Analyzing the loophole in US radio royalties for music performances

Did you know? In the U.S., terrestrial radio stations don’t pay royalties to non-songwriter performers or record labels! Unlike other countries, only songwriters and publishers get paid. Weintraub attorneys Scott Hervey and Jamie Lincenberg share how musicians are pushing Congress to change this with the American Music Fairness Act in this installment of “The Briefing.”

Get the full episode on the Weintraub YouTube channel here or listen to this podcast episode here.

Show Notes:

Scott

As you are aware, or you may not be aware, that in the United States, terrestrial radio broadcasters do not have to pay royalties to the singer or the record label for the performance of music. That’s correct. While radio stations pay the songwriter and publisher or performance royalty, the non-songwriter performers, whether that be the singer, guitar player, or drummer, as well as the record label, get nothing. This is different than most other countries around the world and is also different from how royalties are paid for songs that are streamed over the Internet, such as on Spotify or Pandora. Some musicians are pushing Congress to change that.  I’m Scott Hervey from Weintraub Tobin, and I’m joined today by fellow Weintraub lawyer and frequent “Briefing” contributor Jamie Lincenberg. We are going to talk about what some are calling a loophole that benefits US radio station conglomerates and the arguments to change that in today’s installment of “The Briefing.”

Jamie, welcome back to “The Briefing.”

Jamie

Thanks, Scott. Glad to be here again.

Scott

So, Jamie, before you heard my opening, did you know that US radio stations don’t make any payments to the non-songwriter, artist or record labels when they play music over terrestrial airwaves?

Jamie

I don’t think I did.

Scott

I don’t think most people knew that, to be quite honest with you. So, the fact that non-songwriters and record labels get nothing when a US radio station plays a song has its genesis in the difference in rights a copyright holder in a composition has from the rights a copyright holder in a sound recording has. So, first, let’s clarify a couple of things. So one, a piece of recorded music has two copyrights. The first is in the underlying musical composition, and the second is in the sound recording itself. The rights in a musical composition are usually owned by a songwriter or the music publisher, and the sound recording rights are usually owned by either the artist or a record label if there is one. Now, the copyright act vests copyright holders with certain exclusive rights. However, the rights a copyright holder has in a sound recording is more limited than the rights a copyright holder has in a musical composition. The copyright owner of a sound recording has the right to make and distribute copies of the sound recording and make derivative works from it, such as remixes, videos using the sound recording, etc. The public performance rights for sound recordings, however, is limited only to digital audio transmissions.

This means that AM and FM radio stations do not have to get permission or pay royalties to publicly perform a sound recording. However, since the Copyright Act grants a copyright holder in a composition the right to control the public performance of that composition, a US radio station does have to pay the songwriter or publisher a royalty for the public performance of that composition when they play music over the airwaves.

Jamie

This is only the case for US radio stations, correct? Outside of the US, non-songwriter artists and labels are paid a royalty by radio stations. In the US, a digital audio transmission, such as streaming a song on Spotify or the like, triggers royalties for artists and labels.

Scott

Yeah, that’s right. So according to a post in Variety that’s written by senators Alex Padilla and Marshall Blackburn, foreign performance royalty collection entities, those who already pay their own local artists for radio airplay, currently withhold royalties to American music creators simply because the United States does not reciprocate by paying their performers. So those senators estimate that American artists are missing out on approximately $200 million each year.

Jamie

Wow, that’s quite a big number.

Scott

It is.

Jamie

So what legislation is being proposed on this now?

Scott

So, there was a bill that was proposed last year called the American Music Fairness Act, which would establish that the copyright holders of a sound recording have the exclusive right to publicly perform the sound recording through an audio transmission. So, this would essentially require terrestrial radio to secure a performance license for the sound recording. Now, this will most likely be a compulsory license, and the copyright royalty board will determine the royalty rates, just like they do for the compulsory license issued for compositions. Now, the bill proposes certain exemptions for smaller broadcast stations who would have really only have to pay, well, it’s proposed that they would only have to pay a flat fee of either $2 per day and not more than $500 annually to play unlimited music. And for certain public radio stations and college radio stations, and nonprofit radio stations, it would only be $100 per year.

Jamie

That’s interesting, Scott. It seems like it’s interesting to me that, this hasn’t been adopted yet until this time.

Scott

Yeah, I agree.

Jamie

When’s the last time you listened to the radio?

Scott

Um, that’s very funny. Last time I listened to the radio is actually this morning as I was driving in my car coming back from a conference, so, but I got to say, I do not normally listen to the radio. I do normally listen to satellite radio, so, which pays, by the way, a performance royalty to the performers and the songwriters as well. So, you know, it’s interesting with the kind of crash or decline, maybe is a kinder word in the audience for traditional terrestrial radio, this is an additional cost for terrestrial radio that they would have to bear. We may very well see maybe some, if this does in fact, pass, we may see some consolidation or some closings of some smaller radio stations.

Jamie

Or more ads.

Scott

More, yeah, more ads! More, but I mean, if you got less people listening to terrestrial radio, the value of those ads, the amount that the ad sale guys can sell those ads for, that goes down, too. It’s just a really, that kind of a really bad death spiral. But in any event, that’s the scoop. I thought everybody would be interested knowing that in the United States, non-songwriter performers have don’t get paid a royalty. Historically, since the beginning of radio in the United States, have not received a royalty.

Jamie

Yeah. Thanks for sharing that with us, Scott.

Scott

Thank you for listening to this episode of “The Briefing.” We hope you enjoyed the episode. If you did, please remember to subscribe, leave us a review, and share this episode with your friends and