Phoenix Center Study: Promotional Value Of Music On Radio Should Not Affect Federal Law Regarding Performance Royalties

Phoenix Center

A just-released PHOENIX CENTER economic study, "Promotional Effects And The Determination Of Royalty Rates For Music," found that any promotional effect is fully internalized in a marketplace bargain between the music and radio industries. As such, the study concludes that any alleged promotional effect provides no basis for federal law to mandate the free use of music by the terrestrial radio broadcast industry. 

Concluded study co-author and Senior Fellow Professor T. RANDOLPH BEARD: "If the promotional effect is large enough to justify a zero royalty rate, then the music industry will voluntary accept a zero rate in a negotiation with broadcasters. If not, then a positive royalty rate will be established." 

Added co-ahtor and Chief Economist DR. GEORGE S. FORD: "Promotion provides no basis for federal law to mandate the free use of music by the radio broadcast industry/ Promotional effects, even if present and strong, are not a type of market failure requiring a legislative or regulatory fix." 

"Our analysis shows that a market-negotiated royalty rate balances the income derived by commercial users of music and any promotional effect those users provide, revealing that any promotional effect is fully internalized by the parties," said study co-author and Senior Fellow Professor MICHAEL STERN. "In layman's terms, this means that if you use music to make a profit, then you should have to negotiate with the rightholders for the right to do so." 

NAB EVP Communications DENNIS WHARTON commented on the findings: "NAB is pleased that CONGRESS has long rejected a job-killing fee on AMERICA's hometown radio stations while recognizing the unique promotional value that local radio provides record labels and performers. Every week, local radio jump-starts careers of new musicians and exposes 265 million listeners to legacy artists, all for free. 

"Our stations are proud to be a primary platform for new music discovery, and NAB will strongly oppose RIAA-backed legislation that would transfer hundreds of millions of dollars from local radio to mostly offshore record labels." 

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