Rep. Jerrold Nadler, long an advocate of recording artists getting paid by terrestrial radio, blew some fresh oxygen into that crusade with an OpEd column in The Hill. Rep. Nadler is co-sponsor of the Fair Play Fair Pay Act, which seeks to remove terrestrial radio’s exemption from paying performance royalties to labels and artists for playing their records over the air.
Continuing Investigation
Why now? According to Nadler, the House Judiciary Committee’s ongoing review of the U.S. Copyright Act has inched forward a notch. “Chairman Bob Goodlatte (R-Va.) recently indicated that the review is moving to the next phase […] As the committee prepares to take action, it is increasingly clear that music licensing reform must be at the top of the agenda.”
Rep. Nadler repeated his points of outrage at radio’s royalty exemption, noting as he has many times that other countries in the “free world” make their radio stations pay royalties to musicians, and that America’s terrestrial exemption aligns the U.S. with Iran and North Korea.
American radio stations are not legally obligated to pay record labels for use of recording, though a few privately negotiated agreements exist between the music and broadcasting industries. American law does mandate that webcasts of radio stations pay the same royalty rates as Pandora and other pure webcasters.
Support for Change
Nadler cites “growing support” for his Fair Play Fair Pay Act, including union groups and a lot of musicians (naturally). Congressional support might be another matter, though — opposition force NAB (National Association of Broadcasters) flaunts its lobbying power and the hundreds of signatures accrued to a resolution against Fair Play Fair Pay (232 House members and 26 senators). That resolution doesn’t have any legislative clout, but it does signal an uphill climb in passing Fair Play Fair Pay.
In reviewing this standoff, the House Judiciary Committee must consider the historical rationale that exempted radio in the first place: Namely, that American radio, with its tremendous reach, promotes music and musicians, driving money into the ecosystem through various product channels.
There are a few theoretical cracks in that rationale, though, as we move deeper into the new, digitally suffused millennium. First, music products are on the wane generally, with consumers moving from ownership of recordings to music access via immense cloud libraries. In that context, it can seem unfair that internet radio (Pandora and its ilk) must pay the labels for what is (according to advocates) essentially the same promotional service.
In other words, an uneven playing field doesn’t match new digital and streaming realities, and new consumer behaviors. That is the Fair Play viewpoint.
Resistance from Broadcasters
Balancing that is the NAB’s focus on the mighty reach of radio, and modern research which indicates that AM/FM remains a top discovery platform in the U.S. According to The Infinite Dial 2016, the latest edition of the long-running consumer survey performed by Edison Research and Triton Digital, AM/FM is the “most used” source for keeping up-to-date with music:
That 28% for radio drops down to 9% in the 12-24 age group, indicating that radio is losing its sway as digital natives grow up. Such research might lead Congress to take a “not now, but soon” approach to revising radio’s responsibility to musicians.
Or it might never happen. Change of law can wreak havoc with established industries, and in the case of radio, which has local businesses across the country, every legislator has reason to be concerned. Establishing a new cost in the balance sheets of thousands of local businesses is a dauntingly disruptive prospect.
Interestingly, the Fair Play Fair Pay Act carves out lower rates for low-revenue radio stations: broadcasters making less that $1-million per year pay $500 a year in royalties. Sound familiar? Small webcasters once had similar protection from the Webcaster Settlement Act of 2009, which established a threshold of $1.25-million annually, allowing a percentage-of-revenue calculation to determine royalty obligation. That law expired at the end of last year, corresponding with higher label royalty rates for webcasters established by the U.S. government (specifically, the Copyright Royalty Board), which caused Live365 and many indie webcasters to pull their plugs.
None of these complications trouble Rep. Nadler’s moral and legislative impulses: “As the Judiciary Committee advances to the next stage of its copyright review, the broad bipartisan coalition in support of the Fair Play Fair Pay Act stands ready to ensure that intellectual property law rewards innovation, spurs a diverse economy and consistently upholds the constitutional rights of creators.”
How was the music industry making its money before there was digital at all? Royalties on Digital streaming are based on the idea that a stream is a mechanical copy of the music . In truth, the only difference is that the waveforms run over wires instead of over the airwaves. They aren’t kept or preserved at the receiving end unless somebody hits record on a separate recording device, just as with terrestrial radio. So the whole idea of charging extra for digital radio is lie in the first place, exploiting a technical loophole, flying in the face of common sense. If we’re determined to level the playing field between digital and broadcast, shouldn’t we be doing the thing that will cause the least damage in a still struggling economy, and not the most damage? Charging internet radio stations double the rate that terrestrial radio stations have to pay seems criminal. So-called mechanical licensing should not apply to internet broadcast at all.
There was a deal on the table in 2007 that would have given labels and artists the same royalty songwriters get. They refused. They wanted more. Meanwhile, the songwriters are angry that they get so little digital money compared to labels and artists. What’s Fair Pay about that? That’s what happens when you have a government imposed royalty. In the meantime, Sound Exchange is demanding “fair market value” for their music. But they refuse to negotiate with the music users. That’s how you get fair market value. The way BMI and ASCAP got it from AM/FM. You set up a negotiation, and it happens. Instead, we have people like Jerry Nadler bellowing about how we’re like Iran and North Korea. And nothing gets done. They should have taken the money in 2007. Think of how much they’ve lost in 9 years.