6/4: Should radio pay a performance royalty to artists?
Back in the early days of AM radio (1939 to be exact), stations convinced the record labels that they were a promotional arm to help them sell records. Thus, radio didn’t have to pay the acts or labels any royalties. That argument worked. And the record companies and artists who perform the music for decades have been unable to change that.
Over the years, this has cost acts and labels billions of dollars, saving terrestial radio stations an equal amount.
Now the federal government is trying to change that. The Performance Rights Act passed out of the House Judiciary Committee this week and will be acted on by the full House soon. The National Association of Broadcasters has aggressively lobbied to fight against this bill, but the Recording Industry of America and a coalition called MusicFirst (formed in 2007) have put together an impressive campaign to support this bill.
As Forbes notes, the bottom line is: should a business that profits from the intellectual property of someone else be required to compensate that person?
In an odd loophole, radio stations have had to pay the composers of the songs, not the people who perform the songs. (Those are two different copyrights.) Most other countries require payment for both copyrights. Radio stations shell out $450 million a year to composers or about 3 percent of their revenue. Artists and music labels are seeking a similar amount.
Smaller stations and non commercial stations would have royalties capped (from $500 to $5,000 a year). For bigger stations, fees would be negotiated.
Already, satellite radio and cable music stations, as well as Internet-only stations, pay royalties to artists and composers.
Gary Lewis, who runs Cumulus Atlanta (Q100, Rock 100.5), said he believes terrestial radio still provides plenty of firepower in terms of selling downloads or CDs, be it Shinedown or Lady Gaga. “We generate demand,” he said.
And he noted that the “label conglomerates, largely European owned, are looking to find new sources of revenue to offset their declining sales as people find alternative means of music distribution.”
Lewis also said radio stations are struggling and many who are barely getting by could go under as a result of paying, say, three percent of revenue to artists and labels.
These arguments have been effective in getting many House members to go against the bill and the NAB has claimed to have garnered a majority.
“The members of Congress just simply aren’t buying the argument that radio stations ought to be taxed to make up for the struggling business model of the record labels,” NAB spokesman Dennis Wharton told the Associated Press Tuesday.
Martin Machowsky, a spokesman for MusicFirst Coalition (which includes record labels and recording artists), said all other platforms which help promote music pay royalties and those platforms are becoming more important as radio’s influence wanes.
He estimates artists and labels are being deprived $300 to $400 million a year. And he said most foreign countries provide royalties to recording artists and record labels and the others who don’t include Iran, China and North Korea, not bastions for freedom of speech.
Machowky also argues that most music played on FM radio is oldies, songs that hardly gain sales or even need the promotional aspect of radio. And he said there is evidence radio can be a substitute for purchasing music, not a driver.
“There’s a fundamental notion that it’s unfair,” he said. “Radio’s arguments have withered over time.”
Dennis Wharton, a spokesman for the NAB (against the bill), wrote in an email: “Please do not buy the argument that this issue is about ‘fairness to artists.’ Plainly and simply, this issue is about record labels trying to make up huge revenue losses in recent years because they did not adapt their business model to the digital era.”
“If this issue were about ‘fairness to artists,’ ” he continued, “why would 50% of the proceeds from this new fee go directly to the record labels? Aren’t these the same record labels that have abused artists for decades?”
In other words, he thinks artists are being used by greedy, nasty record labels.
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34 comments Add your comment
JF McNamara
June 4th, 2009
9:15 am
Radio stations should have to pay for the music. You shouldn’t be able to use someone else’s creation to profit unless they’ve consented to it. Many of the older artists are broke, but can be heard regularly on these stations. That doesn’t seem fair.
I’m not sure that negotiating the rates is what our government should be doing, however. The labels and stations should be able to negotiate rates as they see fit. That’s a free market function.
jabster
June 4th, 2009
9:55 am
On the surface, this sounds like a no-brainer that radio should pay for the music. However–
The RIAA and its ilk have imposed several restrictions on radio over the years, such as prohibiting playing more than two consecutive songs by the same act, as well as prohibiting pre-announcing artist and title–although they also encouraged stations to “play it and say it” and announce artist and title AFTER every song, which most stations don’t like to do to the point where some stations like Fish have completely automated the process with pre-recorded liners.
These moves were intended to thwart home tapers, and had the effect of killing shows like 96 Rock’s old “Album Hour” where they would play an album in its entirety. Fair is fair, and if radio has to pay for the songs, these restrictions should go away under the principle of whoever pays the piper calls the tune.
