musicFIRST Coalition Doubles Down on Calls for Terrestrial Radio Royalties as House Hearing Gauges the Music Modernization Act’s Effectiveness

American Music Fairness Act
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American Music Fairness Act
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Photo Credit: musicFIRST

Capitalizing upon a congressional hearing on the Music Modernization Act (MMA), the musicFIRST Coalition is once again calling for the passage of legislation that would compel stateside terrestrial radio stations to pay recorded royalties.

Held specifically by the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, the mentioned hearing (“Five Years Later – The Music Modernization Act”) took place in Nashville this morning. As its title suggests, the hearing was designed to analyze the effectiveness of (and potential areas of improvement within) the half-decade-old MMA.

Witnesses including Mechanical Licensing Collective (MLC) CEO Kris Ahrend, DiMA CEO Garrett Levin, and Big Machine GM Michael Molinar – the latter two individuals also sit on the MLC’s board – appeared at the hearing, ahead of which musicFIRST sent a letter to the committee’s chairman, ranking member, and other members.

Shared with Digital Music News today, the message urged the previously noted recipients “to also consider the ways in which artists’ fight for compensation for the use of their work continues” – while simultaneously underscoring the current royalty framework’s global implications.

“By failing to pay artists anything at all when their music is played domestically,” musicFIRST wrote, “American artists also lose out on royalties abroad. The vast majority of foreign nations – those who do already pay artists for radio plays – withhold royalties from American music artists whose songs are played in their countries, simply because the United States does not pay their artists here. Annually, this amounts to approximately $200 million in lost income for American artists.”

Of course, the organization’s claim that “the United States does not pay their artists here” refers to the fact that AM/FM radio stations cough up only for the use of underlying compositions (not recordings) in the States. And on this front, musicFIRST likewise took the opportunity to call for the passage of the American Music Fairness Act.

Reintroduced in February, this bipartisan measure would compel traditional radio stations to begin paying for recordings. Needless to say, Big Radio has ample incentive to keep the existing framework in place. And as part of the comparatively straightforward goal, the National Association of Broadcasters has long been pushing its competing Local Radio Freedom Act, which simply prohibits the imposition of “any new performance fee, tax, royalty, or other charge” on local stations.

“We urge you to continue building upon the MMA’s progress by supporting the balanced, bipartisan and bicameral American Music Fairness Act,” concluded musicFIRST, which counts as members the RIAA, the Recording Academy, SoundExchange, and SAG-AFTRA, to name some. “We look forward to working with you and your staff on this essential next step in the continued effort to modernize the music industry.”

Notwithstanding the letter, terrestrial radio royalties received only brief mentions during the congressional hearing itself. Instead, despite previous criticism of the MLC, Ahrend touted the entity’s performance thus far (“we have already matched nearly 300 million of the historical royalties that DSPs were not previously able to pay”), whereas different witnesses expressed concerns about artificial intelligence and the accuracy of MLC data.

“The unpaid royalties that we have accrued, we hold,” Ahrend said during one of the hearing’s more interesting exchanges. “And we hold them until we are able to pay out the underlying royalties, and then we pay those royalties with interest. The monies that we hold are invested conservatively through institutional financial firms in financial investments intended to deliver the rate of return the statute requires while minimizing risk as much as possible.

“That is not an easy task, but it is one that we have undertaken. We monitor it carefully, we work with outside fee-based advisors, who have no financial benefit in the process either, to ensure that we’re doing that as effectively as possible.”

“Are the board members participating in that process, in that decision-making process, or is that a decision-making process that you are solely in charge of?” asked Virginia Representative Ben Cline.

“No, the board is fully involved in that process,” responded Ahrend, who subsequently disclosed that the MLC has “$321 million in pending blanket royalties” and “historical unmatched royalties” of north of $400 million. “They adopted a policy, an investment policy, that guides how we hold those monies, and we update them regularly on our progress – as do the advisors that we’ve hired.”

“Do you make public that information as well?” the lawmaker inquired.

“We have not made public the investment policy,” replied Ahrend, “because the policy contains not only the parameters that I just described, but also the specific guidance that our advisors have given us on where to invest the money. And they advised us that it is not good for security purposes or for market-manipulation purposes to make public the information about where we’re investing the money.”