Royalty Fees = Royal Pain?

[TheBigA]

Maybe it is time for grass roots broadcasters to set some strategic fires. Kick off a campaign asking congress to have hearings and write legislation that would collect royalties that would be dispersed directly to the musicians. Campaign that the record companies do not belong in the equation.

The record labels own the copyrights, and when you're talking about royalties, the primary issue is compensation for the copyright. If you're talking about payments strictly for musicians, royalties are probably not appropriate, except that they've been bundled with labels and artists.

My argument is this legislation is attempting to place 19th century rules on a 21st century problem. The public has decided that free music is a right. The musicians and the labels want to get paid. Now what?

The proper way for this to be handled in the digital age of for artists (or their representatives) to own their own copyrights, and make money directly from them. In other words, the musicians should sell their own advertising, get their money from that sponsorship, and then provide their music for free to media. In fact, the sponsors of the music should pay media for their access to those networks, combining music and a message, using radio, TV, and the web. THAT is my solution to this problem.

 

[amfmxm]

One of my buddies is on our state radio association board and says that the Commerce Department's proposal is DOA--that over the past year or so we've got 270+ members of congress lined up to block it. We'll keep our fingers crossed, but I'm not sure it's worth losing sleep over.

With all due respect, I've always had a little difficulty getting too riled up about this. For all the disagreements I've had with the NAB over the years, they seem to be on top of this fight--and seem to have more clout in DC than the music industry. Our broadcast associations do a good job of lobbying the legislators and we often know these people on a first-name basis. FWIW, I don't get the sense that they really want to piss us off.

And, God forbid, even if this campaign succeeded in achieving some sort of radio royalty, it is hard to imagine that it would be a significant slice of revenue. No, I can't envision a Pandora-like 50 percent.

We all worried for several years that web royalties would make streaming unaffordable--and some actually bailed out in fear. Is Philly's B101 still on the sidelines? We've been streaming in our small markets now for years, and the bite is a few hundred dollars a year. Lunch money.

Our current music licensing fees are what--around 5 percent? That is not going to explode to 50 percent. It just isn't. Get real. And though none of us would be happy about tossing another few thousand bucks a year at the music industry for the privilege of making them rich--by playing their damn songs--it would not likely put any of us out of business, either.

 

[TheBigA]

Our current music licensing fees are what--around 5 percent? That is not going to explode to 50 percent.

I think you're right about that. The RIAA has been saying they don't want to start at a top rate, as they did with digital. They just want to stick their foot in the door. The most important part is getting control of their music. The legal RIGHT to say what radio can and can't do with their music. The money part will come later. However, according to attorney David Oxenford, if they use the same benchmark to set the royalty rate, it will be closer to 15% than 5%.

 

[bossbill]

Well, if RIAA thinks they will extract 15% of my revenue, I'll turn my radio stations off first. I can't speak for Pandora and others, but I already give 4% of revenues to the music licensing organizations, and the proposed "small market" minimums under the "Performance Fee" will take another 2.5% of my revenues. Since 6.5% is more than I have netted in recent years, why would I bother turning the transmitter on?

Small markets get slammed on this deal. We don't get $$ like the big boys do for promoting music.

And if you're a broadcaster and you're streaming and only paying a few hundred dollars a year, you don't have enough online listeners to make a dent.

 

[TheBigA]

Small markets get slammed on this deal. We don't get $$ like the big boys do for promoting music.

That's another good point. The big stations can say, "We'll just bill them for airplay." That works when you're a reporting station in a top market. But if you're neither, the labels don't care if you play their music, and they treat you like freeloaders.

Steve Newberry of the NAB tells people in the music industry how his small stations in rural Kentucky get no music service or promotions from the labels. They look at him like he's on drugs. But I know he's telling the truth. He has to go to the Wal Mart to buy music to play on his stations. If a 3rd circuit court ruling in 1940 was used as precedent (RCA and Paul Whiteman vs. the WBO Broadcasting Corporation), those CDs he bought should be exempt from performance royalty. Because they're his property, not promotional copies from the labels.

 

[Gatekeeper007]

Get Music from a record label? Gee what great idea, I wish I had thought of that, only problem is they would probly send you songs based on the size of your station and I would get one song per year.

 

[Carmine5]

As a follow up to this discussion there appears to be a tug o' war going between Nancy Pelosi and two Congressmen over the PRA issue:

"Congressmen Gene Green (D-TX) and Mike Conaway (R-TX) circulated a letter this week to their colleagues, emphasizing their opposition to the proposed Performance Royalty for radio. However, House Speaker Nancy Pelosi announced Thursday that she backs the controversial royalty."

http://www.fmqb.com/article.asp?id=1772195

The only positive I can see is the possibility that new artists, and primarily local artists, who op out of collecting such a royalty might get more airplay. Jerry Del Colliano has suggested that stations with a music format try to incorporate more new artists in their playlist should the PRA pass.

