FMC Critique of SoundExchange Agreement

The FMC Endorses and Gives Constructive Criticism to the Direction of the Agreement to
Pay Artist Performance Royalties Directly to Recording Artists and to
Reform the SoundExchange Board

December 3, 2001

 

Breaking news: December 27, 2001 SoundExchange Agreement now posted publicly on AFTRA website. Please read and critique it here.

The Future of Music Coalition endorses the direction of the SoundExchange agreement by and between the major record labels, the Recording Industry Association of America (RIAA), the American Federation of Television and Radio Artists (AFTRA), the American Federation of Musicians (AFM), the Recording Artists Coalition (RAC), the Music Managers Forum (MMF) and the National Academy of Recording Arts & Sciences (NARAS) to pay artist performance royalties directly to recording artists and to reform the Sound Exchange Board.

It is important to note the positive precedent this agreement sets. The FMC has long advocated for the core policy goals of this agreement, namely the direct payment of recording artists' forty-five (45%) percent share of digital performance royalties, regardless of whether they have recouped with their respective record labels. Based on this agreement, artists will enjoy this hard fought right whether or not they choose to be members of SoundExchange.

This agreement also speaks volumes about what we can accomplish when artists' groups work together. The FMC particularly wants to thank AFTRA, AFM, RAC, MMF and NARAS for their hard work in these efforts, and Ann Chaitovitz and Barry Bergman in particular, for sharing our common vision of what this agreement should accomplish. The RIAA and John Simson should also be congratulated for their realistic and good faith attempts to resolve this matter.

When the FMC filed comments [PDF] on the SoundExchange proposal with the Copyright Office in August 2001, we were primarily concerned with five points:

1. the requirement that each record company that is a member of SoundExchange pay DPRSRA monies directly to recording artists;
   
   
2. an agreement that would dictate that all "major" record labels would be members of SoundExchange;
   
   
3. a structural design of the SoundExchange board analogous to that of the AARC or ASCAP, with recording artists and labels each controlling an equal number of elected board seats;
   
   
4. guarantees that both artists and labels will have equal access to all data collected by Sound Exchange (thereby avoiding the dilemma of closed proprietary systems like Soundscan); and
   
   
5. the adoption of a "protocol" that would protect all stakeholders in the process, such as producers, who may have an interest in the underlying record royalties.

Although we will continue to study and monitor the progress of the agreement, and of SoundExchange itself, there are a number of issues which raise red flags and will need further exploration before the FMC can fully endorse this document without reservation.

Public Posting of the Document Essential for a Legitimate Debate
Even before addressing the issues of concern within the agreement, there is a more fundamental point; public access to the document. The FMC encourages the participants to post this agreement in public where it can be reviewed by artists and citizens alike. The Future of Music Coalition has long advocated for public discussion of agreements which impact our constituency. Artists should be able to have access to these negotiations that are taking place on their behalf.

Without public posting of the final document it is difficult to give accurate suggestions and critiques.

 

Breaking news: December 27, 2001 SoundExchange Agreement now posted publicly on AFTRA website. Please read and critique it here.

That said, there are three elements from earlier drafts that caused us concern.

Autonomy and Power of the SoundExchange board in the face of threats of arbitration
Earlier drafts suggested that, although the board will be made up 50% /50%, in the case that the SoundExchange board makes decisions by less than a 2/3 vote which materially impact the value of the investment made by the RIAA member companies in SoundExchange, without providing corresponding financial benefit, RIAA shall have the right to invoke arbitration to seek reimbursement from SoundExchange of the value of its investment.

We must be careful to preserve the autonomy of the votes of the SoundExchange board beyond the threat of arbitration. It is also unclear to FMC who would be in a position to determine the practical meaning of such terms as “value of the investment” , “corresponding financial benefit” and “reimbursement”.

Public Access to the Data
While the FMC believes that the data that is collected to determine how monies should be divided among artists and copyright holders should be a matter of public record, SoundExchange is rumored to be reserving the right to enter into agreements which would give it the authority to keep this information proprietary.

CARP Costs
There has been some discussion regarding the desire of some SoundExchange members to attempt to recover legal costs related to the ongoing CARP proceedings out of the SoundExchange pool. We consider this to be an inappropriate use of these monies, and believe this agreement should not be used as a means to this outcome.

Music and technology companies who were negatively affected or put out of business by the lack of an interactive statutory webcast license will never be able to recover the costs or the equity that they lost due to the uncertainty of access to licenses and the eventual fees. Furthermore, there is reason to believe that musicians are now suffering in a landscape of reduced business models and opportunities due to this practice. It is therefore particularly inappropriate for a lobby group like the RIAA to recoup lawyers' fees out of the artists' and copyright holders' shares for actions which A) many folks feel have hurt the artists; and B) limited the public's ability to encounter new artists.

In conclusion, our endorsement of the main themes of this agreement demonstrates our commitment to fostering an environment of cooperation that can result in a mutually beneficial outcome for all corners of the music business. Although we have studied the efforts of technologists who want to empower performers with more creative and financial autonomy, ultimately, we are first and foremost an organization dedicated to research efforts that will advance the interests of artists. We believe that the agreement will further that agenda.

home | manifesto | resources | press & news | events | FAQs | subscribe | contact us