Performance Right: who gets paid when songs are played on the radio?

When you hear a song on the radio, the songwriter and publisher are paid a royalty, but the performer is not. Recently, a coalition of advocacy groups and artists has organized to lobby Congress to enact a public performance right for sound recordings, but broadcasters have put up a strong fight, calling it a "performance tax" on radio. Panelists will discuss the role of radio, performance rights on terrestrial and digital platforms, reporting requirements, and the status of congressional action on the issue.

John P. Kellogg Assistant Chair Music Business/Management, Berklee College of Music
Walter McDonough General Counsel, Future of Music Coalition
Sean Murphy Treasurer, Princeton Broadcasting Service / WPRB-FM
Patricia Polach AFM Associate General Counsel, Bredhoff & Kaiser, PLLC
John Simson Executive Director, Sound Exchange
Gigi Sohn President, Public Knowledge



03:35PM EST - WD: The US is pretty unique as the only industrialized country in the world that does not have a performance royalty for terrestrial broadcasts. Why?

JS: It's historical. The copyright precedent was set with the 1909 act; there was no record industry until the 1920s. Also, by our lack of reciprocity with foreign countries, we are losing over 200 million a year that is not being paid to US performers when their recordings are played in foreign countries.

PP: An exciting new coalition we have is called musicFirst, which hopes to have legislation on the board in this congress.

03:42PM EST - WD: Gigi, what do you think is the likelihood of passing such a right in this congress?

GS: There are some people who think the time is NOW, because the broadcasters have their hands full with other issues. My support however comes with three conditions:
1) We must make sure that small webcasters stay in business.
2) Artists must be paid directly, not through their label.
3) If passed, the record industry must not ask congress to limit technological advancements for audio home recording.

JS: I have no stake in the third of your points, however I can speak for the second. I think that's taken care of - 50% of the money that comes into SoundExchange goes directly to artists. As far as small webcasters, we have extended a settlement that extend the rates from the previous period through 2010. This was received very well. There will be an announcement regarding that later this week.

03:52PM EST - WD: Sean, how does this affect non-commercial broadcasting?

SM: We are people who care about music. We're in favor of a performance right for sound recordings, but it must be a reasonable rate with reasonable record-keeping conditions. The party administering those rights must be doing just that. There should be no lobbying or other agendas. I don't want to see this get bogged down the way that the digital rate proceedings have been.

WD: Does anyone have thoughts on what this license should look like?

JS: I don't think you can put a percent of revenue into the legislation. There needs to be consideration for small and non-commercial broadcasters. Senator Berman is already looking to that. I think that when this bill is introduced, we will see something put in place there. There is a real distinction between online and over-the-air, however. Online has no geographic limitations.

03:57PM EST- WD: What would a reasonable rate be?

SM: From a commercial non-profit standpoint, a reasonable rate is on the order of what I'm currently paying with ASCAP, BMI, SESAC and SoundExchange today. We're paying around $2,000 to $3,000 a year. I want to see the kind of transparency that we see with SoundExchange.

GS: John, how many webcasters have accepted your small webcaster proposal? Is there a technological limitation involved?

JS: There is no technological limitation. I don't have numbers with me, but I can tell you there were about 50 with this license last year.

SM: I don't see these negotiations as a good thing. I would hope to avoid the restrictions you are currently imposing, in the future. There should be a separate entity fighting for the new rates, not the same entity that collects them.

JS: In every country in the world, the collecting society is also the body that fights for the rates. I don't think that's going to change. We are representing everyone in the conversation, artists as well as copyright owners.

04:02PM EST - GS: You don't want congress setting every tiny thing, but a little direction would help, perhaps on a percent of revenue.

JK: As far as the artists are concerned, John, how will you break down those royalties? Because different markets have different audiences with terrestrial radio, are you going to weight different plays differently in different markets?

JS: I think we'll try to replicate what we've done in the internet sector, and that's to follow the dollar. If your song is played X number of times, you will get X amount of money. If it's a percentage of revenue, there will have to be certain allocations, which the SoundExchange board will think about very carefully.

WD: In the event that such a right is enacted, who would collect the money?

JS: It's not a done deal that it would be us, but we are certainly set up to do so already, with 28,000 US artists and over 3,000 independent labels.

04:08PM EST - Questions from the audience

Q: How do you pay performers who have already signed away their rights, perhaps decades ago? (Tim Wu)
JS: That's a fundamental principle of SoundExchange. We don't care who has signed away what - we only pay the performer directly. First and foremost, we let the artist tell us how to pay them. As long as they all agree that is. We never pay some non-performer who may have bought the rights.

Q: Where is the honest work being done to determine the social implications of a terrestrial rate? You seem to be protecting the monetary interest very well.
JS: We have extended various offers to non-commercial and public radio. I think we've spent a lot of time looking at those things.

Questioner: I agree, I think you have thought about these issues.

Q: How many artists does SX represent? How do you pay them?
JS: We have 28,000+ in the US, and tens of thousands overseas. We try to find as many people as we can, whether they are a member or not.

Q: I heard that Last.fm has not paid SX. Is that true?
JS: They paid us under the small webcaster rate last year. Since they were bought by CBS, we no longer will accept them as a small webcaster. $280 million is not small revenues.

04:20PM EST - Q: The webcasting decision did not take into account the financial realities of the webcasting industry. How can the broadcast industry feel safe in having a rate set by the same CRB?
JS: The CRB is three experts. As long as the broadcasters present all the relevant information, they should feel secure in the free-market, willing-buyer/willing-seller rate.

PP: Every performer I know has to pay fair-market rates for their food and their medical bills; their living. They earn their living through their art, and despite the public opinion that performers are rich celebrities, the reality is that they are regular people that need these varied income streams, especially those artists that still need a day job. The core of this conversation must always be the creator, not the other businesses that arise around him.

GS: There is a flip-side though, however. Yeah everything should be about the creator, but if their music is not being played, it helps no-one. You want the small webcasters to survive.

JK: I'm sorry but the distribution systems are built on the backs of the musicians work. People today are reluctant to be involved in music.

WD: In both rate settings, the webcasters cried that they were too high. That's fair, that's valid, that's rational. But in both instances, SoundExchange lowered the rates. We don't want to put anybody out of business. I'd rather have 20% of something than 100% of nothing. We need to learn from what went wrong in the past rate setting procedures.