Rethinking Performance Royalties for Sound Recordings
In my previous article, I addressed the concept of piracy as an effective marketing strategy. Ten years ago such a strategy would have been taboo, but the creative community is being forced to think outside of the box more and more to find commercial success. It is somewhat ironic then, that in an era of iTunes and Spotify, Sirius XM and Pandora, most people still find the latest and greatest popular music by tuning their radio dial. In the past, copyright holders were given quite a boost from radio airtime—a catchy single might lead to over one million albums sold and a successful tour. For this reason, broadcast radio has spent the past century free of performance royalties—money paid to owners of sound recordings whenever their recording is performed.
However, developments in digital technology over the past twenty years have made broadcast radio more about content and less about promotion. Kevin Parks, an IP attorney and author of Music & Copyright in America, supports this conclusion with a direct quote from Register of Copyrights Marybeth Peters. “Terrestrial broadcasters have long enjoyed the freedom to use the newest record releases without any payment to the artists or the record companies. While in the past, broadcasters’ argument that airplay promotes the sale of records may have had validity, such a position is hard to justify today.” For example, hearing the song “Gangnam Style” on the radio may drive you to purchase the song for $1.29 on iTunes (or download it illegally), but it will not likely compel you to buy the artist’s album or attend a concert. This fact is not lost on the creative community, whose desire for the next big hit is tempered by the desire to be fairly compensated for the exploitation of their intellectual property.
Because broadcasters have always operated without paying performance royalties, the concept of a “pay-per-play” system in music is still somewhat novel. Performance royalties in this context first appeared in the late 1990s to alleviate the concern that digital music would ruin the industry by allowing on demand access to streaming content. The government feared, as did musicians, that streaming content would replace the need to purchase sound recordings and discourage recording artists from creating new and original content.
If this sounds familiar, it is. The success of digital media has turned the tables on broadcast radio. More and more, the Copyright Royalty Board and Congress are lobbied to lower royalty rates for Internet and satellite radio companies while forcing broadcasters to pay-per-play. In 2009, Congressman John Conyers (D-MI) submitted the Performance Rights Act (“PRA”) to the House Judiciary Committee with the support of a number of recording artists. Smashing Pumpkins guitarist/vocalist Billy Corgan, spoke before the Judiciary Committee on behalf of The Music First Coalition, a group whose sole purpose is to secure performance royalties from broadcast radio play. Mr. Corgan remarked:
All areas of the modern music business are currently feeling the shifting tides as new models emerge and old ones are broken up. Ours is a business that always begins with the brilliance of the artists. Contrary to long-held myths, it does take money to create new music. As the traditional revenue streams have dried up, most notably in the overall decline of record sales, it has placed stress on who continues to benefit from the old models. The future demands new partnerships and a rethinking of long-held practices about how artists should be compensated for their music.
The fact that broadcast radio accounts for the majority of radio listenership is even more telling. If copyright holders are still losing money, it cannot be from Internet and satellite radio alone. To create a system that is fair for all parties involved, the promotional value of broadcast radio must be reconsidered.
At the same time, it is just as important for Congress to address the need to lower performance royalties for Internet radio stations like Pandora. Last week, the Internet Radio Fairness Act of 2012 (“IRFA”) was introduced in the House and the Senate. The goal of the act is to address prior laws implemented to directly disadvantage Internet radio, encourage innovation in digital broadcasting, and increase competition in the music marketplace. By allowing Internet Radio to operate at a lower cost, the government is opening the market to more companies capable of delivering a diverse blend of new musical content. It is imperative that Congress supports bills like the PRA and IRFA to continue promoting the progress of useful arts.