Music Law: What is The AARC and Digital Hometaping Royalties (DART) Royalties and Claims
By Justin M. Jacobson, Esq.

Excerpts from “What is The AARC?” 56 Journal of the Copyright Society 213 (2008) by Justin M. Jacobson.

What is the Alliance of Artists and Recording Companies? What is the AARC?

The Audio Home Recording Act of 1992 (A.H.R.A) imposes royalty payments on the manufacturing, importing, and distribution of digital audio recording devices and digital audio recording media in the United States. These royalties are generally referred to as digital hometaping royalties (DART).

What are Digital Hometaping Royalties? What are DART Royalties? How To Claim DART Royalties?

The A.H.R.A. places an obligation on the importers and manufacturers of digital audio recording devices and digital audio recording media to file quarterly and annual statements with the Register of Copyrights accompanied by the appropriate payments.  The basic royalty on digital audio recording devices is set by statute at two percent of the transfer price, with a $1 minimum and $8 maximum per machine.  Royalties on the blank digital audio recording media are set at three percent of the manufacturer’s or importer’s transfer price.

The monies collected by the Register of Copyrights are then divided into two basic funds: (1) a Sound Recordings Fund which receives two-thirds of the monies; and (2) a Musical Works Fund which receives the other one-third of the monies. Three percent of the total money in the Sound Recordings Fund is set aside for non-featured performers and vocalists, while sixty percent of the remainder is allocated to the copyright owners of sound recordings and forty percent is allocated to the featured recording artists. The monies in the Musical Works fund are divided equally between the copyright owners of the musical compositions and the authors of the compositions.

The Alliance of Artists and Recording Companies (AARC) was established by the Recording Industry Association of America (RIAA) in 1992 to facilitate the collection and distribution of these digital royalty funds as well as to negotiate the distribution of both domestic and foreign digital media royalties that artists are entitled to under the A.H.R.A.  The AARC is governed by 26 board members consisting of 13 artists and 13 record label representatives. In September 2021, the AARC closed down; and, as a result, SoundExchange will now be responsible for collecting these royalties.

In the past, the A.A.R.C. would contact the U.S. Copyright Office to negotiate the distribution of the royalties collected by the U.S. Copyright Office from manufacturers and importers of digital audio recording devices and media to their members.

The allocation of these royalties by the A.A.R.C. is based upon annual record sales as calculated by the Soundscan System. Soundscan tracks the sales of music and music video products throughout the U.S. by collecting weekly sales data from point-of-sales at cash registers in over 14,000 retail stores such as mass merchants and non-traditional (on-line stores, venues, etc.) outlets.

The A.A.R.C. then took the figures compiled by Soundscan and calculates their members’ pro-rata royalty entitlement based on the following weighting system that is used to reflect the economic value of the sales: .08 for each SoundScan-identified sale of a downloaded track, .25 for each SoundScan-identified sale of single product; and 1.0 for each SoundScan-identified sale of album product. Each individual artist’s figures are used in the following formula: (# of downloaded track sales x .08) + (# of single sales x .25) + (# of album sales x 1.0) = individual’s fund credit system.  The individual’s fund credit system is equal to the individual claimant’s percentage of all claimants’ total credits. The A.A.R.C. then takes the Total royalty fund dollars x Total individual claimant’s % in order to determine the individual claimant’s royalty dollar allocation.

The A.A.R.C also has contractual relationships with other countries’ performing rights societies, including Japan’s Geidankyo, Spain’s AIE, the Netherlands’ SENA, Ireland’s RAAP, and Great Britain’s PPL so that their members may receive any D.A.R.T. royalties they are entitled to from these countries.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted when drafting any formal agreement, including band member ones.

© 2022 Justin Jacobson Law, P.C.