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Copyright chief calls radio’s music royalty exemption “indefensible,” ending two-year review

maria pallanteIn February we reported that the U.S. Copyright Office had issued a comprehensive and highly critical review of music licensing regulations. That report proposed a new copyright framework which included a new royalty obligation for terrestrial broadcast radio, which has always been exempt from paying performers and labels for use of recordings. That report was part of a two-year review of copyright law.

That two-year process came to a formal conclusion yesterday, as Copyright Office chief Maria Pallante (formally, the 12th Registrar of Copyrights) testified before the House Judiciary Committee. She was the only witness at the hearing.

Pallante reinforced her conclusion that radio should pay for records, calling the current system “indefensible” and “embarrassing.” She also pushed for unauthorized streaming to be reassigned from a misdemeanor to a felony, bringing it to criminal parity with unauthorized downloading. In other words, stream infringement should be considered piracy as much as illegal file-sharing.

On the radio music-licensing point, Pallante’s testimony naturally drew praised from MusicFirst, a label coalition that supports a performance royalty obligation for radio, and endorses proposed legislation called the Fair Pay Fair Play Act.  “Pallante is an independent expert who speaks for no industry or special interest, only for good policy,” said Executive Director Ted Kalo in a public statement. He noted that Pallante praised the bill as “a smart framework.”

Pallante also said of American copyright law as it applies to radio “is out of step with the rest of the world.”

The radio industry defends its royalty exemption as a natural and necessary protector of radio’s hit-making and record-selling power. The exemption was created when radio was the only promotion engine for a young recording industry. Although many other promotional avenues now exist, especially with the rise of Internet radio and music services (which must pay label royalties), recent research shows that radio remains the main music discovery environment for most people, according to many surveys.

Pandora, the leading Internet radio brand, pays nearly half its revenue to artists and labels, and appears to fund over half of all collections made by SoundExchange, the organization charged with royalty collection and distribution from Internet radio to labels. Pallante’s summary conclusions are timed against a backdrop of wide-ranging government scrutiny of how copyright works in the U.S. This week the Copyright Royalty Board started the Webcasting IV trial, which will set royalty rates for Internet radio (to labels) for the 2016-2020 period.

Brad Hill

3 Comments

  1. Perhaps Ms. Pallante can advise us of a good cpm rate to charge the labels when we play, expose, and promote their 4 minute advertisement known as a song.

    • Well, Tracy, Pandora has to pay half their revenue for their “advertisements.”

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