Residuals and Royalties for Musicians and Others

Dear members, friends and colleagues,

In the current (January 2013) edition of the International Musician, the official journal of the American Federation of Musicians of the United States and Canada, President Ray Hair has written an important column about residuals, royalties and intellectual property rights for musicians. All AFM members should take a look.

President Hair has shared several websites that are the “front office” online for residual and royalty funds for musicians: the Film Musicians Secondary Markets Fund, fmsmf.org, the Sound Recording Special Payments Fund, sound-recording.org, and the AFM & SAGAFTRA fund, raroyalties.org/ along with Sound Exchange, at soundexchange.com/.

In the discussion of residuals in the motion picture and television film industries, a little information might be helpful. Musicians and others who work in these industries rely on residuals in order to make a decent living, but even for many “on the inside” the structure of the system can be confusing and technical. Let’s see if we can shed a little light of day on the subject.

Residuals for film and tv for musicians are mirrored for actors, directors, writers, and members of all of the other craft trades. Residuals are paid by film companies on behalf of all of the members of our sister unions – although this delayed compensation is paid differently for each group.

For directors, writers and actors, residuals vary between direct payments to individuals, and payments to health and retirement funds. The residuals are enforced and processed “in-house” by the unions themselves. For us, musicians, payments are sent to the Film Musicians Secondary Markets Fund, which distributes those payments directly to musicians. The FMSMF is an autonomous stand-alone Fund.

For I.A.T.S.E members, including engineers, electricians, cinematographers, grips and many others, the residuals are not distributed to individual members, but rather contributed directly to their health and retirement system. While this process may be invisible to many I.A.T.S.E. members, the percentage paid on their behalf is actually much higher than for any other group.

To make things even more confusing, all of the residuals for all of the unions and guilds are based on a formula that looks at 20% of the distributor’s gross receipts. So, if the residual base is – as the AFM’s is for DVD’s – 1%, what that really means is 1% of 20% of the money rolling in to the distributor. In other words, musicians are collectively owed just .2% of the gross receipts.

The biggest share goes to I.A.T.S.E., the next largest to SAG-AFTRA, then WGA and DGA, and musicians get the smallest residual amount to share (even though there are generally many more musicians who divide that residual amount than actors, writers or directors).
Residuals pie

Residual obligation on the part of the distributor for each Union
for the Home Video Market (DVD’s, etc.)

(as a percentage of 20% of distributor’s gross receipts)

WGA DGA SAG/AFTRA I.A.T.S.E. AFM
1.5% 1.5% 4.5% 6.75% 1%

All of the talented people who are employed in these industries depend upon a combination of up-front wages and delayed profit participation in the form of residuals in order to make a living. Residuals, as has often been pointed out, are only due after the project has raked in profits – if the film or tv show make no secondary markets money, musicians, like members of all the other unions, get nothing.

We all owe a great debt of gratitude to generations of musicians, as well as writers, actors and others, who fought repeated battles to ensure fair compensation and fair residuals. In the early part of the last century, the AFM was one of the most powerful unions in North America, and acted to ensure residual and royalty payments in multiple industries. In 1960, the Screen Actors Guild (SAG), whose President at the time was Ronald Reagan, went out on strike – successfully – to ensure residual payments when movies were monetized in other media. As recently as 2007, the Writers Guild (WGA) sacrificed deeply to strike for residual payments for New Media. We have all benefited from their activism and leadership. Recording musicians do indeed stand on the shoulders of giants, and we should not forget to honor those who came before us for our ability to make a living, enjoy health care and pensions, purchase instruments, raise families, and strive for success.

Marc Sazer
President, RMA