What would we do without broadcast radio? I listen to it every day. Radio has long been one of the biggest stages for new and struggling performing artists, both known and unknown. Performers, artists, musicians, and record labels use broadcast radio as a promotional tool to expose their music to more fans and hopefully sell more records. Luckily, songwriters and publishers are able to earn performance royalties from radio airplay.
Have you ever wondered (as I do) who gets paid every time those hit songs are played on multiple radio stations every day? Every time a song is played on the radio there are royalties being generated that are paid to somebody. The question is: who is at the receiving end of those mega royalty checks? Like me, you probably assume that it is the artist – the one whose voice you hear in the song. Is it? Maybe it is the band of musicians playing the music; maybe it is the songwriter, the producer – who is it? It is not who you think. I, being a performance artist myself, always thought that the artist along with the songwriter both received royalties and both benefited each time their song is played on the radio. But that is not how it works. Performance artists do not earn royalties each time a song is played on the radio – performance royalties are split amongst the songwriters only. Meaning, unless the artist wrote any or all of the song being played on the radio, they do not receive any royalties. Today I aim to squash one of the most common misconceptions in the royalties/music publishing world.
When we talk about music publishing, we must differentiate between the songwriter and the artist. Music publishing companies are focused solely on songwriters – helping them to protect their rights and collect their royalties. Royalties for public performances are paid to songwriters, composers, and publishers. These royalties are collected by the PROs (ASCAP, BMI, or SESAC). What is “public performance”? Radio airplay is considered a public performance. But what about the artists who performs the song but did not take part in writing it? Glad you asked. Remember Britney Spears’ international chart-topping smash hit from the late 90’s called “Do Me Baby One More Time”? Every time you heard it, you may have thought of it as a “Britney Spears” song. But guess what? Britney did not write any of that song. It was written by one of the most successful songwriters of our generation named Max Martin. Every time “Do Me Baby One More Time” plays on the radio, Max Martin and his publisher receive performance royalties from ASCAP (Max’s PRO).
The decades-old debate about how royalties should be paid when a song plays on the radio has re-emerged, with Congress taking up the issue and record labels breaking new ground by striking private deals with broadcast companies. But U.S. Rep. Mel Watt (D-N.C.) said, “the time for change has come.” He plans to file legislation soon that would recognize performance royalties for artists and require broadcast companies to negotiate royalty arrangements with record labels. In 2009, Watt and others in Congress pushed the Performance Rights Act, which would have mandated a new royalty for artists and labels each time a song is played on broadcast radio.
At stake are tens of millions of dollars in performance royalties that federal law exempts broadcast companies from paying to artists and labels for songs broadcast on the radio. Those payments go exclusively to the songwriters and publishers, as has been the arrangement for decades.
As sales of music records and other physical recordings have steadily been replaced by digital copies downloaded to computers and to other electronic devices, there is a push to increase the royalties that radio stations pay for the use of copyrighted music. The latest push is the Fair Play, Fair Pay Act of 2015 (the Act).
Summary: H.R.1733 — 114th Congress (2015-2016)
Fair Play Fair Pay Act of 2015:
Amends federal copyright law to extend a sound recording copyright owner's rights to include the exclusive right to perform or authorize the performance of the recording publicly by means of any audio transmission, thereby requiring terrestrial AM/FM broadcast radio stations that play copyrighted sound recordings to pay royalties for the nondigital audio transmissions of the recordings. (Currently, sound recording copyright owners have a performance right that applies only to digital transmissions by cable, satellite, and Internet radio stations.)
Requires the Copyright Royalty Judges (CRJs) to commence a proceeding to determine royalty rates and terms for nonsubscription broadcast transmissions. Directs the CRJs, in determining royalty rates for statutory licensing of such digital or nondigital transmissions, to: (1) distinguish among different types of services, and (2) include a minimum fee for each type of service. Allows differences to be based on the quantity and nature of the use of sound recordings and the degree to which use of the service may substitute for or promote consumer purchases of phono records.
Requires the CRJs to establish rates that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller. Directs the CRJs to base their decision on economic, competitive, and programming information presented by the parties, including:
(1) the sound recording copyright owner's other streams of revenue from the recordings? and
(2) the relative creative contribution, technological contribution, capital investment, cost, and risk of the copyright owner and the transmitting entity.
Supporters of the Act create a picture of struggling songwriters and artists living on less than $35,000 per year. However, an analysis of this issue shows that mandating radio stations to make higher royalty payments will not help the little guy. In fact, the Act will make billion dollar businesses and big name artists richer. Essentially, the Act, while seemingly well intended to help struggling songwriters and musicians, would represent pure welfare for the rich. To understand this point, it is helpful to look at who wins and who loses – namely, songwriters, artists, performance rights organizations (PROs), publishers, record labels, and radio broadcast stations – if the Act is passed. Let’s look at these in turn. Today, broadcast radio already pays songwriters, so the Act will not affect them in this regard.
The problem that songwriters face, however, is that the royalties that radio stations pay to them first go to PROs that split these payments among various parties. While managing the two largest PROs – ASCAP and BMI – each pocket over one billion dollars of these royalty payments. After taking somewhere between 12% and 14% of the royalty payments for themselves, these PROs give half of the remaining portion to thousands of songwriters and the other half to a few publishers. These publishers are often indistinguishable from the record labels. In a nutshell, songwriters get significantly less than half of the royalties paid to them, while most of the money goes to a handful of billion dollar corporations. The Act does not address any of this imbalance.
Why? Under the Act, commercial radio stations would pay the same royalty to a famous artist as it would an unknown artist. Radio stations would be encouraged to play the music of well-known artists or, under financial pressure of increased costs, stop playing music altogether. Therefore, the Act would discourage new talent from ever getting heard, while providing an entry barrier that would protect established “big named” bands and their market share. This is why well-known artists support the Act.
Although the Act has not been passed yet, it has sparked controversy as well as many interesting conversations and debates. One thing we must conclude at this point is that while the Act will help performance artists to get paid along with the songwriters, PROs, and publishing houses, it will also hurt commercial radio stations all over the U.S. “Fair Play, Fair Pay” – it is just another song and dance. Let’s continue to enjoy the great music and let “them” figure out this song and dance.