US Broadcasters Say Paying Royalties Is Bad for Listeners – and Artists. How’s That?

The National Association of Broadcasters (NAB) has taken out newspaper advertisements claiming having to pay performers when playing their music is “bad for radio, bad for artists and bad for listeners”. The ads thank two senators for supporting the Local Radio Freedom Act (“freedom” to make more money to the detriment of those you exploit?), a resolution against a possible move to force radio to start paying royalties to performers and owners of sound recordings.

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Though such legislation has yet to be introduced, the inequity American artists suffer when it comes to radio royalties has long been discussed among policy makers.  A handful of countries around the globe don’t pay performers for radio play (the US being in the ‘distinguished’ company of Iran, North Korea and Rwanda). US radio does, however, pay royalties to the songwriters behind the song and their publishers.

Artists and music companies have long been campaigning for a change, but they’re up against a much more powerful lobby. The US radio industry pulled in $17.4 billion in advertising in 2011 alone  – more than the entire worldwide record industry that year ($16.2 billion).

In its ad, NAB calls performance royalties a “performance tax” imposed by foreign-owned record labels on local radio.  “Freedom,” “foreigners” and “tax” – they sure know how to frame their argument for the best result.  They also claim it will reduce the variety of music stations play and stifle new artists trying to start their careers.

As someone who lives in one of the majority of countries that do remunerate featured and non-featured artists (the musicians playing on the record) for public performances, I’m puzzled by their claim.

First of all, as I spend considerable time in the US, Sweden and the UK (where I live), I conclude that paying broadcast royalties to artists does not reduce the variety of music.  Matter of fact, the variety of music on Swedish and British radio is much broader than on US radio.  Therefore I can’t see how it could stifle new artists trying to start their careers.  Quite the opposite.

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Second of all, half of the royalties collected go straight to the artist and non-featured musicians, so even if the artist is unrecouped, they still receive the royalties (this is already the case for online radio, which does pay royalties via Soundexchange).  That’s not a tax – it’s a payment for use of ‘content’, in the same way radio pays its presenters and production companies.

But radio’s refusal to pay artists in the US does not only deprive artists of US income.  As it also deprives foreign artists of income, the collection societies in their countries won’t pay performance royalties to US artists.

Any radio royalties collected in the UK for the performance of music made by American artists gets paid straight to the American label.  “What happens with the money after that, we don’t know,” says UK collection society PPL.  American artists who want to ensure they get their share of royalties may want to consider recording their albums in the UK, however – if they do, they’d be able to join PPL and get the 50% they’re due directly, just like British artists.

Meanwhile, Swedish radio pays sound recording royalties for all records they play – except American ones. They do, however, pay American performers and their labels for digital broadcasts, because Swedish artists get paid for digital broadcasts in the US. See how that works? This doesn’t mean that Swedish radio plays more American music than anybody else – in fact it plays a bigger percentage of domestic artists than any other European country does, according to a 2012 survey.  As a result local artists grabbed more than 44% of all download sales in Sweden – by far the highest of all countries surveyed.

So how about US broadcasters get in line with the rest of us and pay artists?  It’s good for radio, good for listeners – and it’s certainly good for artists.

Written while listening to Villagers’ mesmerizing new album, {Awayland}.  Image by jem, licensed through Creative Commons  (CC by 2.0).

31 Responses

  1. Casey

    In what way would this be good for radio? Having to pay yet another expense for an industry with a bleak future that is barely breaking even or losing money isn’t going to help them in any conceivable way.

    Reply
    • Jeff Robinson

      Casey, are you serious?

      Recording artists provide content to broadcasters. Without it, what’s the program? Reverting all channels to talk radio?

      This is about ‘supporting an economy’ and ‘creating jobs’ in the music industry. It’s about generating revenue for artists and paying what is fair in the global marketplace. Is this simply an aspect of globalization that the Republican mainstream can’t stomach?

      Get with the program. If you are against it, you are an American terrorist exploiting and pillaging American musicians.

      Reply
      • Casey

        If I had a choice between not paying artists or firing local air staff at radio stations so we can pay mainstream artists who already sell gold and platinum records almost solely because of the promotion they received from radio, I think I would firmly opt for not paying artists. Radio helps the local economy, top 40 artists do not. This isn’t going to help your independent artists who can barely make ends meet. They don’t get played on the radio and probably never will. Putting money in the pockets of top 40 major label artists is not going to create jobs. Putting money in the pockets of the oldies artists who may not even be alive anymore but will get paid nonetheless is not going to create jobs. But it would put substantial strain on your local radio stations to fire even more air staff. Fire even more programming directors and cause even further consolidation.

