A group of roughly 30,000 session musicians have won tentative approval of an $8 million settlement to resolve a class action that accused the American Federation of Musicians (AFM) and SAG-AFTRA of charging an improper “service fee” on streaming royalty payments.
A Los Angeles federal judge granted preliminary approval of the agreement at a hearing on Monday, according to Paul R. Kiesel, lead attorney for the musicians. The order sets the stage for final approval early next year of a deal that will pay $5.35 million to artists and see a sharp reduction in such fees.
The lawsuit, filed by musician Kevin Risto in June 2018, accused AFM and SAG-AFTRA of essentially taking an illegal cut from the recording royalties that are paid to so-called non-featured artists — better known as session musicians.
The two unions administer the Intellectual Property Rights Distribution Fund, which holds performance royalties from non-interactive digital streaming services like Pandora for the use of copyrighted sound recordings. The fund then distributes that money to session musicians, both union and non-union alike.
Risto, a non-union musician, accused AFM and SAG-AFTRA of exploiting their control over the fund to improperly tack on a new 3% service fee, paid directly to the unions, before distributing that money. The lawsuit said the new fee was not in the best interest of musicians and was the product of “deep conflicts of interest” between the unions and the fund.
At the time, AFM and SAG-AFTRA called the lawsuit “frivolous,” but U.S. District Judge Christina Snyder later refused to dismiss the case, and then granted so-called “class certification” to more than 30,000 musicians. Then in June, the judge once again refused to dismiss the case, saying it was possible that the service fee had been intended as a “windfall” for the unions.
Last month, with a trial looming, a settlement was finally reached. The deal requires a sharp reduction in the service fee, from 3% of all session royalties to a fixed-sum of $765,000 per year, which is expected to save musicians more than $3 million over the next three years. The deal also includes a $5.35 million payout to class members and $2.6 million for attorney’s fees and administration costs.
An attorney for AFM and SAG-AFTRA did not immediately respond to a request for comment.