The chorus against Spotify, Apple Music, Rdio and other streaming music services just got a little louder. Now America's oldest and biggest musicians union says the world’s biggest record labels haven’t paid the union a huge chunk of the money it’s owed from revenue generated by streaming music services.
The American Federation of Musicians filed a lawsuit against the major labels Monday in the Southern District of New York, alleging the labels have not paid any of the money the union is owed from streams that occurred outside the United States.
“The record companies should stop playing games about their streaming revenue and pay musicians and their pension fund every dime that is owed,” AFM President Ray Hair said in a statement.
Under an agreement initiated in 1994 and renewed and amended most recently in 2012, major labels Universal Music Group, Warner Music Group and Sony Music Entertainment, along with film soundtrack powerhouse Hollywood Records, are required to pay 0.5 percent of “all receipts” that the labels have collected “’as a result of the amendment of the Copyright Act of 1976 to provide copyright owners with the exclusive right, not limited by statutory or compulsory licensing, to publicly perform sound recordings by means of a digital transmission’” into the AFM’s pension fund.
In layman’s terms, those receipts, which include revenue generated from streams, nonpermanent downloads and ringback tones (remember those?), may also include the advances the majors wrung out of services like Spotify in exchange for access to their catalogs. Those advances, whose specific amounts are mostly hidden behind nondisclosure agreements, are widely believed to amount to tens of millions of dollars per label.
According to the lawsuit, an audit the AFM initiated last year revealed that the majors haven’t paid the union a nickel for streams or for ringback tones, and only one label -- Sony -- has paid the union what it owes for nonpermanent downloads. The remaining defendants haven’t paid anything.
The suit could provide further ammunition for industry critics who say the major labels do not adequately account for where and how it distributes streaming music service revenue. A report published last month by the Berklee Institute for Creative Entrepreneurship alleged that musicians were losing 20 to 50 percent of their royalties thanks to opaque, unethical accounting, and others have complained that artists did not receive any of the advance money that labels demanded from streaming services.
Those broader complaints were echoed in Hair’s statement about the lawsuit. “Fairness and transparency are severely lacking in this business,” he said. “We are changing that.”
This is the third lawsuit the AFM has brought against the majors under Hair’s leadership, though the other two are not going well: Last week, Warner filed a motion asking for a judge to dismiss one of the suits with prejudice, which would prevent the AFM from trying to bring the same suit again in another court.
None of the defendants has yet commented on the suit.