Additionally, record companies can’t pay payola directly to radio stations, but they can pay a middleman (an “independent promoter”, or “indie”) to pay a radio station to play certain songs. Clear Channel, for one, doesn’t take any payments from indies anymore. If radio has to pay, would this mean more autonomy on the part of stations to program their broadcasts however they like, since they won’t “owe” Big Music any more favors for free use of their recordings?
There’s also the argument that this isn’t about the artists (at least not the smaller acts), but all about another money grab by the RIAA from which the artists may never get a single dime.
And there is the very real threat that a lot of marginally profitable smaller stations, particularly on the AM dial, may flip from music (including a lot of ethnic formats) to talk, religion, full-service, or brokered programming if programming music becomes too expensive. Some of these smaller stations are about to go under as it is, due to the dropoff in ad sales. Then, nobody gets anything.
Joseph Ezell
June 4th, 2009
9:57 am
Base the fee on local ratings. That’s how many stations set the sales rate card. Then, set a flat fee per spin. Of course, this will see the end of local radio and an increase in talk radio. You think terrestrial radio is boring now – just wait.
alohagator
June 4th, 2009
9:57 am
fantastic…. There ’s way too many commercials on radio already. Now we can all look forward to one song then 5 commercials…. Then another song and 5 more commercials. An so on and so on.
Brilliant…. Now Congress is going to tell radio stations how to run their businesses. Say goodbye to “commercial free music blocks”.
“That was Eminem with his new single… Sponsored the People’s Republic of Washington, D.C.” That’s change we can believe in.
I’m glad I kept my Sirius subscription.
Stan
June 4th, 2009
9:58 am
Good post jabster.
Joseph Ezell
June 4th, 2009
10:00 am
“The RIAA and its ilk have imposed several restrictions on radio over the years, such as prohibiting playing more than two consecutive songs by the same act, as well as prohibiting pre-announcing artist and title”
This is not true.
jstrick
June 4th, 2009
10:21 am
First of all these record companies will not be giving this money to the artists, they are just looking for more revenue streams. Second if the artists and the record companies believe that they are being hurt by radio, simply ask the radio stations not to play their music. By their logic that will solve the problem.
Karl Marx
June 4th, 2009
10:51 am
Mr. McNamara said “Many of the older artists are broke, but can be heard regularly on these stations”. If this passes you will not be hearing these “Broke Older Artist any longer. This is a very bad Idea.
Thomas
June 4th, 2009
11:00 am
Joseph: The RIAA restrictions are true, but they are applicable to streaming, not to terrestrial broadcasts. I don’t know about this legislation, but it could include the same restrictions now for FM radio.
StJ
June 4th, 2009
11:05 am
Jabster hit it on the head. The RIAA claims to be acting for the best interests of the artists, but is really acting in its own self-interest. Now that Big Government is in power, it can’t wait to throw some more regulation (and new taxes) on anything it can get away with.
Logical
June 4th, 2009
11:12 am
Why doesn’t the Radio Stations and the Music Labels hash this out on their own and negoiate an agreement? Why does Congress have to be involved? Its not like this is a national security issue or something – let the two work out an agreement on their own and they’ll find something that works for them. Congress will find something that doesn’t work for anyone.
Gimmeadollar
June 4th, 2009
11:21 am
If there’s a cap for smaller stations between $500 and $5000 per year, exactly why would these stations suddenly go under?
RapStar
June 4th, 2009
11:38 am
Performing artists should be paid big money for their songs on the radio. If the station can’t afford to pay the bling, they need to buy cheaper stuff, like old easy listening music that goes cheap. The hot stuff in rap and rock is expensive, top shelf stuff baby—ain’t nothing cheap!
your local black man
June 4th, 2009
11:43 am
Do what ever it takes to make it “Fair” on both parts! Just keep the “USELESS” government out of it!
Mike
June 4th, 2009
12:15 pm
C’mon, the only people even buy some songs is because they hear them on the radio. Start telling radio stations they have to pay artists, there are a lot of artists who won’t be played. Most radio stations already get paid by management companies to pay certain music (Brittany, Miley, etc). I haven’t listened to the radio in years, it has crappy music and crappy dj’s. I just listen to mp3’s and cd’s.
AM3R1CANONE
June 4th, 2009
1:20 pm
I have worked in radio for many years and by the time I arrived in Atlanta I was truly burned out due to all of the red tape. I listen to several stations here in Atlanta and most do a good job given all the restrictions in radio. Even with those restrictions radio does support today’s artist and drive sales of thier CDs and MP3 sales…no doubt about it. If there has to be an agreement made, bringing the goverment in will kill the industry. If you think one red cent will filter down to your favorite old school artists from these added fees your kidding yourself. Money for the label only.
harryo
June 4th, 2009
1:24 pm
JF McNamara says:
“Radio stations should have to pay for the music. You shouldn’t be able to use someone else’s creation to profit unless they’ve consented to it.”
