Radio performance royalty debate escalates with new bill giving control of airplay to artists

The battle of the bills continues in Washington, as over-the-air radio’s music royalty exemption is again under scrutiny by the 115th Congress. In the latest development, Congressman Darrell Issa (R-Calif) has introduced a new bill with a new solution which gives artists the right to forbid airplay of their music without payment.

To review the basics:

• Over-the-air radio in the U.S. is exempt from government regulation of music royalty payments to record labels and artists (whoever owns the master recordings) when radio plays those recordings.
• Music owners want that money. Online radio does pay labels and artists for use of recordings, creating an uneven marketplace, they say.
• Radio stations and their chief lobbying champion, the National Association of Broadcasters (NAB) ,obviously don’t want a goverment-imposed new cost in their budgets, saying it threatens the livelihood of countless small businesses (local radio stations).
• Rep. Jerrold Nadler, D-NY, is the chief instigator of the proposed Fair Play Fair Pay Act, which would establish a royalty liability on terrestrial radio.
• 165 House members and 21 Senators have signed a non-binding resolution to oppose Fair Play Fair Pay.

Enter Rep. Issa and his PROMOTE bill. PROMOTE is a clever acronym for Performance Royalty Owners of Music Opportunity To Earn. The proposed bill stipulates that artists and labels could withdraw their recordings from airplay, absent a royalty deal, taking the control away from governmental fiat, and distributing that control to individual rights-owners. Here is what Rep. Issa says:

“The PROMOTE Act calls the bluff of both sides in the debate over performance rights. The terrestrial stations playing these works without compensating the artists argue that airtime provides exposure and promotional value, while the artists argue the status-quo allows radio stations to profit on artists’ performances without providing any due compensation. Our bill puts forward a workable solution that would allow those who would otherwise be paid a performance right to opt out of allowing broadcasters to play their music if they feel they’re not being appropriately compensated. This is a win-win that helps solve this decades’ long problem in a way that’s fair to both parties.”

The bill proposes that the royalty rate be identical to what internet radio pays according to the Copyright Royalty Board rulings which occur every five years. The current rate is 17 cents per hundred plays to 100 listeners. that rate is founded on the streaming paradigm, in which one “spin” is heard by one person, amounting to one music impression. Over-the-air radio’s one-to-many paradigm would require some kind of cume calculation of how many people heard the spin.

the swirl of debate is happening in the context of rapidly changing consumer behavior. The historical rationale for exempting radio from paying for music was radio’s immense driver of record sales. As the Recording Institute Association of America (RIAA) recently announced, streaming music now accounts for the majority of industry revenue. In other words, music sales are gradually becoming less relevant as consumer shift from music ownership to music access.

There is a demographic element to that shift. In the 2017 edition of The Infinite Dial, produced by Edison Research and Triton Digital, radio still holds a strong position among music discovery methods. But that position drops radically among young consumer, who lean into YouTube at radio’s expense.

The upshot appears to be that radio’s revenue influence to the record industry is waning, which fuels arguments that the radio platform should be regulated similarly to internet radio.