Performance Problems: Are Broadcast Recording Royalties Worth It?

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As the often sophomoric battle over performance radio royalties churns on Capitol Hill, some fresh figures are emerging.

According to a GAO finding, the Performance Rights Act could inject $18.7 million annually – just for starters – into US-based label accounts.  The Act would force terrestrial stations to pay for broadcast recordings, a long sought-after measure.

But that is simply a calculation using the two-thirds of stations earning less than $1.25 million annually.  After further analysis, the GAO expects to produce a far higher estimate from bigger stations and international broadcasters.  “The additional revenue from a performance right would benefit record companies, musicians and performers, and session musicians differently, but could lead to more investment in the creation of music,” the report concluded.

Label capital continues to evaporate, a major motivation for the current Congressional push.  But increased royalty requirements could cause significant collateral damage, introducing tricky questions of the overall business and societal impact.

In its report, the GAO predicted that some stations would simply go out of business, bankrupted by the increased fees.   Others would sidestep the requirements by shifting towards non-music programming.  Separately, the FCC urged the GAO to examine the impact of inevitable staffing cuts, including the reduction of critical weather, emergency, and news functions.

This is a complicated debate with complicated ramifications.  Major broadcasters have always argued that without their promotional muscle, labels could never gain the traction they need on newer songs.  Others, including A2IM chief Rich Bengloff, notes that this argument only goes so far – after all, plenty of catalog and oldies-focused stations are benefiting from already-established artists and songs, without offering compensation.

But declining advertising revenues are strapping stations, and sources to Digital Music News note that labels could be inviting a disastrous result.  Instead of playing major label content, several programmers and station owners have privately indicated that playlists could shift towards unsigned and unaffiliated artists. Those relationships could be created with waivers on performance payouts, according to the sketch plans.  So, instead of Ludacris, an unknown Atlanta rapper would instead get some airtime, and the huge promotional lift that results.