That’s like saying that a wire service writer or photographer should be paid every time a newspaper runs an AP story or picture. AP writers are under exclusive contract much in the same way recording artists were paid under exclusive contract to produce content. It’s not true that artists aren’t getting any money from the radio industry. Most radio stations stream, and they pay artists a fee for streaming on the internet. The RIAA tried to impose streaming restrictions such as prohibiting playing more than two consecutive songs by the same act, as well as prohibiting pre-announcing artist and title but the radio industry successfully fought off these restrictions. Also about half the recording artists you hear on the radio are being paid from songwriter royalties. People like Prince, Stevie Wonder and Bob Dylan are performers as well as songwriters and would receive three checks from the radio industry. And speaking of songwriters, shouldn’t the performing artists go to Burt Bacharach, Dylan, Gamble & Huff, Holland/Dozier/Holland, Ashford & Simpson and other writers who have gotten rich from the radio royalties. Also the record companies own half of performing artists copyrights, so shouldn’t recording artists be presurring the recording industry and composers for royalty payments, especially since the recording industry created this problem by creating the contract system where artists were paid a flat rate per record contract rather than being part of the royalty pool.
Also Congress is involved because Copyright is federal law.
Finally recording artists…be careful what you ask for…these fees have persuaded station owners to stop playing music altogether…In San Francisco a rock station has gone to all news,in Pittsburgh all three Black music stations are going to be Catholic radio stations and other stations have flipped formats from music to sports and news/talk formats that don’t pay royalties. These stations won’t be playing any music, which means composers and record companies lose revenue and performers lose platforms to promote their music and concerts for free on the radio.
Stu Dio
June 4th, 2009
2:04 pm
Rodney, my young friend, you have much history to learn. While radio stations may have early in their history successfully escaped paying artists direct performance fees, BMI and ASCAP have constantly plagued them for licensing fees. Those burdens, added to those imposed by the RIAA, should certainly be adequate compensation for any artist. Such proposed legislation could also lead the way to taxation of private individuals playing recordings for their own pleasure –– the argument being that my listening to a recording, the performer is being denied compensation. I hope this idea dies a quick and painless death. Otherwise, the federal government will have stuck another foot into our door. I’m certain the ultimate alternative will be to impose a national tax on radios, record players, tape players, CD and DVD players, either on their purchase or on an annual usage basis. The object, naturally, would be to give the artists their just rewards. In the end it will mean control of what we can watch and listen to by the federal government.
Radio’s survival may depend on stations’ ability to pay for music content « Urban Insite
June 4th, 2009
3:01 pm
[...] read from Charlotte Observer and Atlanta Journal Constitution. Look for an Urban Insite opinion coming soon on H.R. 848 Performance Rights [...]
derewood
June 4th, 2009
4:41 pm
i like this bill maybe if the stations have to pay to use a song then we would not have to listen to the same songs every hour on the hour and then maybe will expand the playlist
Joseph Ezell
June 4th, 2009
5:26 pm
derewood quoted: I like this bill maybe if the stations have to pay to use a song then we would not have to listen to the same songs every hour on the hour and then maybe will expand the playlist.
This bill will not change that in any way. Whether they have ten songs in the library or 10,000 they will pay the same. It will be according to what is played on the air.
Stations in smaller markets will pay less or at least a flat fee. Large market stations will pay exorbitant fees and the labels will get half. Even with this bill the performer still gets the shaft.
The artists and labels will find other ways to make a buck like raising CD/download prices. Revenue for the radio station comes from advertising. As it is, stations are charging what the market will allow. They cannot raise rates to compensate for the new fees.
Clear Channel just fired virtually all part timers. Citadel is about to go chapter 11. Cox is shaving everything thin. There’s no way Mom and Pop shops or the conglomerates are going to be able to afford this.
harryo
June 4th, 2009
6:36 pm
Even if you agree with the premise of Conyers bill one has to question the timing. Radio has lost 60 percent of its advertising base with major radio advertisers like Circuit City, Good Guys, Comp USA going belly up. Thousands of local auto dealerships have gone out of business, and many banks and investment houses are no longer around or are spending much less on advertising. As Joseph said, stations are either changing formats that don’t play music or are laying off staff. The latest word is that a majority of house members have signed on to a countermeasure, so it’s not clear if Conyers bill will get a full house vote.