        You think radio is such a gold mine. It isn’t. The fact that the land the station transmitters sit on is sometimes worth more than the station itself says a lot.

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        • Jeff Robinson

          The ‘firing staff’ at local radio stations isn’t even a starter. It won’t happen. The Telecom Act of 1996 already made that happen.

          Voice-tracking a signal for $5000 or $8000 or whatever the going rate is at corporate radio has already ‘commoditized’ the signals of these mega-chains. No one voice-tracks just one station, usually, jocks sign on for as many as they can do- as it pays more like a full-time job. Corporate radio has created myriad part-timers who crave full-time work.

          What planet are you from?

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          • Casey

            Voice tracking was around even before deregulation, back when you had to play the tapes. But there are still thousands of air staffers out there, many of whom will be the first to go when radio needs to cut back to pay your major artists whom already receive promotion on the radio (something advertisers have to pay for). Artists are just hoping to double dip. Get promotion and get paid for it. Great logic huh?

            Visito

          • Visitor

            I understand only some of the basic facts of the terrestrial radio/ internet radio/streaming royalty payment debate.

            I have one question to get started, if they can do it over in the EU why can’t it be done over here?

            Is radio in the EU being subsidized or receiving revenue some other way?

          • Jeff Robinson

            “pay your major artists whom already receive promotion on the radio (something advertisers have to pay for). Artists are just hoping to double dip. Get promotion and get paid for it.”

            If this were true, then two things would be the case:

            1. Airplay and airtime wouldn’t be sold by major corporate broadcasters for music. Remember the indie promoter payola problem? $2500 to get on a P1 station and the artist will never re-coup at $.15 cents spin. No idea how you call that double-dipping.

            2. IF airtime is being sold- as it was for a decade since the Telecom Act of 1996, then corporate radio should be able to provide hard data how effective X amount of spins across a chain should be if a song is rated a 7.5 or higher with a service like Hit Song Science prior to the air time purchase.

            You need to speak in facts Casey, don’t misrepresent what corporate radio has done to destroy the broadcast industry in an effort to become so profitable.

  2. Yves Villeneuve

    Fair radio royalties paid to performers/labels can be phased in over a period of 3 to 7 years, as to soften the blow to advertisers and their customers.

    Remember, the USA radio industry is a very, very large exception to the global norm.

    Reply
    • Casey

      Advertisers? This won’t affect advertisers. There is far too much competition in the ad industry for radio stations to pass this cost off to advertisers. They will have to swallow the cost. Top 100 market stations might be able to choke out the money. Small market stations will just have to cut another staff member or auction off the station. If it is an AM station, they might as well just hand the license back to the FCC. No one in their right mind will buy it.

      Reply
      • Yves Villeneuve

        I’ve got news for you. The USA is an exception. Nearly all countries in the world pay labels thus performers… Yet these radio stations are profitable.

        Radio advertising is not going away even if advertisers absorb the higher costs. Why? Because radio will always have a very sizeable audience.

        If that fails there is always paid subscriptions for the diehard radio fans.

        Time to get out of your bubble.

        Reply
        • Casey

          No, advertisers will not absorb the higher costs. If radio raises their rates, advertisers will simply jump to the internet. In fact they are already doing this, which is why Cumulus is currently in a race to the bottom on advertising. The internet has a larger audience that can engage the audience for less money than radio can.

          Subscriptions are impossible with the current radio setup we have.

          Reply
          • Yves Villeneuve

            I’ve got more news for you. Nothing prevents local radio from broadcasting on the Internet. Like I said, advertisers will not ignore the very large radio audience.

            Make no mistake. Advertisers will pass along the costs to consumers. A 3 to 7 year phasing approach should limit any inflationary shocks.

          • Casey

            There is something stopping them. Royalties. Royalties that are so high it is impossible to make a transition to the internet. Right now most stations just offer it as a service to their listeners, but it is nothing but a loss leader until the royalities drop.

            Advertisers will not pass on the costs to consumers. Advertisers will not accept the costs. They want to save money, not spend more. If the costs go up, they will look to other means of advertising. The local advertisers are increasingly looking to use word of mouth through social networking, which costs them nothing.

