The American Federation of Musicians (AFM) is suing all three major labels – targeting Atlantic Records, Hollywood Records, Sony Music Entertainment, Universal Music Group and Warner Brothers Records – for alleged underpayment of an agreed pension fund.
The AFM claims that the majors signed a collective bargaining agreement in 1994, and further amendments over the next decade, in which it committed to paying AFM members 0.5% of all receipts from digital statutory and non-statutory music licenses – including audio streams, ‘non-permanent downloads’ and ringback tones – both in North America and abroad.
The AFM’s Pension Fund has now filed a lawsuit in New York claiming its independents auditors recently discovered that the majors have failed to make promised contributions in three areas: (i) from streaming receipts outside the US; (ii) from non-permanent downloads outside the US; and (iii) from sales of ringback tones in the US and abroad.
“Although these audits have not yet been completed, it appears that each Defendant record company has not reported on and paid to the Fund contractually required contributions based on revenues derived by the record companies from foreign audio streams,” reads the AFM’s lawsuit.
“The Pension Fund has demanded that each Defendant record company report on and pay these contractually required contributions to the Fund.
“Each of the Defendant record companies has wrongly refused to report or make payments to the Fund with respect to its revenues from foreign audio streams.”
“Each of the major record companies has wrongly refused to report or make payments to the fund with respect to revenues from foreign audio streams.”
It adds: “In the communications between the Pension Fund and the [major] record companies on the issue of foreign audio streams, the Defendant record companies have stated that… they ‘do not dispute’ that payments on foreign non-permanent audio downloads ‘are required’.
“However, based on the Pension Fund’s audits to date, it appears that the only major record company that has made such payments to the Fund on foreign non-permanent audio downloads is Sony.
“The apparent failure by the remaining Defendants (i.e, Atlantic, Hollywood, UMG, and Warner) to report on and make such payments to the Fund on foreign non-permanent audio downloads as specified by contract is a breach of each company ’s contractual payment obligations to the Fund under the 2012 Payment Obligation Agreement.”
On the subject of ringback tones, the lawsuit’s tone is a little less certain. “The Pension Fund has been unable to determine whether the companies have reported on and paid to the Fund contractually required contributions based on all revenues, foreign and domestic, derived by the companies from ringbacks.
“From all appearances, however, none of the Defendant record companies has done so.”
AFM is seeking payment of the monies plus interest, legal fees and “liquidated damages in an amount equal to 20% of each Defendant’s delinquent contributions”
You can read the full lawsuit through here.
“The record companies should stop playing games about their streaming revenue and pay musicians and their pension fund every dime that is owed,” said Ray Hair, AFM International President.
“Fairness and transparency are severely lacking in this business. We are changing that.”Music Business Worldwide