In the last month, there have been two bills introduced in the US House of Representatives seeking to impose a performance royalty for sound recordings on broadcast radio stations in the US. The bill introduced yesterday, The PROMOTE Act (standing for the Performance Royalty Owners of Music Opportunity to Earn Act – whatever that may mean, can be found here), seems to have garnered more attention, perhaps as it was promoted by its principal sponsor, California Congressman Darrell Issa, as giving performing artists the right to decide whether or not their music is played by radio stations. In fact, it does not do that, instead merely setting up a royalty system similar to that in place for Internet radio operators, allowing broadcasters to play music only if they pay royalties on “identical” rates and terms as do webcasters.
The PROMOTE Act proposes to add to the Copyright Act’s Section 106 enumeration of the “exclusive rights” given to copyright holders a provision stating that sound recording copyright holders (for most popular releases, that is usually the record company) have the exclusive right to authorize the performance of recorded songs by broadcast radio stations. That is in addition to the existing right to authorize the playing of these songs by digital audio transmissions (e.g. webcasters, satellite radio and digital cable services). But, like with the right to play music by digital services, that right to prohibit the playing of recorded songs is not absolute. Instead, like for the digital services, through a proposed amendment to Section 114 of the Copyright Act, broadcasters will have the right to play the songs if they pay a royalty set by the proposed legislation at “rates and terms” “identical” to those paid by webcasters. Let’s look at these issues more closely.
First, the proposed Act makes clear that not all radio stations even have to pay the royalty. In a seeming attempt to limit opposition to the bill, the language of the draft Act excludes radio stations that play a “sound recording of religious services.” It also excludes broadcasts by any “educational terrestrial radio station” and by low power FM stations. An “incidental use” is also excluded. Interestingly, there is no definition of what is meant by the term “educational terrestrial radio station” nor is there a definition of the term “incidental use.” While it could be assumed the former means any noncommercial radio station licensed by the FCC, the Act does not say so (while it does cite to specific FCC rule sections to define LPFM stations). “Incidental uses” probably refer to music used in commercials and when picked up in the background of, for instance, news or sports reporting, but again, there is no definition provided by the draft legislation.
Second, it is interesting that the proposed language of the Act suggests that the royalties to be paid by broadcasters to use the music will be “identical” to those paid by webcasters, and will be paid on the same terms. But just how does that work? Webcasters pay on a “per performance” basis, having to count and report each song played by the webcaster and the number of people who are listening to that song. Technologically, broadcasters can’t track that information as there is no methodology to determine exactly how many listeners there are to any radio station at any one time. Interestingly, Sirius XM and cable radio can’t track those numbers either, and these services pay on percentage of revenue basis, yet the draft of the PROMOTE Act says that radio would pay using rates and terms “identical” to webcasters, not to Sirius XM or cable radio, seemingly setting up an unworkable system.
Using broadcast rating information to estimate payments, what would a webcasting-like royalty mean for broadcasters? Webcasters currently pay at a per performance rate of $.0017. In other words, for each listener to every song, the webcaster pays $.0017. To translate that to broadcast terms, if a station averaged 1000 listeners, for each song that station plays, the royalty would be $1.70. If the station played 10 songs an hour, it would pay $17.00 an hour. Multiply these numbers by the actual audience of a station (which could be significantly larger in big markets) and the number of hours of music programming in a given time period, and these fees would really add up. This is in addition to the fees paid to ASCAP, BMI, SESAC and now GMR for the rights to the musical composition, and all other costs of station operation.
Given its lack of precision as to its terms and the methodology for paying the royalty, this seems to be nothing more than a bill introduced to make some headlines, which it clearly has. The bill introduced earlier in the year by Congressman Nadler and others, proposes to bring back the Fair Play Fair Pay Act introduced in an earlier Congress (see that 2015 bill here, the text of the current bill does not seem to be available but a summary is here). This bill addresses many issues in addition to the broadcast performance royalty, including the issue of pre-1972 sound recordings (see our most recent articles on that topic here and here), the disparity between the rate standards used for setting the statutory royalty between “pre-existing” services (satellite radio and cable radio) and webcasters (the 801b standard versus the “willing buyer-willing seller” standard – see our article here). It also addresses issues concerning the distribution of royalties (ensuring that, when record labels directly license music to music services outside of the statutory royalty context, performers get their 50% share of the royalties paid as they would in the statutory context, and also including producers of music in those that get paid out of the royalty payments).
Both of these bills are, of course, opposed by the NAB, which is promoting its own Local Radio Freedom Act (here) opposing a performance royalty. These issues are likely to be hashed out in the broader review of the Copyright Act now underway in Congress (see our articles on the initial issues considered in that review here and here, and on the music issues that were teed up for consideration in the past by the current chair of the committee overseeing this review, here). Watch carefully as these issues play out, and talk to your Congressman with your views on this proposed legislation.