Arguments about whether the American radio industry should pay artists a performance royalty when their records are broadcast on terrestrial radio remain unresolved as the radio industry seeks to reduce the existing copyright royalties paid to songwriters and music publishers.

• The USA is the only major music market that does not recognise a performance right for artists, or recompense them for use of their recordings on air.
• Satellite and internet radio operators have been paying a limited performance right fee since the Digital Performance Right in Sound Recordings Act (DPRA) 1995.

An agreement reached

In September last year an agreement was reached between Warner Music and Clear Channel and its 850 radio stations. Clear Channel now pays an unspecified royalty to Warner and its artists whenever their recordings are broadcast. In return the group will receive “a favourable rate” in the expanding sector of online streaming.

“The big win is to redefine the relationship between music companies and radio for the purpose of building out this exciting new digital future,” stated Robert W. Pittman, Clear Channel chairman and chief executive.

Bone of contention

Terrestrial performance royalties or lack of some, have long been a bone of contention vehemently opposed by a radio industry that argues:

• Artists receive valuable promotion and sales boosts when their records are broadcast.
• Ancillary benefits include enhanced concert ticket and merchandise sales.

Introduction of performance royalties would force smaller radio stations out of business or to a spoken word format.

The music industry has countered by claiming that introduction of a performance right would remove an inequity in copyright law, given that songwriters and publishers are rewarded when their works are played on air.

Ted Kalo, executive director of the musicFIRST Coalition formed by record labels and musicians to obtain a performance right, said: “AM/FM radio stands alone among all forms of radio in refusing to pay music creators for airing their performances.”

He added that while other countries recognise the performance right, foreign performance royalties cannot be collected and distributed in America because there is no reciprocal right.

The proposal of a new act

Mel Watt, Democratic member for North Carolina in the House of Representatives and a ranking member of the House Judiciary’s Subcommittee on Courts, Intellectual Property, and the Internet, hopes to introduce legislation.

The Free Market Royalty Act (FMRA) 2013 aims to give musicians and recording artists a performance right, obliging radio stations to negotiate with them for the right to play their material on air. He and other colleagues campaigned for similar legislation five years ago, but although it passed the House and Senate judiciary committees, it stalled in the face of opposition from the radio industry.

Significant UK benefits

Peter Leathem, chief executive officer of the UK’s Phonographic Performance Ltd (PPL), is unsure whether Watt’s proposal will make progress into US law, given the fate of previous similar attempts. But if it does, it would benefit performers and record companies around the world. In view of the popularity of UK music in the US, a share of the American terrestrial radio revenues would have a significant beneficial impact on the UK recorded music industry.

Partial victory

In February Pandora Media an internet radio company, gained a partial victory in a case brought against it in a royalty dispute by the American Society of Composers, Authors and Publishers (ASCAP).

ASCAP had sought a gradual increase in the current rate of 1.85% to 3% in 2014/15 while Pandora had argued for a lower rate of 1.70% in line with a separate deal at that rate reached by ASCAP with a group of parties including terrestrial radio stations. U.S. District Judge Denise Cote ruled that the rate should remain at 1.85%.

David Israelite, president of the U.S. National Music Publishers Association (NMPA), criticised the ruling, saying music writers are losing out because of a royalty system that no longer works due of technological changes.

“This is a very sad day for America’s songwriters and music publishers,” stated Israelite. “World War Two era consent decrees do not allow songwriters to be paid fairly and that must change.”

Nigel Hunter

Nigel Hunter pursued a long career as a music industry journalist, with staff positions on “Disc”, “Music Week” and “Billboard” and contributions to “Record Mirror”, “Record Retailer”, and “The Observer”. He also presented several Latin American music series for BBC Radio 2 and the World Service.

Entertainment and Media Group, March 2014

The views expressed are the author’s and not ICAEW’s.