Battle of the Airwaves

Published in the March 2009 issue of the Overture, official publication of Professional Musicians, Local 47.

Battle of the Airwaves

Performers, advocates and lawmakers renew their fight to close the radio-play loophole denying royalties to performing artists with the Performance Rights Act

by Linda Rapka, Overture Managing Editor

Whenever a song is broadcast over radio, royalties are paid to nearly everyone involved with the recording – except the people who actually performed on the record.

Every time you hear Aretha belting out her powerful version of “Respect” on the AM/FM dial, you might think that, as the performing artist, she’s receiving some sort of compensation. But you’d be wrong. The estate of the late Otis Redding, who composed the tune, receives a check from BMI, as does the song’s publisher, Irving Music Inc. But Aretha doesn’t see a dime.

Where’s the R-E-S-P-E-C-T for performers?

Consider that when this same tune is played on satellite radio, a cable music station, or a webcast – even a webcast of the above-mentioned terrestrial station – checks are sent to the Redding estate, the publisher, and to Miss Franklin.

If this sounds peculiar, it is. Besides the United States, only a few countries do not provide a terrestrial broadcast performance right on radio, including Iran, North Korea and China. At least 75 nations, including most European Union member states, do have a performance right for radio.

Traditional-Radio Loophole

Why does U.S. radio get the golden exemption? Since the advent of commercial broadcasting in the 1950s, broadcasters have contended that airplay increases album sales, thereby serving as adequate compensation. Because labels were content with receiving this “free advertising,” for decades broadcasters have been able to convince Congress that they should be exempt from paying the public performance royalty for sound recordings.

But not everyone sees this as a win-win. At a Grammy Town Hall meeting last month, Supremes singer Mary Wilson countered the argument that radio airplay is solely a promotional tool that drives sales and touring for artists and thus serves as fair compensation. Anyone who wanted to buy the Supremes’ music has likely long since done so, she argued. Many such artists are no longer touring or producing new albums, but radio continues to reap benefits from their decades-old songs.

Performance Rights Act

Lawmakers are seeking to close the “corporate radio loophole” with the Performance Rights Act. First introduced in December 2007, the bipartisan bill was resubmitted to Congress last month as H.R. 848 and S. 379 by its sponsors, Sens. Patrick Leahy (D-VT) and Orrin Hatch (R-UT). Supporters claim the bill would have minimal affect on most radio operators in the United States, with over 75 percent capped at a $5,000 blanket license as long as they stay under revenue benchmarks. Non-profits would be capped at $1,000.

Performing artists and advocates including the AFM, AFTRA, recording artists, the U.S. Copyright Office, the Recording Industry Association of America (RIAA) and members of Congress from both parties and houses support the bill, which would require terrestrial stations to pay performance royalties to artists, musicians and master recording owners.

The AFM has actively urged Congress to pass the legislation since it was first introduced. In June 2008, Local 47 Vice President (then Vice President) Vince Trombetta joined other AFM members and performers in an effort organized by the AFM and the Music FIRST Coalition urging Congress to support the expansion of the public performance royalty. They lobbied members of the House and Senate Judiciary Committees and other key members of Congress such as Rep. Dan Lungren (R-CA), Sen. John Cornyn (R-TX), Rep. Zoe Lofgren (D-CA) and Rep. Hilda Solis (D-CA), and AFM President Tom Lee and recording artist Nancy Sinatra testified before a House Subcommittee hearing about the importance of fair performance rights on radio.

Importance of Royalties

The RIAA maintains that it is “fundamentally unfair that publishers and songwriters receive royalties from terrestrial radio broadcasts while labels and performing artists do not.” Royalties are generated when a copyrighted song is publicly performed – whether on a radio station, at a sports event, or on a jukebox. In the U.S., these royalties are collected by ASCAP, BMI and SESAC and distributed to the member songwriters and publishers. And we’re not talking chump change: in 2007 ASCAP distributed more than $741 million; BMI paid out $786 million last year; and by the end of 2007, SoundExchange, which collects royalties for digital music transmissions, had collected royalties of over $248 million, so far having distributed more than $150 million to artists.

Brief History of Residuals

The residual system started in U.S. network radio. Live radio programs with nationwide audiences were usually performed multiple times to account for different time zones between the coasts. The performers were paid for each performance. Audio “transcription disc” technology became available in the late 1930s and was used by radio networks for time-delaying the west coast broadcast, eventually eliminating the need for multiple performances. The performers were kept on standby and paid for a second performance in case there were technical problems with the recording. This established the precedent for residual payments from recorded performances.

Digital Media: A Wrench in the Works

When digital streaming technology came along, it upset the happily symbiotic relationship between radio broadcasters and labels. Americans began spending less time flipping the AM/FM dials, opting instead for newer technologies such as Internet and satellite radio, and iPods. The new availability of “on demand” media was seen as a threat to album sales, which led to the passage of the Digital Public Performance Right in Sound Recordings Act of 1995, giving artists and labels a right to collect royalties when their sound recordings are performed via digital media. Traditional radio remained exempt from this new performance right act, however, as it only applied to new media.

