Column Although the recording industry is thought by some to be all-powerful, American broadcasters actually wield far greater power. Radio has been able to get away with not paying labels for music they play: specifically, performance royalties that broadcasters elsewhere in the world owe to the labels for broadcast music. But is this all about to change?
As CD sales fall dramatically, labels are clamoring to find additional revenue streams and are turning to the issue of radio royalties. The recording industry, which posted a dwindling $11.5bn in sales last year, is appealing to broadcast radio, which boasted a steady $20bn in advertising revenue, for some financial compensation. But as friction between the two parties comes to a head, the labels are reminded once more of the overwhelming power of broadcast radio.
A brief history of lobbying
When it comes to music, United States copyright law protects two distinct sets of rights: rights associated with the musical composition (the song), and the musical recording (the master). The Copyright Act gives the copyright owners of songs the exclusive right to perform the copyright work publicly - but this does not extend to owners of the masters. This means that radio broadcasters must pay songwriters and publishers for the songs they play – not artists and labels. This arrangement has been in place for decades to the seemingly mutual benefit of all. But as the music industry suffers dramatic losses from declining CD sales, the record companies are clamoring for change.
When the old copyright law of 1909 was passed, sound recordings of music - which were in their infancy - were not covered. Eventually in 1972 federal law was amended to protect sound recordings, but public performance was deliberately omitted from the types of protection that normally apply to copyright materials. Why? Politics and money!
The broadcast community, which has one of the strongest lobbies in the history of American politics, successfully argued that radio is one of the strongest ways of promoting music recordings and should not be forced to pay for the performance of records.
In the past, radio stations have not been required to pay a royalty on the public performance of the sound recording based on the argument that airplay promotes CD sales and tours, the increase of which benefits the sound recording owners: the artists and labels far more than it does the songwriters. As the music and radio businesses both thrived it seemed that this arrangement was mutually beneficial.
But in recent years the arrangement has become insufferable to the artists and labels. In the hopes of securing some revenue from the ever-growing popularity of digital transmission, the Recording Industry Ass. Of America, the RIAA, led the record companies in the fight to obtain a performance right in sound recordings on all digital services, including the royalty on Internet radio. So the RIAA and SoundExchange - the newly-created collection that receives sound recording performance royalties - are backing the musicFIRST Coalition to push Congress to require the collection of royalties from over-the-air radio.
At a hearing held on July 31, before a House Committee to discuss the issue, it therefore came as something of a surprise that the Committee seems in favor of the imposition. Congressman Berman, (D. Cal) who chairs the Committee indicated that the royalty that he was seeking to impose would cover only broadcasters - and not be extended to commercial establishments like bars, restaurants and retail stores, who all currently pay a performance royalty to the music composers.
He also said that he wanted to ensure that any royalty would not hurt the ability of radio stations (especially smaller stations) to cover the news, and he would consider the possibility of special provisions to protect smaller stations. In addition, he made clear that he did not want any sound recording royalty to diminish the amount currently paid to composers. But while the current proposal is for royalties only on broadcasters, US Copyright Office chief, Mary Beth Peters made clear that she saw no theoretical reason why that royalty should not also extend to other public performances of music such as retail stores.