Radio

Applauding the Fair Play Fair Pay Act

There was very exciting news for creators this week as on Monday, Representatives Jerrold Nadler (D-NY) and Marsha Blackburn (R-TN) introduced the Fair Play Fair Pay Act of 2015. This bill proposes a number of updates to existing legislation that would serve to correct antiquated provisions in the copyright act and bring modernization and fairness to the way performing artists and songwriters are paid.

Most importantly, the bill proposes to finally grant a public performance right for terrestrial radio broadcasts and to ensure that royalty payments are made in connection with streaming of recordings made prior to February 15, 1972.

The current system is antiquated and broken. It pits technologies against each other, and allows certain services to get away with paying little or nothing to artists. For decades, AM/FM radio has used whatever music it wants without paying a cent to the musicians, vocalists, and labels that created it. Satellite radio has paid below market royalties for the music it uses, growing into a multibillion dollar business on the back of an illogical ‘grandfathered’ royalty standard that is now almost two decades old.
— Congressman Jerrold Nadler

The United States does not currently grant a public performance right for radio broadcasts. (A surprising fact when you consider that the other nations that don't are China, Iran and North Korea.) This means that when a song is played on terrestrial radio, neither the singer nor the record company get paid (while the songwriter does). The Fair Play Fair Pay Act would grant that right, allowing artists to make money when their performances are broadcast. 

A side benefit of this could also mean that US performers would become eligible to collect public performance royalties from foreign broadcasts. Currently they do not collect these neighboring rights, as foreign governments don’t allow their PROs to pay on broadcasts of US recordings, their rationale being, “why pay US performers if the US doesn't pay ours?” (This would also require the US signing The Rome Convention, but passage of the Fair Play Fair Pay Act would certainly pave the way.)

Granting a public performance right would finally end a long-standing record business tradition originating from the idea that radio equals free promotion and that performers are ultimately paid through increased record sales. While that may have been true once, as consumers transition from purchasing music to streaming it, that free promotion will no longer mean increased revenue.

Under current law, internet and satellite radio stations are paying a digital public performance royalty. By ensuring terrestrial broadcasters make these payments too, the playing field for terrestrial radio stations and internet and satellite broadcasters will leveled, allowing greater competition and standardization of rates and payments.

To answer critics that suggest the bill will make it difficult for radio stations to make money, it attempts to mitigate the expense by putting in place caps on their royalty payments. Stations with less than one million dollars in annual revenue would not pay more than $500 per year. For non-commercial stations that amount would be $100 per year, and religious stations or incidental uses of music would need no royalty payment at all.

The other very important aspect of the bill is implementing royalty payments for so-called pre-1972 recordings. These recordings are not covered by federal law, and as a result, some digital broadcasters have not been paying any royalties when the recordings are streamed. Several lawsuits are working their way through the courts on this issue, with an important decision rendered against SiriusXM, and a similar lawsuit pending against Pandorabut it remains to be seen as to what the final outcome will be.

While the Register of Copyright’s February 2015 report entitled Copyright and the Music Marketplace [PDF] suggested that the law be changed such that pre-1972 recordings receive protection under federal law, Nadler's and Blackburn's bill would at least insure that uses of those recordings will generate the same royalty payments, even if they don’t get full copyright protection.

A couple of other changes proposed include provisions protecting songwriters and publishers from companies trying to lower rates, as well as streamlining the process of paying producer royalties, and allowing artists to receive direct royalty payments despite how their labels may wish to handle them.

In all, this is a very important step in protecting the rights of performing artists. It will not face easy passage however, as the National Association of Broadcasters will undoubtedly fight it, expressing their resistance to it before the bill was even announced.

Pandora's Box

News about Pandora seemed to explode this week as several artists wrote high-profile pieces expressing their dissatisfaction with the internet radio company's royalty rates as well as the company's attempts to lobby for what appear to be even lower rates.

798px-Pandora2-Logo.svg.png

On Sunday, members of Pink Floyd penned a well-annotated op-ed in USA Todayand on Monday, David Lowery (from Cracker) posted statements showing that he makes less from Pandora than from a t-shirt sale. These two pieces are in addition to the recent and well-publicized email exchange between Blake Morgan and Pandora founder Tim Westergren. On Wednesday, Westergren responded with a lengthy blog post.

While I think that the conversation that is starting to happen is very important for the entire streaming business, it represents the opening of a Pandora's box for Westergren. Over the past couple of months, Pandora's attempts to advocate for lower rates have increased, and with them, so has publicity about their efforts. For Pandora, what began with a letter inviting artists to have a conversation about the rates, has now backfired as these high-profile artists turn against them. Also, Pandoa's purchase of a terrestrial radio station in an attempt to become eligible for the lower rates paid by terrestrial broadcasters smacks of avoiding the conversation altogether.

There should be no mystery about my feelings toward streaming music services. While I'm not satisfied with the absolute value of current payouts to artists, I consider these services to be terrestrial radio replacements. As such, I would argue that the payouts are in line with the audience. (Or at the very least, we should be more clear about what each of these revenue streams represents in terms of audience and therefore potential revenue.) All of that said, I'm an optimist here—this is a new market, and a growing one—so my expectation is that these amounts will grow in the future.

Streaming music represents a new model that needs to be nurtured, if not wholly embraced. Consumers are less and less satisfied with a music consumption model based upon ownership. The tide is turning toward one of access. Streaming represents the future, and the money will come as listeners become more accustomed to the idea of streaming and sign up for particular services they like.

In may ways, opening Pandora's box could actually be the tipping point in the conversation about streaming royalty rates specifically—and public performance rates in general. While no terrestrial public performance rate for sound recordings even exists, the other rates form a confusing jumble that no longer makes sense for the music industry. Starting this conversation will go a long way toward fixing that. What might be bad for Pandora may actually be good for the industry as a whole.