SAG-AFTRA and Record Labels Announce Groundbreaking Online Payment Formulas

SAG-AFTRA and the recording industry, including Sony Music Entertainment, affiliates of Warner Music Group, Universal Music Group, Capitol Records LLC and Hollywood Records Inc., today announced a tentative successor sound recordings agreement, which includes a groundbreaking payment formula for online streaming and non-permanent digital downloads that encompasses revenue from these types of exploitations generated outside the United States.

The successor collective bargaining agreement is the latest legacy contract negotiated since the merger of SAG and AFTRA in 2012 and will now be known as the SAG-AFTRA National Code of Fair Practice for Sound Recordings (or, the "Sound Recordings Code"). The code originated in 1951 and covers session singers, royalty artists, announcers, actors, comedians, narrators and sound effects artists who work on recordings in all new and traditional media and all music formats, as well as audiobooks, comedy albums and cast albums. The agreement covers work for the major record labels and sub-labels, as well as signatory independent record labels. The previous agreement expired Dec. 31, 2014. The new contract covers the period from Jan. 1, 2015, through and including Dec. 31, 2017.

Among the new provisions in the contract is an agreement by the industry to make payments based on revenues from the worldwide exploitation of member work in online streaming services and as non-permanent digital downloads distributed through platforms such as Spotify, Tidal and Rdio. This is a significant expansion of the obligations the industry undertook in a deal originally struck in 1994, and it represents the first time the labels have included revenue generated outside the United States in any payment streams under the union's contract. "The Sound Recordings Code is one of SAG-AFTRA's most important contracts, and I am very pleased that we have achieved groundbreaking changes in this first agreement post-merger," said SAG-AFTRA National Vice President, Recording Artists Dan Navarro. "SAG-AFTRA and the labels recognize the need for change in order to deal with the challenges and opportunities presented by new economic models in the industry. This deal starts us down that road."

Negotiations between SAG-AFTRA and the recording industry's bargaining group commenced in the fall of 2014. Negotiating sessions took place over several months in New York and Los Angeles.

"SAG-AFTRA and the labels came to the table with ambitious, visionary goals. The changes reflected in this agreement set the stage for a significant expansion of participation for our members in the global market," said Duncan Crabtree-Ireland, SAG-AFTRA's chief operating officer and general counsel, who served as co-lead negotiator.

"Tough but fair negotiation on everyone's part has led us to a deal that reflects the needs of the industry and of the people who bring the spark of creation," said Stefanie Taub, SAG-AFTRA national director, sound recordings and co-lead negotiator. "Increased wages and improved health and retirement contributions are among the elements of this agreement that help meet the needs of working recording artists and session vocalists."

"The music industry continues to face existential challenges, which make the importance and value of our partnership with creative talent a top priority. We are proud to have worked with the SAG-AFTRA leadership who were willing to show the flexibility needed at this critical juncture. With both sides recognizing the need to make crucial changes, we are able to move forward in a new and progressive agreement that also expands the pool of revenue in which the performers will share," said Bernard Plum, lead negotiator for the labels.

Key terms of the agreement include: Groundbreaking inclusion in payment formulas of label revenue generated from worldwide exploitation of member work in online streaming services and as non-permanent digital downloads; For the first time, payment of AFTRA Health and Retirement (H&R) contributions on a portion of domestic and foreign streaming payments; Substantial restructuring of the compensation system for licensing of sound recordings, streamlining and making licensing more effective for the industry, while generating more revenue for performers; Overall increase to minimums of 2 percent each year of the contract; and Improvement to H&R contributions, including: Increase of 0.25 percent in the basic H&R contribution rate effective Jan. 1, 2017; 12.5 percent increase in the cap on H&R contributions for groups of three or more performers; and Substantial increase in cap on label payment for roster artist health insurance eligibility.

The agreement now proceeds to SAG-AFTRA's membership for ratification.

SAG-AFTRA's 15-member negotiating committee was chaired by Navarro, with vice chairs Jon Joyce, Janice Pendarvis and Pat Alger. Taub, Crabtree-Ireland and Randall Himes were co-lead negotiators for the union. The labels' lead negotiators were Plum and Michael Lebowich of Proskauer Rose LLP.

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