For decades, radio has enjoyed a statutory exemption to royalties to the labels/artists. The exemption goes back when there was a closer relationship between the labels and radio, not just in the payola days but even into the 60s when the "good guys" and "boss jocks" were actually promoting music on the air.
It goes back before that. Two of the founding companies in radio also owned record labels. RCA owned NBC, and they also owned the RCA record label. CBS owned Columbia Records. When ABC came along, they also started their own record label: ABC Records. So the connection between radio and records goes to its founding. From the beginning. radio paid songwriters. ASCAP's history pre-dates radio. But ASCAP was a monopoly, and used that power to overcharge radio stations. So in the 1930s, radio companies came together and started BMI, which is Broadcast Music Inc.
The time for record labels to fight for their royalty was in the 1930s. That's when every other country set up their radio royalty systems. But in the US, the record labels were tied to broadcasting. Some of the biggest recording artists hosted radio shows. Bing Crosby, Paul Whiteman, the Carter Family, and many others hosted network radio shows. So artists and labels were making money from radio. They didn't need a royalty.
However in the late 1980s and early 1990s, the major record labels were sold to foreign companies. RCA records was sold to the German BMG, Columbia was sold to Sony, and MCA was sold to the French Vivendi. Those countries have label royalties. So they wanted those royalties extended to the US. The problem was how to do it. For many years, the assumption was to simply adjust the existing songwriter royalty to include labels and artists. Have ASCAP & BMI include labels in the split. But the writers objected, because it would cut into their money.
In the 2000s, this idea of creating a second royalty system came about. It would start a new royalty using SoundExchange to collect it. The problem was that by that time, rradio stations had been operating under the existing system for over 70 years. They also had begun using SoundExchange for streaming. They felt they were already paying labels and artists for those songs. The new royalty was basically paying twice for the same music. The record labels didn't see it that way. That's where we are now.
The problem as I see it is that the labels refuse to negotiate. Radio has had a very close relationship with music for years. The royalty radio pays to BMI and ASCAP (as well as GMR and SESAC) are NEGOTIATED royalties. The royalty the labels want to impose is a government-set royalty with rates decided by copyright judges at the Library of Congress. Radio wants this new royalty to be more like the existing one. They also want a discount for the streaming royalties they already pay. They get that discount from ASCAP and BMI. But the labels won't negotiate. That's where we are now.
The law was written to take into consideration small stations, especially noncommercial stations, where the "talk" to promote music may still be more prominent.
The small stations are the ones who are most opposed to this new royalty. They got a similar offer when SoundExchange started, and that small royalty has grown to thousands of dollars. The royalty judges increase the rate every three years. So while it may start out at a hundred dollars, it won't necessarily stay there. That's why it's important that this is a negotiated royalty, not set by judges. They also don't like the idea that all stations pay, even those that don't play music. The current proposal is that all stations would pay, regardless of format.
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