Is A Big Fight Brewing Over Performance Royalties?

3

When a terrestrial radio station plays a song during its over-the-air broadcast, the artists and their record labels receive no compensation for the sound recording right.


Yet radio’s digital competitors — including streaming services and satellite radio — do pay performance royalties to performers and their labels for the sound recording.

Terrestrial radio’s cost-advantage is not the result of marketplace deals or competitive forces, but from a statutory preference granted to radio broadcasters.

Legislation aimed at leveling the playing field has been strongly resisted by broadcasters based on the claim that radio provides a promotional effect, or free advertising, for record labels and performers.

However, a new report from Phoenix Center, an Inside The Beltway non-profit organization that studies law and economics of the digital age, says that’s hogwash.

The report, “Promotional Effects and the Determination of Royalty Rates for Music,” concludes that any promotional effect “is fully internalized in a marketplace bargain between the music and radio industries.”

As such, the Phoenix Center finds that any alleged promotional effect provides no basis for federal law to mandate the free use of music by the terrestrial radio broadcast industry.

“If the promotional effect is large enough to justify a zero royalty rate, then the music industry will voluntary accept a zero rate in a negotiation with broadcasters,” said study co-author and Phoenix Center Senior Fellow Professor T. Randolph Beard. “If not, then a positive royalty rate will be established.”

Study co-author and Phoenix Center Chief Economist Dr. George S. Ford added, “Promotion provides no basis for federal law to mandate the free use of music by the radio broadcast industry. Promotional effects, even if present and strong, are not a type of market failure requiring a legislative or regulatory fix.”

Phoenix Center Senior Fellow Professor Michael Stern, another study co-author, added, “Our analysis shows that a market-negotiated royalty rate balances the income derived by commercial users of music and any promotional effect those users provide, revealing that any promotional effect is fully internalized by the parties. In layman’s terms, this means that if you use music to make a profit, then you should have to negotiate with the right holders for the right to do so.”

The study sparked an immediate response from the NAB, which will fight any fees assessed to AM or FM radio stations by the recording industry.

EVP/Communications Dennis Wharton said, “NAB is pleased that Congress has long rejected a job-killing fee on America’s hometown radio stations while recognizing the unique promotional value that local radio provides record labels and performers. Every week, local radio jump-starts careers of new musicians and exposes 265 million listeners to legacy artists, all for free.”

He added, “Our stations are proud to be a primary platform for new music discovery, and NAB will strongly oppose RIAA-backed legislation that would transfer hundreds of millions of dollars from local radio to mostly offshore record labels.”


3 COMMENTS

  1. bull!!! what about ascap and bmi ??? we as a small station pay so dam much to these people, its un believable, !! we have to pay for promoting thier product ,, how about working to remove the bmi and ascap fees to broadcasters,,

  2. Will it ever stop? Radio started the music revolution in the U.S. and countless artists, record labels, musicians, etc. benefited beyond measure. Without radio these people wouldn’t have a fraction of what they have today. Radio deserves its present exempt status. By the way…what about payola? if the promotional value of radio is negligible, why do we have payola laws? Why were record companies paying people to play their music?…..UHHHH… that’s right…because the promotional value of radio is HUGE and they know it. The bias RIAA influenced Phoenix center and their “economists” are a joke.

  3. Last week we donated our entire record collection 2,000+ to the Good Will
    because every piece is readily available on the Internet. Music license fees
    exist for broadcasters simply due to the Ostrich Syndrome suffered by the
    industry which is too limp-wristed to take this bull by the horns, much
    the same as its meek acceptance of the fines, fees, forfeitures and legal
    expenses resulting from the intentional complexification of CFR Part 73.
    Indeed, “The meek, humble and fearful are the easiest to exploit.” and
    “Keep the masses confused, frightened and frustrated and you can easily
    pluck their last dime.” ~K. Benner, National Press Club, 1969~

Comments are closed.