Pension News

Seeking Solutions: More Revenue for the Fund aka STREAMING

October 13, 2019

The theme of the Convention was “Together We Can” and presentation after presentation brought focus to the larger effort necessary to address solutions for today’s difficulties. From facing the challenges of maintaining a balanced budget for the federation, to keeping pace with changing technologies shaping the livelihoods of musicians, and (of course) to putting our Pension Fund back on course to solvency.

The topic in common to so many discussions was streaming. The newly bargained Sound Recording Labor Agreement could not be discussed without discussing its role in generating millions in new revenue from streaming for the pension fund and residuals. The campaign to bargain fair-share residual payments for films and content made originally for streaming platforms is central to those negotiations. And the recent resurgence of MPTF would not be happening if new revenue was not now coming from streaming.

We saw analysis from SoundExchange, Film Musicians Secondary Market Fund, and the Sound Recording Special Payments Fund all showing the new and recent economic expansion in the revenue of recorded media generated by the platforms of streaming. And of course, this is something we can all see as streaming platforms (Netflix, Apple, Disney, Amazon, etc.) have become central to how we digest media of all types.

Looking at the past twenty years we have witnessed a horrifying decline in the recording industry. There has been a yearly decrease in total revenue generated from the physical retail of our product – from around $14 Billion in 2000 to about $2 Billion in 2018. During this period, studios restructured, downsized, and discontinued recording in some areas altogether. We knew technologies were changing, allowing a near free-for-all as various forms of piracy undermined the industry with the growth of the internet.
But finally something began to change the greater picture. The industry revenue began to level out at about $4 Billion in 2015, even though revenue from physical retail continued to drop. Then in 2016 revenue actually started to rebound rising to around $8 Billion in 2018. The reason?

Streaming! Yesterday’s sale (of physical media) has become today’s stream. And as the streaming platforms are only now really finding their footing, we seem to be looking at a new media frontier as these platforms not only deliver product but create product of their own – and it is not just Netflix any more, as we see competitors joining the fray. Disney+ starts streaming on November 12 as it pulls its own programming from Netflix.

Unfortunely, it isn’t quite so simple for us to reap the benefits of this change. As revenues are now revitalizing a nearly decimated industry, we must adapt and bargain. While SoundExchange, Film Musicians Secondary Market Fund, and the Sound Recording Special Payments Fund are all reporting increased residuals to distribute to musicians due to streaming, this did not just happen on its own. This was realized through newly bargained provisions of the SLRA, pointing some of that new (streaming) revenue to the pockets of musicians.

The same challenge is before us as we bargain with Hollywood and television film producers. While we are seeing rises in residuals for the streaming of programming originating from other platforms, we must now pursue residuals for all this new programming made originally for streaming. This discussion has been at the table in Film Agreement negotiations as residuals for material made for streaming has been pursued, and is ongoing. Negotiations resume in November with these goals in mind.

So what does this have to do with solutions for the Pension Fund? As we grapple with the cash flow problems that the Fund now faces, the only change at our disposal short of MEPRA restructure (which we now face) or legislative solutions providing relief (Butch Lewis) is to increase contributions. Not only do increased contributions help to pay current benefits, but the changed assumption of future contributions helps address the fund’s future liability. By bargaining residuals and revenue for the Fund from sources that did NOT exist before, we not only help to pay current benefits but also future benefits. This is the type of cash flow improvement to the fund (unlike a good year in the stock market) that compounds into the future, and these assumptions are what are used to calculate the funds solvency. And indications suggest, the streaming platforms and the change from physical media to streaming media has only just begun.

Therefore, how we face these changes and bargain for the future now provides for our musicians a part of the industry revenue, and shows us a way to reconfigure the cash flow into the fund, for today and tomorrow. These are efforts at SOLUTIONS, not just a band aid to push the likelihood of insolvency down the road a year or two. While a Butch Lewis solution must be on the front of our agendas and the understanding that cuts through MEPRA are also a reality (if Butch Lewis fails to pass), these are the types of solutions that face the fundamental problem. The 101st AFM Convention was about determining what those solutions are and moving together to make them a reality.