          • Yves Villeneuve

            Why would advertisers not pass along the additional costs to consumers? They are intent on keeping profit margins. You have not given a reason.

            Why would advertisers ignore the very sizeable American radio audience? 93% of the American population (313 million) listen to broadcast radio versus 76% (240 million Internet users). If there is only Internet advertising the cost of Internet advertising will increase proportionately. Radio listeners won’t stop listeners won’t stop listening to radio if there is less advertising on radio. Your supply/demand logic does not make sense.

            http://dmnrocks.wpengine.com/permalink/2012/120612radio

            Any advertiser can attempt to use word of mouth marketing. Don’t see how this is relevant to the conversation unless broadcast radio wants to kill off word of mouth advertising or the Internet itself. Broadcast radio can also use word of mouth for its advertisers on the radio and Internet also.

            Btw, radio is not promoting artist music. They are spinning music they think their audience will like to retain their audience thus attracting advertisers. As well, Artists are not double dipping unless they have sold a copy of their song to every fan of that song. At this time, only 30% of the population bought music in the last 12 months. Your theory that artists are double dipping is mostly false.

  3. Visitor

    The radio imperialists stand no chance against the power of art. Power that only we as artists posess.

    Reply
  4. Visitor

    I am same visitor from above.

    So how is it that performance royalties can be paid in the EU and not the USA?

    Where are the EU radio stations getting the additional revenue to pay the royalty?

    Wouldn’t it be a simple argument to settle if given the numbers and an accountant about 10 minutes to figure out?

    Reply
    • Casey

      There are a lot of stations that are subsized by the government or tv licenses in Europe. Many countries have their own radio networks. We have NPR, but that is not really comparable.

      Europe has less radio stations than the US and significantly more people. Simply put the radio landscape is completely different. To think what works in one market will in another is just a silly assumption.

      Reply
      • Visitor from Above

        I am not assuming anything.

        I am just saying that an account could look at the numbers and end this debate very quickly.

        If some of the EU radio stations are partly subsidized by the government, then are their books open to public examination? or is it not that easy?

        Reply
      • Yves Villeneuve

        Canadian radio stations are not subsidized at all…yet they are profitable while paying labels and performers.

        You are obviously an insider, not an outsider looking in. Start observing and thinking out of the box rather than applying automatic defence mechanisms is my suggestion.

        Where is your stats that the EU is subsidizing private radio companies?

        Reply
  5. you can't have it all!

    If they don’t want to pay for music rights, then I guess all labels should just stop giving them free CDs and files.

    Let the producers go and buy the music they want to play on air. Let’s see how they react to that.

    Reply
  6. Visitor

    You know for the vast majority of music’s history it was the record industry paying the radio industry for putting tracks on rotation.

    Reply
  7. MB3

    The best thing to do here is to stop supplying music content to US radio stations and prohibit US stations to broadcast any musical content which they have not purchased. Just as television stations have to buy any private production which they wish to air, in order to keep their audience and subscriptions, so should the radio stations. BTW, without musical content, these radio stations will not be able to see the same quantum of advertisers. So, infacf it is the musical content provider which is helping the radio station generate revenue through advertising. Are US based radio stations willing to pay a %age of advertising revenue they get from broadcasting a certain artist(s) musical content. Youtube does that, so why can’t US radio stations ? i guess it’s all about how much US radio stations wish to control their profit margins ! I am sure, these stations, in the absence of any musical content to broadcast, will simply agree to “start paying royalties” like rest of the world.

    Reply
  8. Chris

    Commercial Radio in the EU manages to pay royalties whilst still managing to operate in a cut-throat commercial environment. If a station earns money from advertising they should pay royalties – end of discussion. Just as Kim Dot Con and his ilk should pay artists for their commercial gain from art that they exploit so should radio.

    Reply
  9. radio & records vet

    Casey: Are you in radio?

    I am. I have been since 1975. I’ve even sat on the board of directors for a public/community non-profit radio station.

    NPR is a content provider, not a broadcast entity. You purchase NPR content as an NPR subscribing station. NPR is partially funded by the Corporation for Public Broadcasting. http://www.cpb.org/

    There are very few radio stations that do not utilize digital platforms today. Therefore they do pay some modicum of performance royalty.

