What are Hometaping Royalties?

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Several countries, including the US, permit consumers to make copies of copyright protected sound recordings. The reproduction is permitted so long as the copy is made for the consumer’s personal, noncommercial use and is made from a legally obtained sound recording (i.e., the consumer making the copy has purchased the sound recording he/she is copying.) These laws also include requirements that the manufacturers of the media, and in many cases also the recording equipment, pay royalties that are then used to compensate artists and record companies for the lost sales resulting from this reproduction of their sound recordings.

Audio Home Recording Act

Brief History
In October 1992, the United States Congress passed the Audio Home Recording Act of 1992 (AHRA,) which requires manufacturers or importers of digital audio recorders (including, for example, DAT, DCC, and MiniDisc recorders) and blank media to make royalty payments. In 1993, AARC was created by the recording industry to administer these royalties in the most efficient and cost effective manner. Shortly thereafter, in 1995, AARC became the first organization in history to distribute AHRA monies and has continued distributing these royalties on an annual basis.


Royalty Payments
Under AHRA, royalty payments are deposited with the Copyright Office, a federal government agency, and placed into two separate funds for the two types of copyrighted works affected by audio home recording. The Sound Recordings Fund holds the portion of the royalties allocated to the sound recording for distribution to artists and sound recording copyright owners and the Musical Works Fund holds the portion of the royalties allocated to the underlying musical work for distribution to the songwriters and publishers. AARC represents artists and sound recording copyright owners with regard to Sound Recordings Fund royalties.

AHRA allocates two thirds (2/3) of the annual AHRA royalty payments to the Sound Recordings Fund. Of that amount, four percent (4%) is allocated for distribution to non-featured musicians and vocalists, administered by the performers unions. Of the remaining royalties (96%), forty-percent (40%) is allocated to the artists who perform on the sound recordings sold during the year for which the royalties were collected. Sixty-percent (60%) is allocated to the owners of the exclusive right to reproduce the sound recordings distributed during the royalty year.

Each year, the Copyright Royalty Board administers the distribution of royalties to the individual claimants within each subfund (in the Sound Recordings Fund, the subfunds are the Featured Artist Subfund and Sound Recording Copyright Owners Subfund). AHRA requires the allocation of Sound Recordings Fund royalties on the basis of the sales of the claimants’ records during the year for which the royalties were collected.

If the claimants within a particular subfund are unable to reach a universal settlement regarding the distribution of the royalties, the Copyright Royalty Board must allocate the royalties. The Board will determine distribution based upon evidence submitted during an administrative trial. The Copyright Royalty Board will not pay out the royalties until either the parties have reached a universal settlement or the Board has determined allocation based on a trial.

This process is complicated, time consuming and expensive. This is why AHRA permits claimants to designate a collective to handle these matters for them.

Foreign Hometaping Royalties
Many countries have hometaping (usually referred to as “private copy) laws. As in the case of AHRA, these laws include royalty provisions for artists and record companies. Each country’s laws include unique requirements and processes for collection and distribution of the royalties, which are administered by collectives. The collectives also have their own processes and requirements regarding data, tax information and other information, which can be overwhelming for an individual claimant. AARC ensures that all the requirements are satisfied and that the processes are properly followed with regard to each and every one of our members. Currently, AARC has reciprocal foreign royalties agreements with Japan, Spain, the Netherlands and Ireland. We are in discussions with many other countries regarding hometaping royalties for our members.

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