KOC
June 4th, 2009
8:29 pm
I say – and have said for years – that if the record industry is going to demand royalties, then radio’s answer is to charge the record companies at the going ad rates for exposing their product. Tit for tat. A three minute song should bring a top metro Atlanta station hundreds, if not thousands, of dollars every time it airs. Radio stations could afford to pay the royalties with no problem. The radio-record business has been and is a symbiotic relationship. Each depends on the other to survive and prosper. Get the government out of this dialogue and let the two parties hammer it out. Radio needs to grow some ‘nads and give the record business back some of their own b.s.
Art Stone
June 5th, 2009
1:16 am
Stations can accept money for playing specific songs. What they -cannot- do is accept money (or goods) and not tell the audience. Imaigine a future where you hear “The following hour of music is sponsored by Sony Music”, followed by an hour of Sony’s music and no commercials and perhaps some artist profiles or news about upcoming releases, concerts, etc… (and Sony paying the station for the hour, just as today people buy time to sell herbal cures).
Think that wouldn’t work? Take a look at Radio Disney. They own their stations and play only their music and promote going to Disney World.. Got a problem with that?
Art Stone
June 5th, 2009
1:22 am
By the way, Cox Enterprises – the publishers of The Atlanta Constitution operates Cox Radio, which runs WSB and 85 other radio stations, and they are a member of the NAB.
In the spirit of good journalism, wouldn’t that have been worth putting in as a disclaimer in this story?
JJB
June 5th, 2009
8:25 am
What is good for the radio stations is also good for the consumer. Get used to the end of “free radio”. Everyone is now demanding their blood, why should the consumer expect anything less?
Sam
June 5th, 2009
3:01 pm
harryo said:
“That’s like saying that a wire service writer or photographer should be paid every time a newspaper runs an AP story or picture. AP writers are under exclusive contract much in the same way recording artists were paid under exclusive contract to produce content.”
–But the AP is paid when someone else uses their pictures just as the copyright owners of master recording should be compensated when their product is performed on radio. Whether the performer who doesn’t own a copyright interest in the master recording should get paid from radio performance really is an argument between them and the copyright holder.
Ralph
June 5th, 2009
8:02 pm
Radio stations DO PAY to play artist’s music. They pay BMI and ASCAP fees annually and it is based on the radio station revenues. In addition, resturants, retail stores, and other outlets also pay these fees to BMI and ASCAP. If artists and government continue to dip into the revenues of radio stations, soon, very soon radio stations will go the way of a lot of newspapers and other businesses, they will be gone.
More Radio Industry Royalty Nonsense « SoundTempest
June 6th, 2009
1:11 am
[...] Should radio pay a performance royalty to artists? [accessAtlanta] [...]
Chris
June 8th, 2009
9:07 am
That’s wonderful, all we need is more talk radio
Still confused but optimistic
June 8th, 2009
3:12 pm
You ALL have made me think a little more about this. From what you are saying is that the Artist will still not get paid even if this bill pass?
Trying to understand: An artist is under contract from company, lets say Sony Music. They are paid a percentage for the number of records/units they sell. Are they paid for each time their record is play on air? Are they paid for downloads by itunes or Napsters, etc?The radio station pays BMI & ASCAP for recorded music by artists to have the right to play them on air. So, now the Record companies want the radio stations to pay for artists performance on the record?
Why doesn’t the record company give the artist a bigger percentage in their contract? (I know the record company is trying to have the better deal to make & keep money)
I don’t know, I just think that the radio stations paid for the rights to play music recordings through all of the govt standards and other standards, so how can they be double charged to pay for the records they are playing. That responsibility should still rest with the record companies–they hired the artists and they pay the artists.
Just my take on it. I really hope that our stations do not become talk radio, then no one wins.
Jennifer
June 10th, 2009
4:30 pm
I agree with the posters who have said that radio is effect paying enough and that a further “tax” on music would harm the industry. Someone mentioned that labels should then be forced to pay stations for airtime – why not? Radio is essentially giving artists free advertising by playing their songs – artists and the labels then benefit from increased interest and sales. Why would anyone think it practical to then charge someone for advertising for you?
Do they charge their “street teams” for advertising an artist? Some of these groups play the artist’s music to help generate interest and they do it for free – how are they different from radio stations? Sure radio stations make a profit – if they can generate advertising from third parties who have no ties into the music that is being played. Labels need to get a reality check about what their continued actions are doing to the music industry and people’s interest in it.
An open letter to black radio from Tony MF Rock | Crib Notes
June 17th, 2009
10:43 am
[...] In this “open letter,” Tony Rock discusses the response of black-owned radio stations to the pay to play Performance Rights Act. [...]
An open letter to black radio from Tony MF Rock « Davey D’s Hip Hop Corner-(The Blog)
June 18th, 2009
7:58 am
[...] In this “open letter,” Tony Rock discusses the response of black-owned radio stations to the pay to play Performance Rights Act. [...]