As Elizabeth has noted, traditional radio stations pay royalties to songwriters whenever they play music over the air. However, they don't pay money to the singers (or their labels). When the Copyright Act was last given a complete overhaul (in 1976), the broadcasters, equipped with an extraordinarily powerful lobby, convinced Congress that labels and performers didn't need the royalty because radio play was valuable in and of itself to performers–getting radio play ensured that they would sell more albums.
Since then, over-the-air terrestrial radio has been joined by satellite radio and webcasting as means of performing music to the public. As these digital services came to market, record labels, suspicious of their effects on their bottom line, were able to ensure that these new services paid royalties to performers in addition to the fees paid to songwriters.
Now, the RIAA, with its own star-studded lobbying juggernaut, is renewing its call for traditional radio stations to pay performers and labels a royalty fee. The House IP Subcommittee held hearings on this issue yesterday. And there's been lots of rhetoric thrown about by these two industry groups that, from time to time, have had cause to disagree vehemently with PK.
Each side has some valid arguments. Yes, artists should be compensated for their work. Yes, radio play is a massive booster for record sales. But alongside these arguments, both industries are also throwing around illogical and irresponsible talking points that only serve to muddy the issue.
Who's Exploiting Artists?
For example, the RIAA keeps telling sob stories about starving artists who signed with a label and got loads of radio play but never saw a cent for their hits, even though oldies stations even today play them. They say that a performance right would prevent the injustice of a hit artist having to scrape for cash.
The problem with this argument is that it fails to address the real problem. Traditional radio has never paid a statutory royalty to performers, and those performers who were paid a pittance were paid a pittance by the recording industry. The labels, who were turning profits on the sales of these performers' albums, bear as much blame for the poor fortunes of these artists as broadcasters–maybe more. And creating a royalty payment from broadcasters certainly doesn't prevent the exploitation of artists by middlemen and labels, so long as the payments can be contracted away.
Equal Injustice?
Another argument the record labels raise is the fact that satellite and Internet radio pay performance fees, while terrestrial broadcasters don't. And that's true. Since all three forms of music distribution provide consumers with about the same thing (moderate quality music chosen by the provider in real time), why shouldn't the law treat them equally?
I think they should. But looking at what's happening to Internet radio doesn't provide a great deal of comfort. The RIAA says that broadcasters got an exception due to their extremely powerful lobby. It could just as easily be said that webcasters got slammed because of their comparative weakness (in 1994 and 1995) versus the RIAA. It makes some sense that performers should get royalties, but it's not a natural right, the way the RIAA seems to assume.
And if the royalty rate for radio can be set as high as it is for webcasters, the labels could end up using the higher rates as a threat in private negotiations, in which they could set rates just low enough for a given broadcaster to pay, but just high enough to sueeze out as much profit as possible. And in private negotiations, the labels would get to price-discriminate all they want–they can nickel-and-dime small broadcasters and rake in the dough from Clear Channel.
Digital Hasn't Killed the Radio Star (Yet)
The RIAA has been saying that radio play isn't the promotional gold standard it once was, since there are other ways for artists to get their music out to the public, like webcasting and online stores like iTunes and eMusic. While it's certainly true that there are competitors to traditional radio, no one gets the sheer number of listeners that terrestrial broadcasts do. It'd be hard for anyone to argue that getting play on a popular radio format isn't going to drive sales. Just because other forms of distribution exist doesn't obviate radio. In fact, it shouldn't be hard to figure out that radio's still going strong as a promotional tool.
The existence of payola scandals (as recently as this past winter) shows just how much artists and their labels want to get on the radio. Of course, this isn't a counterargument you're likely to hear from the broadcasters too often, because it makes everyone look like a sleaze.
How is That a Tax?
Of course, the broadcasters have more than their fair share of blatantly silly arguments to support their favored status. One of the first is their characterization of a performance right as a “tax.” In the hearing, the NAB representative kept fielding questions from the Committee on why broadcasters called payments to performers a “tax,” while payments to songwriters were “royalties.” He never came up with a particularly convincing explanation for this nomenclature. And really, there isn't any reason it should be considered a tax. The revenues don't go to the government, and lower rates can be negotiated with private parties. There's plenty of room for debate on how to fairly distribute proceeds, and plenty of room to debate the philosophical differences between a performer and a songwriter, but there's no reason to call a royalty like this a tax, unless you're just trying to tap into anti-tax sentiment.
Broadcasting Isn't Charity
Broadcasters also argue that the additional costs of paying the royalty will cause them to lose revenue, leading to cuts in the local and public interest programming they provide. This is a transparent ploy to simultaneously invoke pity and fear. Pity–by emphasizing all of the fine things that broadcasters do, and how the royalty will victimize these outstanding corporate citizens; and fear–by hinting that the broadcasters might pull already-endangered local and public interest programming.
Of course, most broadcasters facing a royalty are for-profit enterprises. Existing statutory licensing schemes already have carveouts or reduced rates for non-profit broadcasters. As for for-profit broadcasters, the costs of the royalties should come out of their existing profits, not from their legally-obligated public interest programming.
Most of these arguments were raised in yesterday's hearing–some (like the “tax”) were attacked as the fallacies they are, and hopefully won't be trotted out again. Others (like the “starving artist”) didn't meet much of a challenge. I'm hoping (but not too optimistic) that both sides can put these content-free sound bites to rest, and focus on the real questions.