News Room


08/01/2007, Fund Administrator,  

(Below is a copy of the letter sent to musicians receiving checks, those utilizing direct deposit and beneficiaries received slightly modified letter to reflect their circumstances.)

Dear Participating Musician:

Enclosed is a check that represents your portion of the Sound Recording Special Payments Fund ("Fund") distribution for this year, which is based on the fiscal year ended April 30, 2007. Please note that the check is only valid for ninety days, or until October 29, 2007, and accordingly must be cashed or deposited by that date. We have also included for the first time a section on the check stub that shows how your distribution payment was determined, in response to the many inquiries we have received from musicians asking how their payment was calculated. Also enclosed is a statement of your reported scale wages for calendar year 2006, if any.

I am pleased to report that this year's distribution is $11,065,000, almost a 6.2% increase over the prior year. This is despite the fact that record company contributions decreased by over $1.5 million compared with the prior year (more on this below). This is due largely to our unrelenting efforts to resolve compliance audit claims, which resulted in almost $2.4 million in collections this year. In addition, we were able to reduce by $250,000 our operating and compliance audit expenses by maintaining tight control over expenditures. Lastly, our investments benefited from rising interest rates and higher returns. Overall, these items more than offset the decline in record company contributions.

The decrease in contributions, as with past years, can be attributed to the overall decline in CD sales due to a combination of factors, including competition for consumers' entertainment dollars for products such as DVD's, hi-speed internet service and satellite radio, music piracy, and the ongoing transition of consumer purchases away from physical product to digital downloads, which is in the early stages of its growth phase.

Contributions to the Fund from the sales of digital downloads increased by over 300% this year but still approximated only $0.7 million. However, I believe there is ample evidence to suggest that contributions from digital downloads will increase significantly in the future. [Recently, Apple Inc., the worldwide leader in MP3 sales and digital downloads, announced it had sold their 100th million iPod; 60 million were sold in the past year alone. Separately, Samsung Electronics has developed a memory card that slots into cell phones, which enables the phones to also be powerful MP3 players. A projected 1.1 billion of these "slotted" phones/MP3 players are expected to be sold by 2010, which makes it reasonable to anticipate there will be a significant increase in potential customers who will download music in the future.]

As you may be aware, changes in the terms and conditions of the new Sound Recording Labor Agreement ("SRLA") Agreement (effective retroactive to August 1, 2006 through January 31, 2009) will ultimately increase contributions to the Fund. Among these changes is an increase in the contribution rate for permanent digital downloads (from .5% to .55% of wholesale price) and for physical sales of sound recordings in excess of 1,000,000 royalty bearing units (from .55% to .56% of manufacturers' suggested retail price). In addition, concert DVD's for the first time are subject to payment to the Fund.

Below is a summary comparison of financial information related to the annual distributions for the fiscal years ended April 30, 2007 and 2006:

Compliance audit collections
Investment income and interest
Other income
Unclaimed distributions
Operating expenditures
Employer share of payroll taxes
Compliance audit expenses
Reserves and capital expenditures
Distributions for prior years
Total distribution
Total participants

As a reminder, using the Fund's website, enables you to get information and news about the Fund, view your prior years' tax and scale-wage statements, make changes to your address and personal information and sign-up for direct deposit. Using the website helps reduce the Fund's administrative expenses. So if you have not already done so, visit the website and fill out the registration form and return it to the Fund.

Hoping all is well,

V. Robert DiPaola
Fund Administrator