SOUNDEXCHANGE TO DISTRIBUTE ROYALTIES DIRECTLY TO ARTISTS

The Big Five, the RIAA, NARAS, AFTRA, the American Federation of Musicians, the Recording Artists Coalition, and the Music Managers Forum have come to an agreement on SoundExchange, the collection and distribution agency for sound recording performance license fees created by the RIAA last November (hitsdailydouble.com, 11/28/00).

Under the agreement, SoundExchange will distribute the performers' share of performance royalties it collects under statutory license—from webcasters and cable and satellite music services—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—small, non-sequential bills sent in a series of FedEx envelopes—on Oct. 15, 2001 to artists and sound recording copyright holders.

And now, the exciting quotes from the talking heads involved in this historic accord.

"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," said SoundExchange Executive Director John Simson. "I believe this will strengthen our organization and our ability to license, collect and distribute royalties."

"Even in its infancy, SoundExchange has been a huge success for the recording industry," said RIAA President/CEO Hilary Rosen. "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."

"This is a positive step for the music community," says Don Henley, Recording Artists Coalition co-founder and very important rock star. "The Recording Artists Coalition looks forward to working with SoundExchange to ensure success in collecting and distributing performance royalties in this complex digital age."

"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," said MMF President Barry Bergman. "Unless direct payment is made, all your efforts to protect the artists will be impaired."

"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 Grammy honcho Michael Greene. "Artists—especially the sexy ones—deserve direct payment of their royalties and a voice in the management of SoundExchange. The Recording Academy is committed to continuing its firm support of artists' supple rights, and we're pleased to be involved in this effort."