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American industry welcomes the launch of radio royalty proposals in US Senate

By | Published on Friday 23 September 2022

US Congress

The American record industry has welcomed the introduction of formal proposals in the US Senate that would force AM and FM radio stations in the country to start paying royalties to artists and record labels for the first time. The bipartisan American Music Fairness Act – introduced by Republican Senator Marcia Blackburn and Democrat Alex Padilla – mirrors the proposals already on the table in the US House Of Representatives.

US copyright law is unusual in that the sound recording copyright does not provide the same level of control to a copyright owner as the song copyright does. Basically the owner of a sound recording in the US does not have control over the broadcast or public performance of their music, which is why AM/FM radio stations don’t need a licence from or to pay royalties to the record industry.

They do need licences on the songs side though, which they get from the American song right collecting societies like BMI and ASCAP.

In most of the rest of the world, licences are required and royalties are due on both the recordings and songs side whenever radio stations broadcast music, so in the UK a broadcaster gets a licence from the record industry’s collecting society PPL as well as the UK equivalent of BMI and ASCAP, ie good old PRS.

Because the principle of performer equitable remuneration applies with this revenue stream, 50% of the monies paid over by radio stations flows directly to artists, including session musicians, oblivious of any deals they did with a record label when a recording was made.

There is a digital performance right as part of the sound recording copyright in the US, which means that online and satellite radio services do need to get a licence and pay royalties, which they would usually do via the collecting society SoundExchange.

As a result, not only does the US system mean American labels and artists miss out on a revenue stream that is pretty standard everywhere else, but online and satellite radio services are at a disadvantage to more traditional broadcasters.

The record industry has been campaigning for reforms to US copyright law, so to bring it in line with the rest of the world, for decades now. The American Music Fairness Act is the latest manifestation of that campaign. The House Of Representatives version was launched by Republican Darrell Issa and Democrat Ted Deutch in June last year.

Needless to say, the American radio industry – which is a powerful group in Washington – continues to oppose the introduction of any new royalty. It continues to use the same main argument that has been employed for decades, ie radio airplay is free promo for artists and labels, and therefore the record industry is already getting a commercial benefit.

It was never a great argument, especially with stations that exclusively play older music which, in the main – and certainly in the pre-digital age – the record industry wasn’t actively selling and therefore didn’t need any promo support for. But it’s become an ever weaker argument as radio airplay has slipped down the marketing priority list of most labels releasing new music.

Presumably aware of that, the radio industry lobby also now usually talks about the possible negative impact any new royalty obligation would have on smaller radio stations that are truly local and truly independent. Though that argument isn’t always so credible either when it’s mainly being used by the lobbyists of major media groups like iHeart, Audacy and Cumulus.

Supporters of the American Music Fairness Act also insist that the proposals are designed to mitigate the impact on the smaller broadcasters.

Music industry campaign group MusicFirst stated yesterday: “The bill would require AM/FM radio stations whose gross annual revenue is greater than $1.5 million – or stations owned by parent companies whose annual revenue tops $10 million – to pay the artists whose songs they play to fill their airwaves. The bill also includes broad exemptions and low annual flat fees for smaller stations and public, college and noncommercial broadcasters”.

musicFIRST also says that a survey it commissioned shows a majority of Americans – around 70% in fact – support AM/FM radio stations paying royalties to artists and labels. Though the National Association Of Broadcasters is hoping that it enjoys majority support where it really matters, Congress.

In recent years the NAB has encouraged Congress members to sign up as sponsors of what it calls the Local Radio Freedom Act, which is basically a way of getting those politicians to publicly oppose the introduction of any new royalty for artists and labels.

Last month the trade group announced that 222 members of the current House Of Representatives – ie more than half – have now signed up. The not-really-an-act-at-all also had the support of 28 senators at that point, and presumably the NAB will now be working hard to get that up to 51, so it has majority support in the upper chamber of Congress too.

Nevertheless, the music industry seems hopeful that support for its argument is building. “The American Music Fairness Act is gaining momentum on Capitol Hill and we look forward to progress in the months ahead”, musicFIRST Chair Joe Crowley said yesterday. “Big radio has used an antiquated loophole to deny payments to artists for decades, but with the help of Senator Blackburn, Senator Padilla and other allies in Congress, this is the year we will finally end this injustice”.

Meanwhile, the boss of SoundExchange, Michael Huppe, added: “The American Music Fairness Act is a necessary and overdue step towards bringing the music industry into the 21st century. It ends decades of injustice of denying music creators payment for their work on AM/FM radio and levels the playing field between traditional broadcasts and streaming platforms. This is a common-sense blueprint for a healthier and fairer music industry, and we strongly support its passage on behalf of our 570,000 creator community”.

And the CEO of the American Association Of Independent Music, Richard James Burgess, said: “By introducing the American Music Fairness Act today, Senators Padilla and Blackburn are standing on the side of musicians and small independent record labels who for too long have seen enormous national radio conglomerates make billions of dollars without paying a cent for the sound recordings that draw in their listeners”.

“That’s just not fair, and the status quo should be an insult to all content creators, including broadcasters themselves”, he went on, before adding “the bill has the most generous exception ever for truly small community broadcasters, so the time is now to enact it into law”.

Just to balance things off, here’s the official response of NAB CEO Curtis LeGeyt: “NAB remains steadfastly opposed to the AMFA, which disregards the value of radio and would undermine our critical public service to line the pockets of multinational billion-dollar record labels”.

“NAB thanks the 250 bipartisan members of Congress, including 28 senators and a majority of the House, who instead support the Local Radio Freedom Act”, he added, “which recognises the unique benefits that radio provides to communities across the country and opposes inflicting a new performance fee on local broadcast radio stations”.

“We are committed to working with lawmakers to find a mutually beneficial solution to this decades-old policy disagreement”, he concluded, “but this one-sided AMFA proposal is not the answer. We urge the recording industry to return to the negotiating table in an effort to find common ground”.