When Congress passed the Audio Home Recording Act (AHRA) in 1992, “digital recordings” didn’t mean Spotify downloads or bitcrushed MP3s. Back then — a decade before Napster’s shutdown, and Apple’s first iPod rollout — the music industry was far more concerned with the clear and present danger of Digital Audio Tapes (better known as DATs), and to a lesser extent, Digital Compact Cassettes and MiniDiscs.
The AHRA was unique in how it helped manufacturers and musicians at a key turning point in commercial technology. On one hand, it protected major device makers like Sony and Philips from being sued for contributory copyright infringement — a fate that would have put the brakes on their production lines and rendered any real long-term use moot. It also protected users from being sued over creating private, noncommercial recordings on any devices not levied by the law. (Many were not initially mentioned in the AHRA, including hard drives, CD burners, and MP3 players.)
Here is how the AHRA’s rates and regulations led to a largely overlooked, and often misunderstood, segment of the royalties landscape: private copy royalties.
What Are Private Copy Royalties?
One of the main selling points of the AHRA was the Digital Audio Recording (DART) fund it established. As Songtrust explains in our Help Center, it splits royalties that were “underwritten by manufacturers of digital audio recording equipment and recording media, such as blank CDs, personal audio devices, media centers, satellite radio devices, and car audio systems with recording capabilities.”
According to SoundExchange’s membership summary, this is essentially the U.S. equivalent of how “artists and labels are entitled to receive royalties for the private ‘home taping’ uses of their recordings [in many countries].” This explains the other name these earnings typically go by: “private copy royalties.”
Here’s a simplified breakdown of how this all shakes out monetarily: Manufacturers and importers of digital audio recording devices pay a 2% royalty on their transfer price. The minimum royalty is $1, and the max is $8. Manufacturers and importers of digital audio recording media pay slightly more — a whopping 3%.
According to the AHRA bill, this money is then funneled into two different funds. One-third of it lands in a Musical Works Fund that is split evenly between songwriters and publishers. The rest filters down to the Sound Recordings Fund, where non-featured instrumentalists and vocalists receive a slim royalty slice (around 4%) compared to the chunk “interested copyright parties” (featured artists and their label, usually) carve up.
Who Collects and Distributes Private Copy Royalties
For nearly three decades, the Alliance of Artists and Recording Companies (AARC) handled the distribution of private copy royalties for its more than 500,000 members. SoundExchange announced its own arrangement to “begin collecting and distributing domestic and foreign private copy royalties” on July 13, 2021.
“We are committed to leveraging our best-in-class technology solutions to enhance the music ecosystem,” explained SoundExchange CEO Michael Huppe. “Expanding into private copy royalty collection and distribution is just one step in our mission to make the business of music simpler and more efficient for creators.”
According to SoundExchange’s official statement, international private copy royalties were set to roll out in late 2021, with domestic royalties following last February. At the same time, the AARC promised to share any remaining private copy royalties they’d collected since 2018 by the end of 2021 — when they would cease to exist.
How Can I Start Earning Private Copy Royalties?
As the Little Rock-based producer WordPlay T. Jay explains in this short YouTube tutorial, riding the private copy royalty wave is relatively simple. All you have to do is make sure you’re a SoundExchange member, sign into your account, and select its AHRA Authorization option since it is not automatic the way YouTube monetization is when signing up for Songtrust.
There is a catch, of course. Namely the fact that private copy royalties have never been a major source of revenue for musicians based in the U.S., due in part to the types of devices it taxes. As Billboard explained in a report around SoundExchange’s initial announcement, “The total amount of [private copy] royalties generated in the U.S. is low compared with Europe, where participating countries tend to apply private copy royalties to additional devices not covered by U.S. copyright law. Indeed, the European region accounted for over 90% of the over $1.2 billion in private copy royalties generated around the world in 2018.”
Europe doesn’t just dominate the private copy royalties demo on a global scale either. It’s also a local concern. According to PRS for Music — the U.K. collection society — “private copying policies have been prevalent in countries including Germany and France for many decades, where collecting societies redistribute levies on blank CDs, cassettes, mobile devices and hard drives back to rightsholders. In Europe alone, these revenues make up 6% of total royalty collections, while in some markets, such as Africa, the contribution jumps into double figures.”
PRS for Music based their findings on a broad study by the International Confederation of Societies of Authors and Composers (CISAC) that examined the private copying systems of 191 countries across five continents. Lurking between the lines of its myriad data points was a simple takeaway: When a proper system is put in place for tracking and collecting private copy royalties, they “can provide a substantial source of revenues for creators,” a way of fighting back against “widespread copying over digital media and the growing popularity of mobile devices with large storage capacities.”
Our neighbors up north have also supported reforms around private copy royalties. As the Canadian Private Copying Collective (CPCC) wrote in a recent paper submitted to the government, “Our most recent research shows that there are 5.95 billion tracks of music currently stored on Canadians’ phones and tablets, and that half of those copies are unlicensed…. That is a lot of revenue out of the pockets of music rights-holders.”
The country’s RACS (Recording Artists’ Collecting Society) echoed this assertion in their own call “to stand on guard for Canada’s music,” arguing that “a levy of just $3 on the sales of phones and tablets would generate $40 million per year in royalties from this use of your work – revenues that would flow to songwriters, composers, music publishers, recording artists, musicians and record companies. Revenues that are needed more than ever to help you keep making music.”
Given how prevalent smartphones are throughout the U.S., it’d be easy to make the same argument here. Whether that will actually happen given all of the other factors impacting the music industry remains to be seen. For now, we recommend following any future developments on soundexchange.com and keeping your eyes on our Help Center and blog, which are updated frequently as we continue to strive towards becoming the top source for music publishing administration.