Today, music consumption continues to move further away from CD sales and toward digital media. Physical album sales fell 20 percent to 362.6 million in 2008, from 450.5 million in 2007. Meanwhile, sales of digital music continued to soar with more than 1 billion songs downloaded last year, a 27 percent increase from 2007. These figures indicate that the likelihood of performers being compensated based on traditional CD retail sales will only continue to decline as digital media gains popularity.

Radio’s ‘Unfair Free Ride’

With new media platforms have to make royalty payouts to songwriters, publishers and performers, traditional radio’s performance right exemption is more and more being seen as unfair. Broadcasters of digital performances – digital cable and satellite television, Internet and satellite stations like XM and Sirius, and webcasts – have to obtain licenses from ASCAP, BMI and SESAC, which compensate the songwriters and publishers, and must also pay royalties to the performers. Terrestrial radio which remains the only medium which broadcasts music but does not compensate artists or labels for the performance.

Opponents of the Performance Rights Act

A major opponent to the Performance Rights Act is the Free Radio Alliance, a coalition of individual terrestrial radio stations and other organizations such as the National Association of Broadcasters (NAB). They argue that while a performance right sounds good, most of the money would not, in fact, trickle down to the artists; a full 50 percent of the fee would not go to performers, but rather the owners of the recorded works (i.e. the record labels). They add that the money wouldn’t even be going to American-based companies – three out of the four major record labels (EMI, Sony BMG and Universal) are foreign-owned and headquartered outside the United States.

Calling it a “tax” that would cripple broadcast radio, opponents say the bill would cause more stations to turn to talk and news programming, resulting in less exposure for musicians which fuels their concert and record sales. At a hearing on the controversial bill last June, Charles Warfield, on behalf of the NAB, said that a performance fee would “take money out of the pockets of local radio stations and put it in the hands of record companies and a few top-grossing performers,” arguing that a performance fee “would not alleviate any economic concerns if the artists themselves continue to lack bargaining power in their relationships with the record labels.” Opponents say the bill would create a slippery slope, fearing that over time institutions other than radio would be included, such as restaurants, bars, gyms and even offices.

Performance Rights’ Effect on Radio

If performance right fees are levied on local radio, some fear that stations would be forced to increase advertisement to compensate for the additional expenditure – meaning less time for music, news, sports, weather and public service or community service programming. Many smaller, community or specialty radio stations unable to afford the fees would be forced to shut down, and even those larger stations which could sustain the fees would have a smaller revenue pool to provide local news and information.

Those against the bill argue that although as currently written it would give favorable treatment to smaller stations (nonprofits capped at $1,000 and the majority of stations capped at $5,000), there exists the threat that the fees would expand, as has been the case with Internet radio. In 2007, the Copyright Royalty Board ruled that the fee to play a music recording on web radio should increase from 8/100 of a cent per song, per listener in 2006 to 19/100 of a cent in 2010.

Opponents see the PRA as disastrous for the very recording artists and record companies who are pushing for its enactment, arguing that the revenues many artists and labels seek in exchange for performance of their copyrighted recordings would be reduced, while the essentially free broadcast advertising of concerts (and related merchandise) that has existed for years would dwindle, leaving everybody involved worse off than before.

Supporters of the legislation maintain these claims are largely overrated. They argue that land-based radio has enjoyed margins of up to 75 percent on some music formats, such as smooth jazz or classic rock. And because terrestrial stations here don’t compensate American or foreign performers, foreign stations don’t pay U.S. performers when their songs are played abroad. Between 40 and 50 percent of all music played by foreign broadcasters is American, and estimates range from tens to hundreds of millions of dollars as far as how much money for U.S. performers, musicians and master owners is kept abroad because of the lack of a performance right here in the States.

Fighting for Fairness

Proponents of the Performance Rights Act are stepping up efforts to get the legislation approved by Congress. A Grammy Town Hall meeting Feb. 6, 2009, aimed to re-stimulate the grassroots movement in support of the bill. The two Judiciary Committee chairs, Patrick Leahy (D-VT) and John Conyers (D-MI), with an assist from a bipartisan posse of U.S. Representatives, have joined with the AFM and the musicFirst Coalition in a “nationwide push” to extract performance royalties from radio stations.

The AFM, AFTRA and ASCAP have urged Congress to pass the bill “as quickly as possible.” National Music Publishers’ Association President and CEO David Israelite issued a statement in support of the bill, proposing the concept of “One Music” urging the entire music community to “be supportive of each other regarding the value of music.”

“Recording artists fuel the business that sustains radio in the U.S.,” said AFTRA National Executive Director Kim Roberts Hedgpeth. “The federal government now has an opportunity to correct this area of inequity by creating a performance right for all recording artists to receive fair compensation for the value they bring to the American airwaves, and our culture as a whole.”

“The Performance Rights Act will ensure that musicians get fair compensation when corporate AM/FM radio stations broadcast their recorded work,” Local 47 President Trombetta said. “May the radio Gods shine upon us.”

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