U.S. Copyright Office Report Endorses Performance Royalty For Radio
February 5, 2015 at 1:55 PM (PT)
The U.S. COPYRIGHT OFFICE has released a new study, “Copyright and the Music Marketplace,” that recommends major changes to current copyright laws. Chief among them are requiring terrestrial radio broadcasters to pay performance royalties from sound recordings and giving publishers and other music rights owners the power to withdraw streaming rights from services. Essentially, performance rights organizations would evolve into "music rights organizations" that can bundle reproduction, distribution and performance rights together.
As noted on its website, "The COPYRIGHT OFFICE’s recommendations address almost every aspect of the music landscape, including the existing statutory licenses, the role of performing rights organizations, terrestrial performance rights for sound recordings, federal protection for pre-1972 sound recordings, access to music ownership data, and the concerns of songwriters and recording artists. These recommendations present a series of balanced tradeoffs designed to create a more rational music licensing system for all."
“Few would dispute that music is culturally essential and economically important to the world we live in,” Register of Copyrights MARIA A. PALLANTE said, “but the reality is that both music creators and the innovators who support them are increasingly doing business in legal quicksand. As this report makes clear, this state of affairs neither furthers the copyright law nor befits a nation as creative as the U.S.”
Why A Performance Royalty For Radio?
The report essentially undercuts radio's arguments that a performance would cripple its business structure and that the airplay's promotional value more than makes up for a royalty:
"Radio broadcasters argue that a sound recording performance royalty would unfairly impose a 'tariff' to subsidize the recording industry at the expense of broadcasters -— their opinion, the limited performance right and lack of royalties in terrestrial radio have not impacted the 'growth or supremacy of the U.S. recording industry.' This argument would seem to ring hollow, however, given the current challenges faced by that industry.
Radio broadcasters also point to the promotional effect of traditional airplay on sales of sound recordings as a reason for maintaining the status quo. Undoubtedly, sound recording owners recognize value in radio airplay, in particular for new releases. But any such value must be considered and weighed in the context of the overall earnings of the broadcast industry. Significantly, as consumer preferences shift away from music ownership, the potential for sales is becoming less relevant, and the promotional value of radio less apparent.
"In this regard, the creation of a terrestrial sound recording performance right need not overlook or negate the question of promotional value, because this factor can be taken into account by a ratesetting authority, or in private negotiations, to arrive at an appropriate royalty rate. Such an approach would appear to be a rational solution because it seems fair to assume that a willing buyer and willing seller would do the same."
Predictably, musicFIRST COALITION Exec. Dir. TED KALO welcomed the report's conclusions: “THE COPYRIGHT OFFICE is the nation’s preeminent authority on copyright issues -– and they don’t have a dog in this fight other than coming up with the best and fairest policy we can. When they call for an AM/FM performance right for sound recordings and 'licensing parity' to level the playing field among music services and technologies, that’s a game-changing moment for this debate.
“The COPYRIGHT OFFICE could not have been more clear that we need broad reform to make music licensing work better for everyone who loves and creates music. That includes artists, record companies, songwriters, music services, and above all fans looking for a sustainable, accessible music ecosystem.
“The COPYRIGHT OFFICE was particularly emphatic about the need to end the decades-long loophole that allows Big Radio to use any music it wants without paying artists or record companies anything, saying their arguments for promotion ‘ring hollow’ and promotion by radio is ‘less apparent’ than ever in a world moving towards streaming and listening-based models. It also categorically rejected the idea that satellite radio should have its own special below-market rate standard, calling the SIRIUSXM grandfather a ‘legislative artifact.’”
Reaction: The NAB
Just as predictably, NAB EVP/Communications DENNIS WHARTON took issue with the COPYRIGHT OFFICE's perspective: "As it has for decades, the COPYRIGHT OFFICE proposes music licensing recommendations looking only through the lens of copyright owners. What cannot be denied is that the U.S. music industry is the envy of the world, aided by a legal framework that enables 244 million listeners to enjoy free and local radio every week. We're pleased that CONGRESS recognizes the unparalleled promotional value of broadcast radio, and has rejected a punitive new fee on local stations. NAB will review this sweeping report and engage both CONGRESS and the COPYRIGHT OFFICE as they consider policies that recognize the interests of consumers and innovators."
ASCAP Pres. PAUL WILLIAMS offered his own perspective: "With its report today, the U.S. COPYRIGHT OFFICE was clear: the current music licensing system needs reform and fast. The report emphasizes how the current system undervalues musical works – something many of our members experience daily. The many proposed updates -– particularly recommendations intended to make the system more equitable for songwriters -– underscore yet again the inefficiency of the current system for music fans and creators alike. As outlined in the report, the current marketplace is strained by the 70-year old consent decree regime and is not appropriately responsive to the free market, particularly in our new digital world. As we continue to advocate for our members in WASHINGTON, today’s report is an important step towards meaningful reform."