Almost every record company located in the U.S. and Canada with significant sales is a party to the Sound Recording Labor Agreement (“SRLA”) along with the American Federation of Musicians of the U.S. and Canada (“AFM”). The SRLA is a collectively bargained agreement between the recording industry and the AFM, which historically covers a three-year period. Incorporated into the SRLA is the Sound Recording Special Payments Fund Agreement (“SPF Agreement”). Record companies that are signatory to the SRLA automatically become subject to the terms and conditions of the SPF Agreement.
Provisions in the SRLA detail how much musicians will be paid in scale wages and benefits when they perform services on behalf of the record companies. The SRLA and the SPF Agreement also contain provisions requiring the record companies to make contributions to the SRSPF based on a percentage of sales or licensing revenue for products created under the SRLA. These include physical product (i.e. CD’s, cassettes, music videos, concert videos), permanent downloads (i.e. audio albums and singles, music videos, concert videos), non-permanent downloads (i.e. music videos, concert videos) and sampled songs. Click here to view the provisions of the SRLA that affect the SPF. The contribution formulas and rates differ depending on a product’s configuration. For detailed information including copies of a payment remittance report and examples on how to calculate the contributions for each of the products, send a request to email@example.com.
While record companies are required to make contributions on all or some of the products noted above, most of the contributions received by the SRSPF are generated from sales of sound recordings. Contributions become due on sales of sound recording albums when more than 25,000 units of CD’s, cassettes or permanent audio downloads are sold, after combining the unit sales for each of the configurations. For singles, contributions are due when sales of permanent audio downloads exceed 10,000 units (sales of physical singles are not subject to contribution). Based on contributions received from sound recordings, less expenses to operate the SRSPF, the SRSPF makes its main annual distribution to musicians and beneficiaries (about 19,000) on or about August 1st each year.
Contributions from the record companies for all subject product types are due and payable to the SRSPF 45 days after each semi-annual period (i.e. February 15th and August 15th).
Another way in which the SRSPF receives contributions is through utilizing auditors to test the sales reports of the record companies to verify that they are making contributions as required under the SRLA and SPF Agreement. These compliance audits have resulted in the SRSPF receiving additional contributions each year.
The record companies and the AFM rely on the SRSPF to perform all of the administrative functions on their behalf as outlined in the SPF Agreement. These functions include collecting contributions from the record companies, determining which musicians are eligible for distributions (e.g. researching sampled songs to determine who performed on the song) and calculating the distributions payable to those musicians based on the different payment methods associated which each product type. Additional administrative functions include locating musicians and beneficiaries with unclaimed distributions and complying with U.S. and Canadian statutory regulations such as withholding payroll taxes on distributions and remitting them to governmental agencies, as well as issuing musicians year-end wage and tax statements (e.g. W-2 and T4A).