With CD sales tumbling, record companies and musicians are looking at a new potential pot of money: royalties from broadcast radio stations.
For years, stations have paid royalties to composers and publishers when they played their songs. But they enjoy a federal exemption when paying the performers and record labels because, they argue, the airplay sells music.
Now, the Recording Industry Assn. of America and several artists’ groups are getting ready to push Congress to repeal the exemption, a move that could generate hundreds of millions of dollars annually in new royalties.
Mary Wilson, who with Diana Ross and Florence Ballard formed the original Supremes, said the exemption was unfair and forced older musicians to continue touring to pay their bills.
“After so many years of not being compensated, it would be nice now at this late date to at least start,” the 63-year-old Las Vegas resident said in Milwaukee, where she was performing at the Potawatomi Bingo Casino. “They’ve gotten 50-some years of free play. Now maybe it’s time to pay up.”
The decision to take on the volatile performance royalty issue again highlights the rough times the music industry is facing as listeners abandon compact discs for digital downloads, often listening to music shared with friends or obtained from file-sharing sites.
“The creation of music is suffering because of declining sales,” said RIAA Chief Executive Mitch Bainwol. “We clearly have a more difficult time tolerating gaps in revenues that should be there.”
It’s not the first attempt to kill the exemption. In the past, politically powerful broadcasters beat back those efforts.
But with satellite and Internet radio forced to pay “public performance royalties” and Web broadcasters up in arms about a recent federal decision to boost their performance royalty rate, the record companies and musicians have a strong hand.
Broadcasters are already girding for the fight, expected to last more than a year. In a letter to lawmakers this month, the National Assn. of Broadcasters dubbed the royalties a “performance tax” that would upend the 70-year “mutually beneficial relationship” between radio stations and the recording industry.
“The existing system actually provides the epitome of fairness for all parties: free music for free promotion,” wrote NAB President David Rehr.
Performance royalties are collected from traditional radio stations in nearly all major industrialized countries, but U.S. musicians and record companies can’t because there is no similar royalty on the books here.
“The time comes that we really have to do this,” said John Simson, executive director of SoundExchange, a group created by the recording industry to collect and distribute Internet and satellite music royalties.
For record labels and musicians, addressing the issue now is crucial because digital radio, now being rolled out, allows broadcasters to split a signal into several digital channels and play even more music exempt from performance royalties.
Groups preparing to push Congress to change the law include the RIAA, the National Academy of Recording Arts and Sciences, the American Federation of Musicians and other organizations. The U.S. Copyright Office has long supported removing the exemption.
The groups have a major ally in Rep. Howard L. Berman (D-Valley Village), who now chairs the House subcommittee dealing with intellectual property law. Berman is “actively contemplating” leading a legislative push to end the exemption.
“Given the many different ways to promote music now that didn’t exist as effectively when this original exemption was made,” he said, “the logic of that I think is more dubious.”
Congress granted composers and publishers of music copyright protection in 1909. But the recording and radio industries were in their infancy, and the actual musical recordings were not covered. Congress extended limited copyright protection to musical performances in the 1970s to guard against an earlier form of piracy: the copying of records and tapes.
But by then, broadcasters were influential enough to snuff out any talk of making them pay musicians and recording companies for playing their music.
“The old saying is the reason broadcasters don’t pay a performance royalty is there’s a radio station in every congressional district and a record company in three,” said Chris Castle, a music industry lawyer.
Broadcasters even successfully fought a group of singers and musicians led by Frank Sinatra in the late 1980s who tried to pressure Congress into changing the law. Broadcasters also prevailed in 1995, when Congress exempted them from new fees for digital recordings that everyone else had to pay.
“Congress has always recognized that broadcasters generate enormous sums of revenue to record companies and artists in terms of airplay,” said NAB Executive Vice President Dennis Wharton. Radio stations also have public-interest obligations that satellite and Internet broadcasters don’t have to worry about, he said.
Satellite radio, Internet broadcasters and cable television companies offering digital music channels now pay performance royalties. The recording industry and musician groups say it’s time for traditional radio stations to pony up.
“Most of the artists in the world are kind of middle-class cats, trying to piece together a living,” said Jonatha Brooke, a singer-songwriter who is part of the Recording Artists Coalition advocacy group. “It’s important to be recognized and paid for our work.”