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MAY 14, 2009 1:40PM

Don't Touch That Dial! - The Future of Broadcast Radio

Rate: 10 Flag

House Judiciary Committee Chairman John Conyers (D – Mich.) recently introduced a bill (H.R.848) to eliminate terrestrial radio stations’ current exemption from paying royalties to performance artists.  If the current bill becomes law, radio stations will have to “pay to play” on a go forward basis.

 

There is heated debate on both sides of this issue.  Those in favor of eliminating the exemption, which has been in place for the last 80 years, cite the following:

 
  • Although songwriters receive royalties through negotiated agreements, the artists who perform on musical recordings receive no remuneration from the radio stations. Recording artists make very little money, while radio stations generate massive amounts of income via recorded music formats. Many older artists live in poverty, lacking the basic necessities or proper health care, while radio stations continue to generate income by playing their music.
  • Radio stations that play music generate income by selling advertising spots.  Since artists provide product (music) which attracts listeners, creating the market for Ad revenue, they should be entitled to a share of the proceeds
  • Eliminating the exemption will place terrestrial radio stations on equal footing with European radio stations, internet streaming services, satellite radio, television and the movie industry, all of whom pay royalties for use of non-original content.
 

Those who favor continuation of the exemption raise the following arguments:

 
  • Radio stations already pay for content.  They pay millions in royalties annually to songwriters.  Forcing them to pay additional royalties to the performers will put many smaller radio stations out of business, or force them to change to a Talk Radio format.
  • Stations that continue to play music will ultimately narrow their formats, which will have a negative impact on newer artists, whose music will not be played.
  • Radio has been the primary exposure vehicle for many artists, helping bring their music their music to the masses, generating sales and stimulating concert attendance and merchandise sales.  Many established artists who’ve signed lucrative record deals and are able to command millions annually in appearance fees owe their start to terrestrial broadcast radio.
  • Poorer communities which do not have access to satellite and internet will be negatively impacted as terrestrial stations cease broadcasting, change their format or limit their play lists.  Public service, community information and community outreach will be negatively impacted as well.
 

Some in the broadcast community feel that the music industry’s support of this legislation is nothing more than an attempt to supplement lost income due to continually declining sales, disguised as an altruistic appeal to more equitably compensate performance artists.  They point out that the bill currently under consideration would give 50% of the royalties collected to the record companies, which are primarily internationally based organizations.  Were the bill to pass, the US would essentially be pulling dollars out of the domestic economy and shipping them overseas.  Some stations have offered to support a bill that would solely compensate the performance artists.  Record companies feel they are entitled to a share of the proceeds since their initial investment in the artist makes the end product possible.

 

As someone who grew up on radio, I am very disappointed in today’s segmented formats and restricted playlists.  However, I would feel a sense of loss if the limited options currently available were to continue to dwindle or cease to exist.  Similar to television, the day is fast approaching when we will need to pay for entertainment that was previously piped into our homes, offices and automobiles free of charge.

  

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Comments

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Interesting. I had no idea this was going on.

I had always assumed that producers, engineers, musicians, etc., negotiated "points" on a recording, and received royalties on sales, but I never thought about how this might apply to radio airplay.

Thanks for posting this.
As someone who worked in the medium before Reagan de-regulated it, I too am disappointed by the lack of diverse programming. when companies own upwards of a thousand outlet instead of seven in the old days, programming is homogenous so you can sells advertising to serveral markets at low rated to agencies.

As for the process for paying ASCAP and BMI, every two years an audit firm would have us log all the music we played by song title, publisher, and songwriter. The station would be billed for the royalties for the music we played for just one week.
RW

Thanks for your input. I have mixed feelings about this issue as well. I could more easily support compensating the artists, if the record companies were not so insistent on getting a piece of the action.

Jeanette

Thanks for stopping by. You are correct; an artist’s contract with the record company can be very lucrative. However, new artists typically make little or no money until they become established stars, regardless of how many units they sell. Record companies must first recoup their up front costs. If an album (now Disc) has phenomenal sales, the revenue is often used to offset production costs associated with all the artists that did not sell well enough to cover initial investments. Similar to professional athletes, those who achieve “star” status are able to negotiate much more favorable terms on their 2nd contract.
The thought process behind paying royalties only to the song writer/publisher was that the artist could generate income by touring; while the song writer/publisher had no such option. Fair or not, that is how the business has been run for a very long time.