Of course, I'm assuming that an artist has the option to NOT be a part of collecting a performance royalty. If that is case, then those who do op out should be rewarded with frequent airplay.

c5

 

[KeithE4]

Of course, I'm assuming that an artist has the option to NOT be a part of collecting a performance royalty. If that is case, then those who do op out should be rewarded with frequent airplay.

Will the people who actually create the music even see a dime of this shakedown royalty? If they already have contracts with the record companies saying how much money they get, I'd be surprised if that would go up if/when the companies' revenue increases with this fee.

I wouldn't blame the radio stations one bit if they said "**** you" to the record companies if this comes to pass.

 

[johnbasalla]

Re: Music service

There is a website for radio stations called (I think) DMDS and posted there each week are tons of new releases. Just download them. Then there's another service that you can purchase that will, once a month or so, send you a 20+ song CD with all of the latest hits in whatever format you sign up for. Record companies still send promotional copies to stations, but that's not always necessary in this digital on-line age.

 

[TheBigA]

Of course, I'm assuming that an artist has the option to NOT be a part of collecting a performance royalty. If that is case, then those who do op out should be rewarded with frequent airplay.

The problem isn't just "opting out," but all the legal paperwork that will be required to prove every song played doesn't require royalty payment. Every station that has more than $1.6 million in revenues will have to get waivers from all artists it plays. That gets costly after a while. That's really what this royalty is about, taking away the blanket exemption.

What has happened in other countries that have this royalty is older music doesn't get played, because it's too expensive. So the older artists don't get paid. The RIAA is trying to use the older artists (like Mary Wilson and the Four Tops) as a way of justifying the royalty, but they're the ones who will be hurt, as stations look for exempt music to play, and will avoid classic hits from the 60s, 70s, and 80s.

There are lots of problems here in that the music industry is operating like a cartel, using its owned & operated subsidiary, SoundExchange, to act as a collection agency. At least in the publishing world, you have independent agencies, like ASCAP and BMI, who collect and disburse the money.

The biggest problem though is the system being used to calculate the royalty rate. According to the proposed law, it's the same system used for digital royalties, and we have seen the results.

 

[Carmine5]

Of course, I'm assuming that an artist has the option to NOT be a part of collecting a performance royalty. If that is case, then those who do op out should be rewarded with frequent airplay.

The problem isn't just "opting out," but all the legal paperwork that will be required to prove every song played doesn't require royalty payment. Every station that has more than $1.6 million in revenues will have to get waivers from all artists it plays. That gets costly after a while. That's really what this royalty is about, taking away the blanket exemption.

What has happened in other countries that have this royalty is older music doesn't get played, because it's too expensive. So the older artists don't get paid. The RIAA is trying to use the older artists (like Mary Wilson and the Four Tops) as a way of justifying the royalty, but they're the ones who will be hurt, as stations look for exempt music to play, and will avoid classic hits from the 60s, 70s, and 80s.

There are lots of problems here in that the music industry is operating like a cartel, using its owned & operated subsidiary, SoundExchange, to act as a collection agency. At least in the publishing world, you have independent agencies, like ASCAP and BMI, who collect and disburse the money.

The biggest problem though is the system being used to calculate the royalty rate. According to the proposed law, it's the same system used for digital royalties, and we have seen the results.

Should the PRA pass, I can see where a collective or a clearinghouse could emerge that would allow a new artist or group to sign on and waive a performance royalty in exchange for more airplay. Because, as it is, if all artists and bands are under a compulsory royalty arrangement, it would be nearly impossible for new, untried groups to get airplay.

Just as a point of comparison there is an interesting chart on this website:

http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/

It shows the amount of play/sales needed for an artist to receive $1.60 in royalty fees. According to the figures it would take over 1.5 million plays per month on last.fm (and we could consider something similar for broadcast radio) for an artist to earn 1.60 verses 155 CDs sold for the same amount.

The point is, that the amount of money earned through a royalty is so miniscule that such an arrangement could actually end up doing more damage to an artist's or band's career then help it.

c5

 

[bossbill]

Yup. But the foreign-owned labels will do okay.

 

[TheBigA]

Exactly. The artists and musicians must register with SoundExchange to collect any royalty. But since SoundExchange is a subsidiary of the RIAA, you can bet the labels will all get their money.

This proposed law is a very bad system. Even if you accept the concept of paying artists, this proposed system is bad, as we've all learned with the digital royalties.