On September 3, 2010, the Government Accountability Office (GAO) released a report analyzing the economic impact of the proposed Performance Rights Act (H.R. 848), which would require terrestrial radio broadcasters to pay royalties for the performance of sound recordings on FM and AM radio stations. Under the proposed act, a radio station would pay a royalty based on its gross annual revenues and status as a commercial or noncommercial station, and the royalty would be distributed among the copyright holder, featured performer and background musicians, performers and vocalists.
The GAO report found that the proposed act would result in additional costs for the broadcast radio industry, including financial costs in the form of royalty payments and administrative costs in the form of potential reporting requirements. Although GAO acknowledged that it was unable to determine the total cost to the industry at this time, it concluded that, if the rate is set as a percentage of annual revenues, each percentage point increase in the rate would cost the industry an additional $101 million in total royalties annually. Moreover, radio stations with revenues greater than $1.25 million would pay the vast majority of the total royalty payments, and within this group of stations, the payments would vary significantly. For example, if the 25% of radio stations with revenues at or above $1.25 million pay a royalty equal to 2.35% of their annual revenue, their payments would account for more than 90% of all royalty payments. According to broadcast industry stakeholders, the financial and administrative costs resulting from the proposed act could lead radio broadcasters to discontinue station operations, reduce staff or change to nonmusic formats. The report also noted that the impact of the proposed act on minority, female and religious stations is unclear.
The report concluded that the proposed act would result in additional revenue for the recording industry, though it estimated that most featured performers and musicians would receive less than $100 per year from airplay in the top 10 markets. For example, GAO calculated that a 2.35% royalty rate, which would cost the broadcast radio industry over $258 million annually, would result in 56% of performers receiving less than $100 per year and fewer than 6% of performers receiving $10,000 or more per year in royalties from airplay in the top 10 markets.
The GAO report is available here