    Terrestrial broadcasting will, SOMEDAY EVENTUALLY, be gone as we know it today. To advance legislation regarding existing royalty payments seems counter productive, when what we might want to create legislation for is advancing technologies, sure to take the place of terrestrial broadcasting … and yes, we should be giving back the frequencies to the public, which is who owns them to begin with.

    Radio has a license to use those frequencies. They do not own those frequencies outright. They technically belong to the citizens of the country, by virtue of the government.

    Anyway. Entrenched commerce interests will fight for what they perceive to be their rights in this or any arguement pertaining to money.

    Reply
  10. Les Garland

    I’m struggling to get it. Why is radio being asked to pay performance fees to music companies OR to an artist for the “privilege” of being a major force in the brand-building & breaking of an artist, subsequent music sales, concert ticket sales, merchandising, etc. This seems almost as silly as radio demanding a % of artist revenues. As we know, radio already pays a considerable amount to music publishers, which is shared with the writers.

    If, in the late 50’s & 60’s, radio had been forced into PAYING to take the risks of PLAYING Elvis, The Beatles, The Rolling Stones, Little Richard, James Brown, Led Zeppelin, Jerry Lee Lewis, and the hundreds of others belonging on such a list, i wonder if there would be this thing we know as Rock n Roll? hummmmm, what about Rap (Hip Hop)?

    Free airplay on radio is the equivalent of a free commercial. A long one, at that. Akin to what videos on television were once upon a time. I’ve never heard an artist complain about that great feeling of hearing their music for the very first time on a radio station, either.

    Reply
    • Jeff Robinson

      Les, I’d like to suggest you get out of corporate radio if these are your views.

      Radio is about creating a brand with great music. Diverse music serviced are like colors in a painters palette. The paint company (musician/record company) does not pay the painter (broadcast entity) to use their paints (at least not prior to the Telecom Act of 1996).

      In old days, creative radio sales team used to ‘sell’ the ‘sound’ of the station’ created with a diverse array of music. There is no way in hell you’re gonna tell me that the artists are dictating the sound of radio stations today. That’s an awful lot of power if they are and I know you don’t believe that to be the case.

      Reply
      • Les Garland

        Thank you, Mr. Jeff Robinson, for your suggestion. While I’m no longer in radio, “corporate radio” is NOT in my DNA. There’s IS the chance i do not comprehend your definition of ‘corporate radio’, so please forgive me if i’ve misinterpreted. Bulletin: In the old days creative radio sales teams used to sell RATINGS, no matter what was the “sound”.

        Reply
  11. DJ

    I own an internet station that plays music and I would choose paying for every record I spin over dealing with and paying royalty agencies… in a heartbeat! Internet stations must pay FOUR music licensing agencies, the most expensive of which is for Internet webcasters only. So we pay more, via higher rates and an additioanal agency that terrestrial radio doesn’t have to pay. Casey makes some very good and valid points. Plus everyone knows these agencies don’t pay these funds out fairly in the least. The smaller artists all too often don’t get their fair share while big major label artist get more than their share. The whole idea of these agencies being non-profit is a complete joke!

    Reply
  12. Earnest Scribbler

    Hey, Casey and all you radio apologists, I’ve got a question:

    Why do you pay your employees? Don’t you know that there are hundreds of eager young people who will will for nothing? Call ’em “interns”. They’ll be grateful for the experience as jocks, Pds, engineers, salespeople, reporters – even executives! Business schools spill out tons of unemployable commerce grads and MBAs who would jump at the chance to work for the experience alone.

    And think of the powerful effect this would have on your bottom line! Why … why, you could tell them that you’re not enslaving them, no, you’re promoting them as capable employees. Hell, your fundamental humanity and decency would shine through – ’cause you wouldn’t be asking them to pay for the privilege of working for you!

    Why stop there? Need a car or truck for the station? Just take it from the dealer – and take the gas, too! Asking you to pay is just silly – you’re promoting the dealership and the gas company!

    You see, I’m sure, how far this could go. Yes, America leads the world, once again – just as it should be! Radio will set the standard for American businesses – zero cost of doing business and 100% margin! You’ll win all kinds of awards.

    How pathetic, how stupid those performers are – how ungrateful! Asking to get paid for the use of their work is just un-American. It’s almost socialistic. Pay them today – why, it’s off to the gulag tomorrow to slave for Johnny Red!

    Thank you, radio guys, you’ve restored my faith in the fundamental wisdom of America’s commercial genius.

    Reply

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