The woes of
the recorded music industry have been well documented. Sales of CDs
thus far this year are down 20% compared to last year. Revenues from
digital continue to grow but not enough to prevent further downsizing.
All of which is why the labels are turning over every rock looking for
additional revenue streams such as licensing their music video
catalogues, to getting into the advertising business to creating all
sorts of derivative products around an artist and a release. This is
the backdrop against which we are hearing rumblings about the labels
trying to get a performance right from radio so that they’d be paid
royalties from the use of their music on terrestrial radio, just as the
music publishers, songwriters and composers receive a royalty
(typically collected by a society such as ASCAP, BMI and SESAC).
Incidentally, business is booming for these societies from their
burgeoning licensing revenue
– as I’ve written in the past, more
people are consuming music than ever before, and that represents
licensing opportunities for copyright holders.
First some background: Satellite radio pays about 7% of its revenues to the labels and artists, while internet radio
webcasters pays anywhere from 12% to many times this rate
depending on how you’re counting. What does terrestrial radio pay?
Zip. Nada. Through a historical accident, terrestrial radio has paid
royalties to songwriters and publishers, but not the labels and
performing artists. The LA Times has a
good rundown of this, and mentions how it may
be easier this time around given the troubles of the record industry and the
fact that satellite and internet radio have to pay such royalties (as
does most of the rest of the world’s terrestrial radio stations). The labels have tried to claim this performance
right in the past but have found themselves outmatched politically by the powerful
broadcasters. Chris Castle has the money quote from the LAT article: "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".
There will be rhetoric from both sides with the record companies
trotting out starving artists to make their case while the broadcasters
try to brand this as an extra "performance tax", which they know will be anathema
to many in Congress, and noting how they provide a promotional medium
for the labels (so much so that they’ve been paid extra for this in the
form of payola but you won’t hear them say this too loudly!).
This makes no sense to me.
Call me an apologist for the
labels but if you take my product and build a business out of it, I
should be able to get paid for it or choose to let you use my product
for free in exchange for the promotion I’d get. But that should be my
choice. The government shouldn’t determine my business model by not
letting me charge you for its use. What should really happen is for
the government to be neutral on this and let the industries determine
the price of playing music on terrestrial radio in the free market
(with the government’s consent so as not to breach anti-trust
regulation, and some ground rules like it being a blanket license so
you don’t get bogged down over the price of playing one song vs
another). It may be that the labels get a windfall from this, or that
they decide that the price is ‘zero’ or even that the broadcasters
actually demand a per-play royalty going the other way, in which the
labels would have to pay for every time a radio station plays one of
their songs. It would be a wonderful thing to let the market decide
the price of playing music over the air. Now that’s a negotiation I
would tune in for…