Royalties

There are new ripples in radio’s ongoing performance royalty battle this year as efforts in Congress to update federal music copyright laws may engulf the decades-long issue of whether AM-FM airplay should trigger payments to artists. The Senate Judiciary Subcommittee on Intellectual Property took the rare step on Wednesday of opening to the public a fact-finding session held for staffers to better understand why the music industry thinks it’s due money from radio stations – and why broadcasters believe radio’s free-and-local business model should remain exempt.

Senator Thom Tillis (R-NC) said the aim of the virtual roundtable was to stimulate a dialogue among the various industries impacted by proposals to adopt a radio royalty. He also said the briefing was intended to determine whether there’s a “fair outcome” possible or any if changes are needed to the Digital Millennium Copyright Act (DMCA) governing streaming music royalties. As he noted, the issue pits broadcasters’ arguments that radio airplay amounts to billions of dollars’ worth of free promotion for artists against the music industry’s position that not requiring radio to pay is unfair since no other content creator isn’t directly paid for their work.

“At some levels I can understand and agree with that. I can’t tell you how frequently though that I have heard a song playing on the radio and thought I’ll add that to my playlist on Spotify, which results in copyright owners being compensated through streaming royalties,” Tillis said. “It’s very complicated.”

During the two-and-a-half hour online briefing, both sides leaned on arguments that are now familiar to even the most casual observer of the radio royalty. What was different was the setting and a broadcast industry facing decreased advertising revenue because of the COVID-19 pandemic. National Association of Broadcasters COO Curtis LeGeyt said adopting any additional music royalty would “further stress” the economics of the current free and local broadcast model.

“Broadcasters have especially taken it on the chin with respect to what’s happened with advertising,” LeGeyt said. “We don’t have the luxury of shutting down our business for a few weeks as a way to account for this fiscally. Our stations are staying on the air, they are available 24/7 and frankly they’re doing their best work right now,” said LeGeyt.

Salem Media Group VP Scott Hunter, who serves as Executive Director of the National Religious Broadcasters Music License Committee, agreed that forcing stations to pay more introduced “damaging uncertainty” into the radio business. “No one knows how long this disruption will last. Introduction of new royalties now would only exacerbate this uncertainty,” he said. “This might be the worst possible time as they struggle to stay in business.”

Hunter also said a new performance royalty is “unwarranted,” in part because Congress has repeatedly rejected attempts to adopt a public performance right, including in 1995 when it expanded copyright protection, or in 2018 when the Music Modernization Act was adopted. Hunter said in his view, there’s even a case to be made for expanding radio’s exemption to include any listeners of a station webcast if they live within a 150-mile radius of the transmitter.

‘Injustice From The Beginning’

The radio royalty issue had already been alive on Capitol Hill since the Ask Musicians for Music Act, or AM-FM Act for short, was introduced last November by Rep. Jerrold Nadler (D-NY) and Senator Marsha Blackburn (R-TN). If enacted it would give copyright owners the authority to require stations to obtain their consent to use their recordings, a move designed to require stations to secure licenses to use music. The bill includes what would be significant discounts for small and noncommercial stations.

How much radio could pay in over-the-air royalties remains a mystery. That would be up to free market negotiations if enacted as outlined in the AM-FM Act. More certain is the $100 to $200 million in overseas reciprocal royalties that artists say they are missing out on because the U.S. doesn’t collect on radio airplay.

“Our industry has been fighting from the very beginning to have music paid for by the radio stations that use it,” said SoundExchange Chief Legal Officer Colin Rushing. “It’s not any more unfair today; it’s been an injustice from the beginning.” He argued that radio is just another music distribution platform and should be playing by the same rules as digital radio.

American Association of Independent Music President Richard Burgess also dismissed arguments that radio stations are local service outlets, pointing to layoffs that have hit the broadcasting industry in recent months. “This claim out localism just needs to stop,” he said.

But LeGeyt pushed back, saying layoffs are evidence of the pressure that local stations are under to survive – and another royalty could push some out of business. “These economics right now are very difficult to preserve a locally-focused radio model,” he said.

LeGeyt also took a swipe at the music industry for its recent efforts to convince Congress to leave radio out of COVID-19 relief efforts. “I don’t think our members take your words to heart when you say you want to help local radio – your actions don’t match it,” he said.

‘Open For Dialogue’

For the past three years the NAB has held informal discussions with the music industry as it tried to work out a compromise to a royalty conundrum that has existed for decades. The conversations have helped convince some members of Congress to maintain a hands-off approach, hoping the radio and music industries could work out a solution without legislative intervention.

“We are always open for dialogue,” said LeGeyt, telling Senate staffers the NAB has “gone to great lengths” to see if there might be a solution that could benefit both sides and is willing to continue in that effort. “We have at many points felt like we did not have a willing dance partner on the part of the music industry,” he said.

But the music industry representatives said they are skeptical a compromise is possible. “We tried, but we didn’t even get close to anything that was even workable for musicians or labels,” said Burgess.” It’s hard to incentivize someone who is getting something for nothing to pay something for it or to give more value back.”

Rushing also took a dim view, saying a negotiation where one side pays nothing is “not a landscape for fruitful negotiations.” But he said the AM-FM Act could break through that roadblock. “This bill in a very elegant way solves that problem by saying now there’s a right and the parties should go work it out and figure out what the real value is,” he said.

What’s Next

The Senate Judiciary IP Subcommittee has said it plans to spend much of 2020 analyzing whether reforms need to be adopted to fine tune the music rights within the Digital Millennium Copyright Act (DMCA). On Wednesday aides to Tillis said if they decide that some updates are required, they’re not expected to be introduced until after the November elections. That timing would be especially precarious to broadcasters since the so-called lame duck sessions have traditionally been legislative wildcards and the non-binding resolutions signed by more than 200 House members and 27 Senators opposing a radio royalty may not provide the same insurance that a performance royalty won’t be enacted – especially if many of the lawmakers lost their reelection bids.

Some in the music community don’t want to wait until year-end. The Record Academy’s interim-CEO Harvey Mason suggested any future COVID-19 relief package should include the provisions included in the AM-FM Act. “In this crisis, many workers are sadly not getting paid because their work is not needed at this time. But on radio, musicians are not getting paid while their work is needed more than ever,” he said. “The current crisis has shone a bright spotlight on this injustice. And the time to fix it is now.”