American Music Fairness Act latest legislative push to reverse radio royalty exemption

A proposed bill called the American Music Fairness Act was introduced yesterday in a public spectacle attended by Dionne Warwick and other music celebrities. The legislation is fronted by congressional reps Ted Deutch (D-FL) and Darrell Issa (R-CA).

The Argument

At issue — long standing issue — is the exemption from performance royalties for the use of recordings enjoyed by the American radio broadcast industry. Radio stations must pay those royalties mor tracks played in the online streams of those stations, and the rates are set by the Copyright Royalty Board (CRB) every five years. That process also governs the rates paid by Pandora and other pureplay online webcasters. That bifurcation of law — royalties apply to online performance but not over-the-air performance — is indicative of an uneven playing field for both streaming business and musicians who are unpaid for public performances.

The situation in the U.S., which is nearly unique in the world, is derived from the idea that the record industry benefits from radio airplay promotion. That premise has not held up well into the 21st century for multiple reasons, from the viewpoint of the music industry. First, because the synergy of radio listening and record buying has been shattered by 21st-century distribution of music via cloud subscription services. And also because streaming services arguably promote new music and create hits more vigorously and effectively than radio does.

The National Association of Broadcasters (NAB), the chief lobbying organization for American radio, disagrees. “For decades, broadcast radio has enjoyed a mutually beneficial relationship with the music industry, launching and sustaining the careers of countless artists, promoting album sales and streams, and helping to foster a robust music-creation environment that is the envy of the world,” NAB head Gordon Smith said in response to the American Music Fairness Act.

Another argument on the side of radio’s exemption is that applying a royalty regime would be catastrophic to the local business of independent radio. That lobbying effort has characterized a music royalty as a “tax.” (Music royalties are not U.S. taxes, even when regulated by the government.)

The Bill

The American Music Fairness Act is the latest in a series of legislative proposals, and seems to consider the radio industry’s business realities. The bill proposes a salced royalty system which puts less financial burden on smaller stations. The benefit of that category is significant: Stations which earn less than $1.5M, and whose parent groups earn less than $10M, would pay a blanket fee of $500 per year. The bill’s supporters are quick to calculate that into less than two dollars a day. Scaling down to even smaller stations brings the cost down as low as $10 per year … which seems more like a token payment than a real compensation for playing music. There are also carve-outs for public, college, and other noncommercial stations.

All this is more graduated than the two-tier system applied to webcasting, which is based on a fixed per-spin royalty rate and a two-step minimum which is lower for small webcasters.

What about big radio stations and the large national groups? The bill does not assert rates, but invokes the Copyright Royalty Board as the governing agency for setting those rates. In all, the bill seems to be roping broadcast radio into the CRB realm of a government-set royalty system.

As such, there are hopeful murmurs that some forward motion is possible here. Recording Industry Association of America (RIAA) CEO Mitch Glazier and royalty collection agency SoundExchange CEO Mike Huppe both uttered hopeful praise, saying the bill is “calibrated” and “sensible.”


Brad Hill