OES

Thanks for your insight. Feel free to amend any inconsistencies in my feedback to Jeanette as your knowledge of the industry is far superior.
Radio has an exemption from royalties??? Um, why? I don't think that's the case anywhere else. I know that musicians in Israel make more money from media royalties than they do from albums and concerts. This sounds whack. Radio station can make millions selling advertising geared at people who are only listening because my music is on, and yet I see not a penny of this money? Screw that. I'm in favor of the house bill. If radio can't find an economic model, it doesn't deserve one.

As for the exposure - bands that want to get the exposure and waive the money can do just that - sign a waiver.
Yes, this is one of the stories that in this time of economic trouble is a personal trouble to many that won't get covered.
Thanks for making me aware.
Rated
Maybe they could (or will) exempt the smaller stations. I agree that the big mega stations should pay up.

Is there a way out for the little guys, as the bill is written?
It's even more complicated than that. The perromance rights organizations decide who gets paid by a "proprietary" method of counting. In any given week, the pick 50 to 100 COMMERCIAL stations and track their playlists. Then they extrapolate based on their sample and pay the composers and publishers 7 cents each for each play of a song.

There are 12,000 terrestrial radio stations in the US. When the system was set up in the 1030s, the PROS claimed that it would be too costly to track every song played by every radio station in the US - in spite of the fact that it's standard practice for every radio station to log it's plays regardless.

Now add in the role of the major lables who have massive financial interests in making sure we hear their products one way or another. Can you imagine a group of private organizations that depend on each other NOT being in total collusion?

Tuesday is new music day on every commercial station in the country. The major labels pay "independent promoters" to "represent" their product to the music directors of commercial stations. The stations add three (count 'em! 3!) new songs a week and test the waters. If people like the tunes and the phone banks light up, they keep playing the tunes - if not, next.

Where in this scenario do you think musicians who are not signed to major labels EVER fit in? Do you think that a radio promoter is going to risk his lucrative relationship with a major label to promote even the few indies that can afford to pay what the majors pay to get on air?

Off course the broadcasters don't want to double the cost of blanket licenses - it gives the major labels more leverage when they want something played, And it costs more. If I remember correctly from the 1990s, mid sized commercial blanket license cost $50k a year.

If your song is lucky enough to get play on a major commercial station, you might see your money. But it's more likely Britney Spears or Michael Jackson will get it.

Then think about the mom and pop folk clubs that the PROs already shake down for $6-1200 a year. Those fees will likely double as well. If you're a coffeehouse on the edge and your musicians aren't drawing the crowds you expect, do you pony up $2400 or do you just skip music entirely?

The current royalty system in the US needs to be nationalized and taken out of the hands of businesses that have every motivation to cut out the vast armies of indy musicians from the publicaly owned airwaves and limit what we hear to narrow formats that define radio play. Until these basics are covered in the system, it won't mean a thing to any but a microscopic subsection of musicians, who after all, were paid up front to play on the recording.

As a small record label owner, it's all kind of sickening to watch. I'd love to pay my players what they deserve. But the recording rolyalty added to the writing royalty isn't going to make that easier. THAT much, I know for sure.
Ricky B

The waiver for bands that would rather have the exposure than the royalty money sounds like an interesting idea. Smaller stations who feel the “performance tax” would cause them financial hardship would then be motivated to play mostly new artists’ music (no royalty fee!). The larger stations could continue to play mostly “mainstream” music. I like it. Sign me up!

KOB

It’s interesting that my musician friends fall on both sides of this issue.

Zuma

The sponsors of this bill continue to look at possible options to mitigate the impact on smaller stations.

Stcrispy

Thanks for your insight. As an industry insider, you bring a valuable perspective to the discussion.

Update: The bill was voted out of committee on May 13 and will now go before the full house. Rep. Sheila Jackson-Lee (D-TX), a member of the House Judiciary Committee indicated that she expected additional changes to the bill going forward, but the consensus was that we need to change the current system. Maxine Waters (D-CA) was the only member of the 40-member committee to vote against passing the bill to the full house.