As the Records Spin: Changing the Tune of Performance Royalty Legislation

by Joycelyn James on October 22, 2013

Performance RoyaltyI love radio and have fond memories of my college DJ days when we used these really neat things called records to play songs.  This was so far before the digital transition that some of our old-school jams were on 8-track tapes, or as we called them, carts.  It was a treat to intern at the nearby commercial station because they had CDs.

Clearly, times – and technology – change, as has the business of broadcasting.  Though business models evolve, one thing that has not changed in radio is the need to increase the presence of minority-owned broadcasters.  That is one of the reasons why the reemergence of performance royalty legislation is troubling.  Not only is new legislation bad for business, but new revenue-sharing agreements between a growing number of broadcasters and the recording industry make expanding performance royalties unnecessary.

What is a Performance Royalty?

A performance royalty is a fee paid to a music publisher or record label in exchange for the right to play or perform a song.  This applies to songs performed live, broadcast, or streamed over the Internet.  Local radio stations have long paid this royalty to music publishers, but Congress has repeatedly rejected any sort of payment to the record labels for songs played on-air because the success of a song (including music sales, concert ticket sales, and all other forms of recording industry revenue) is directly tied to the free promotion provided by airplay on local radio.  After all, current law prohibits payment by the record labels for radio airplay.

Since 2007, the recording industry has pushed to require broadcasters to pay a new performance royalty to the record labels.  The legislation, introduced in 2009, has not passed, but it has sparked debate on whether record labels should – for the first time – receive performance royalties from local radio stations.  Another version of performance royalty legislation was introduced just before the government shut down.  However, Members of Congress who oppose a new performance royalty have introduced resolutions in both the House and Senate (known as “The Local Radio Freedom Act”) which reject such a new fee.

Why Performance Royalties Matter to Minority Listeners

Despite the popularity of streaming audio and MP3 players, radio still reaches 92 percent of people aged 12 and over, including 94 percent of Hispanic listeners and 90 percent of African American listeners.  In 2009, MMTC estimated that if performance royalty legislation were passed, it would result in as much as a 30 percent loss in revenue for minority-owned broadcasters, putting approximately one-third of them out of business.  Since then, the number of minority-owned stations has declined according to the FCC, making the potential harm that much greater.  Minority and non-English dominant communities need to have access to a voice focused on their needs.  Minority-owned broadcasters hold get-out-the-vote and community health events designed to engage and inform their communities.  These stations serve those needs by providing access to news, information, and entertainment that other stations often overlook.

In recent years, much of the decline in ownership is related to access to capital for minority entrepreneurs to start businesses and sustain them.  Industry groups, such as the National Association of Black Owned Broadcasters (NABOB), are concerned that lenders are not reaching out to minority purchasers when stations become available.  For those already in business, ad spending on other platforms as well as no-Urban/no-Spanish dictates, where advertisers are instructed not to purchase time on stations with these formats, have kept minority-owned broadcasters from thriving.  It is in this context that we see how harmful the additional cost of performance royalties would be for these broadcasters, threatening the voices of underserved communities.

Changing the Record

Having a song on broadcast radio is the best form of promotion a record label can receive.  According to the National Association of Broadcasters (NAB), numerous record label executives – and artists – are quoted as saying that broadcast radio airplay is the key to a song’s success, and as discussed above, radio remains extremely popular.  The problem with the proposed performance royalty legislation is that it ignores the relationship between broadcasters and the recording industry.  For decades, record labels have relied on radio to promote their music, while radio depended on the recording industry for content.  Performance royalties will disrupt this relationship, placing an additional financial burden on broadcasters while artists and recording companies continue to enjoy free airplay.

As BBSJ’s past coverage of performance royalties indicates, we’ve been down this road before.  However, broadcasters are working with artists and the recording industry to develop private agreements that address all parties’ concerns, eliminating the need for new laws.  It’s time for those who sing the praises of performance royalties to change their tune, allow the market to act, and stop pushing for legislation that is unnecessary and harmful to minority broadcasters.

  • Joycelyn F. James

    Joycelyn F. James, Esq. is a graduate of the Institute for Communications Law Studies at the Catholic University of America Columbus School of Law. She currently serves as the Cathy Hughes Fellow for the Minority Media & Telecommunications Council, where she works on matters that focus on the advancement of minority and women’s entrepreneurship in the nation’s media and telecommunications industries.

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