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Soundexchange, Record Labels & Artist Groups Reach Royalties Agreement

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Wednesday, November 7, 2001



Pays $5.2 Million Directly To Artists And Labels In Historic First Distribution.


WASHINGTON— SoundExchange, the major record labels, the Recording Industry Association of America (RIAA), artists’ unions the American Federation of Television and Radio Artists (AFTRA) and the American Federation of Musicians (AFM), and artists’ groups including the Recording Artists Coalition (RAC), and the Music Managers Forum (MMF) and the National Academy of Recording Arts & Sciences (the Recording Academy) announced an agreement concerning performance royalties and SoundExchange, the collection and distribution agency for sound recording performance license fees.


This landmark agreement places SoundExchange under the joint control of recording artists and record companies. Artists, artist representatives, copyright owners and copyright owner representatives will share governance of the SoundExchange Board equally.


Under the agreement, SoundExchange will distribute the performers’ share of performance royalties it collects under statutory license directly to performers, rather than to the record labels for subsequent distribution to the performers. Artists will receive these royalties regardless of their recoupment position with the record labels.


In addition, the major record companies have agreed to this system of direct payments and non-recoupability regardless of which performing rights collective they may join. Royalties earned from licenses issued by a label under its exclusive right -- such as licenses issued for interactive services -- are unaffected by the agreement.


SoundExchange made its first direct royalty payment of $5.2 million on October 15, 2001 to artists and sound recording copyright holders.


"I think the record companies have shown great leadership in embracing the direct payment approach, at a time when there is great uncertainty in our industry," commented SoundExchange Executive Director, John Simson. "I believe this will strengthen our organization and our ability to license, collect and distribute royalties."


"AFTRA made achieving direct payments of the performers’ share of these statutory royalties one of our primary goals for 2001," said Ann Chaitovitz, AFTRA’s National Director for Sound Recordings. "We worked to attain this goal on many fronts simultaneously –on Capitol Hill, through our position on the Board of SoundExchange, in our participation in the current webcaster CARP proceeding, and with the Copyright Office. We are very pleased that we were able to negotiate an agreement with the RIAA and the major labels giving artists equal control in the governance of SoundExchange and requiring that SoundExchange pay the artists’ share of the statutory royalties directly to the artists and prohibiting recoupment against these royalties. We will continue our efforts to ensure that recording artists receive fair treatment and compensation in the digital age."


"Even in its infancy, SoundExchange has been a huge success for the recording industry," stated Hilary Rosen, President & CEO of the Recording Industry Association of America. "I am proud that the recording companies extended themselves beyond what the law requires to partner with artists to reassure the webcasting and broadcasting industries that the music community is united on behalf of sound recording performance rights," concluded Rosen.


"Since 1994, the AFM has worked to ensure that the new digital performance right created by Congress would benefit artists as well as copyright owners, including payments to artists that were not recoupable against their advances," said Thomas F. Lee, President of the AFM. "The AFM believes that this agreement is an important milestone in our continuing efforts to ensure that artists are rewarded when their work is exploited in new mediums. We look forward to working with the record companies and other artist groups to achieve these goals in Sound Exchange."


"This is a positive step for the music community," says Don Henley, co-founder of RAC. "AFTRA, the AFM and the RIAA are to be commended for the work they have put into this critical issue. The Recording Artists Coalition looks forward to working with SoundExchange to ensure success in collecting and distributing performance royalties in this complex digital age."


Barry Bergman, President of the Music Managers Forum, reflects back to June 28, 1995, when he testified before Congress stating "We cannot emphasize enough how essential it is that the artists’ portion of royalties from this bill must flow directly into the artists’ hands without any party being able to reduce this revenue for any reason whatsoever. Unless direct payment is made, all your efforts to protect the artists will be impaired."


"The MMF is extremely pleased that, with the various artist groups working together, this essential component of the digital performance royalty for artists has finally come to fruition" stated Mr. Bergman.


"As an organization that represents more than 20,000 recording professionals, direct royalty payment to artists has been an important part of the Academy’s overall advocacy agenda," said Michael Greene, President/CEO, the Recording Academy. "Artists deserve direct payment of their royalties and a voice in the management of SoundExchange. The Recording Academy is committed to continuing its support of artists’ rights, and we’re pleased to be involved in this effort."


Existing management will continue to oversee the daily administrative activities of the SoundExchange organization, including future direct payments to artists.

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