Pandora: Broadcasters Should Pay Performance Royalties

pandoraLast week, after news that Pureplay Webcasters had reached an agreement with Sound Exchange on performance royalties, Internet radio industry darling Pandora made more news by announcing support for the Performance Rights Act before Congress. That bill would require AM/FM broadcasters to pay performance royalties as well.

Deep background, for those who don’t have it, is that in 1998 the Digital Media Copyright Act (DMCA) was passed requiring various forms of new media, including satellite and Internet radio, to pay performance royalties on digital media transmissions. Traditional broadcasters have not paid performance royalties. Broadcasters have maintained that the benefits that musicians receive from having their songs played on radio stations is substantial and therefore replaces the need for additional payments.

While I believe that’s true – that the value of playing a song on the radio is substantial – the fact remains that record companies are suffering from an enormous shift in the way music is purchased, and their business is way down. I’ve been saying for a long time that future of the music industry – both record companies and music services (AM, FM, online, whatever) is going to be one of sharing revenue. Radio stations can’t survive if record companies do not find a way to profit.

There are many ways to argue against Pandora’s stance. Just because they have to pay royalties, why does that mean broadcasters should. Isn’t that an eye for an eye mentality? Sure, I think that’s a good point  – why should Pandora want broadcasters to be penalized in the name of fairness?

A much better point, also made by Pandora, is that they want to see musicians get their fair share. Because, whether broadcasters like it or not, if musicians and their labels can’t make money, the system is flawed, and the industry is doomed.

4 responses

  1. Many artists have been screwed for decades due to bad label deals. The strategy to ensure that musicians get their fare share is absolutely correct, but the tactics of getting there are as confused and intertwined as a clump of lent. It is a mistake to connect the financial fate of music and musicians to the record labels. Those days are over. The fate of the music business is now in the capable hands of musicians and/or their handlers who can navigate all the territory with or without a major label. There will still be labels and bands with label deals, but there are already infinitely more bands who are doing it alone or with patched together resources. There are only so many label deals, but there are tons of bands. Adding layers of taxation without first unwinding old licensing arrangements only serves to undermine the key industries that support the music business. Let’s make sure the new reality is not only fair to artists but to all pieces of the music business puzzle. Saving the major label business now is putting emphasis in the wrong place. (Think about the car business: With or without Pontiac, there will still be cars.) We should be focused on the artists, not the companies that exploited them for decades.

  2. Thought you might be interested in this. Clear Channel and Radio One are going hard after Conyers for his work on the PRA, using free airtime on 53 channels in 16 markets to blast him and other members of the CBC for their support.

    From Media Matters:

    Radio One Misleadingly Links Rep. Conyers To Bribery Scandal In Retaliation for Royalties Bill

  3. You say “Radio stations can’t survive if record companies do not find a way to profit”

    Really? Radio stations are no more in the business of making profits for record companies than record companies are in the business of making profits for radio. Radio stations and record companies have always enjoyed a mutually beneficial relationship but that is changing along with everything else. How interested would record labels be in a perforance tax if radio sought to get a percentage off the top of every CD sold? After all, advertising is down and record companies can’t survive if they don’t find a way for radio to make a profit, right? Radio and record companies would be trading dollars an in an odd way instituing a new form of legal payola with record companies paying radio stations for sales instead of for spins

    With artists cutting labels out of the loop anyway through digital distribution, I doubt they are shedding any tears for a number of labels that for years have been perfectly content to exploit them on the premise that only a major label could get them “on the radio”. Let the listeners decide what they want to buy and let existing copyright law protect artists from piracy or unwanted redistribution. Let the record companies figure out how or whether they will be relevant in the future by serving their customers and client artists without subsidy from an entirely different industry.

  4. Jennifer Lane

    Jeff and Mike make good points. Mike’s right – the system is broken and would best serve everyone if it got rebuilt from the ground up. I’m just skeptical that can happen – given Congress’ support of the music labels, the existence of the DMCA, the inclination of the Copyright Board to support the labels, etc..

    I read another comment by a Radio-Info reader who suggested a good point about Pandora’s fairness campaign, which was that if online stations really want to see equity among various platforms, they should have to enjoy the expenses and demands of FCC rules and regulations that broadcasters have.

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