPTF—their fair share of the pie. It’s the same old song. We make all the music—the music the world wants to hear—but everyone else makes all the money. Why? What can be done about it?

Next month, could growth in streaming revenue be a game changer for the AFM, its locals and its members?

AFM, Media Convergence and Performance Rights Part 2

In this five-part series, we look briefly at AFM’s origins, structure, media agreements, historical challenges from the rise of technology, disruption of established media business models, institutional stress from a new techno-economic paradigm, and opportunities for new money for musicians from performance rights. In part two below, we examine early efforts to organize and monetize media services, modern Federation media agreements, and the underlying pressures to lower standards.

The future of the Federation depends in part on its ability to bargain progressive media agreements despite global competitiveness and a burgeoning background of web-based, user-generated-content that has blurred the lines between broadcasting and other media across all elements of consumption. To understand what is happening now in music and media, we look to our past to remember who we are, where we came from, what we did, and to see where we go from here.

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