The Broadcast Radio Exemption, Essay Example

Background

Capitol Hill recently turned out as a battleground in one of the contentious debates that ensued between musicians and different record labels, with one side of the parties engaged being the radio broadcasters. The born of contention ensued from the exemption of radio broadcasts from the acquisition of performance rights. While cable radio, satellite radio, and webcast services along with other non—terrestrial broadcasters continue to pay their performance royalties to labels and artists, terrestrial radio stations continue to enjoy exemptions from the payment of such royalties.  According to Wang & Shi (2006), this exemption primarily arose during the infancy of the radio broadcasting industry. During this period, broadcasters primarily claimed that the radio stations’ play typically served as promotional materials that drive music sales (Copyright Licensing in Music Distribution, Reproduction, and Public Performance, n.d.).  On the other hand, they asserted that the need to compel the radio stations to pay royalties would significantly cripple the emergence of other radio stations within the industry.  However, these arguments lost their stream since cable radios, satellite radios, and webcast services currently pay their performance royalties. On the other hand, the U.S. remains the only nation globally where radio broadcasters do not pay performance royalties.

The Broadcast Radio Exemption Problem

The terrestrial radio broadcasting lopsided exemption remains one of the obvious challenges that the music industry has faced for a considerable amount of time. In the United States, Wang & Shi (2006) establish that performance rights organizations (PROs) enter into negotiations with the publishers to ensure that their payments are received upon their content for commercial purposes. Therefore, the PROs negotiate for the right to acquire licensure for performance rights on songs before the distribution of these rights to the consumers. Essentially, PROs equally collect rights from the publishers of all songs and later provide licenses that grant the licensees the right to utilize the songs collected by the PROs (Wang & Shi, 2006).  In the U.S., major PROs include the Society of European Stage Authors and Composers (SESAC), the American Society of Composers, Authors and Publishers (ASCAP), and the Broadcast Music, Inc. (BMI). As part of the PROs, terrestrial radio broadcasts are often exempt from statutory requirements that require them to make payments for recordings broadcasted through their mediums.  Contrarily, satellite and Internet radio broadcast companies are not exempted from such royalty payments that the government regulates. According to McIntyre (2010), the music industry’s unevenness has driven lobbyists and lawmakers to call for satellite, radio, and Internet radio to establish similar royalty rules. The historical justification for the exemption of terrestrial radio broadcasters from the payment for recordings is based on the assumption of establishing a promotional value, and that radio increases hits and sales (McIntyre, 2010). Detractors argue that the rationale for such actions is outdated within this age when different listening platforms equally promote music and are required to pay for use. For example, Pandora pays close to half of its collected revenue to performers and labels, accounting for half of its collections by SoundExchange that distributes the royalties to the rights holders.

Benefactors from the Solution

The National Association of Broadcasters (NAB), as guided by different legislations that include the Free Market Royalty Act of 2013, the Performance Rights Act of 2019, and the Fair Play Fair Pay Act of 2017, focuses on emphasizing the need for the music industry to focus on maintaining a status quo. According to NABs President and CEO—Gordon Smith:

A job-killing performance tax would be devastating to free and local radio, which has an overall economic impact of over $513 billion in Gross Domestic Product and generates more than one million jobs annually. Opening a business avenue between zero royalties and imposed royalties, Clear Channel, the largest radio group in the U.S., has been on a deal-making tear with record labels, including Warner Music Group, one of the largest. The two sides package revenue sharing and promotional sharing in that and other agreements, including paying terrestrial performance royalties (McIntyre, 2010).

SoundExchange primarily focuses on supporting legislative measures intended to close this decades-old loophole, allowing AM/FM radio broadcasters to pay royalties to the recording labels and artists when their content is played on air. For example, in 2013, one of the nation’s largest broadcasters—Clear Channel, began to conduct direct deals with indie labels such as Warner Brothers Music, Big Machine Records, and Fleetwood Mac to pay terrestrial performance royalties for labels and artists’ songs played on air (Cloud 2021). In collaboration with other members and stakeholders of the musicFIRST Alliance, SoundExchange is focused on ending such injustices (McIntyre, 2010). On the other hand, the Fair Play Fair Pay Act of 2017 (H.R.1836), upon introduction as a bipartisan group of different lawmakers, vouched for the need to create performance rights specifically for sound recordings aired on terrestrial radio. From a personal perspective, the benefactors to these measures mainly include the small and medium radio broadcasters that will acquire statutory licensures as determined by the Copyrights Royalty Board.

Entities Impacted by the Solutions

In September 2013, the Free Market Royalty Act was introduced by Rep. Mel Watt. Just like the Performance Rights Act, this legation establishes the need for AM/FM broadcasters to engage in the payment of the copyright owners and performers (Cloud, 2021). However, one factor that differed from the Performance Rights Act was the proposed measures and mechanisms that would be used, given that the bill would have an impact on how the non-interactive services rates and systems are set.  Therefore, this move saw the FMRA eliminate the compulsory system widely used by non-interactive web broadcasters such as Sirius XM and Pandora (Cloud, 2021). On the other hand, the approach would later require the terrestrial radio and digital service broadcasters to negotiate with the artists and the copyright owners through an established market that is administered primarily by SoundExchange as opposed to the payment of the rates that the government sets.   Currently, the patchwork rates represent a two-tiered approach and system in the American Copyright law. The patchwork partitions the non-interactive digital audio systems and services into two primary categories. According to Law et al. (2021), each category has a set of standards that guide its statutory performance royalty rates.  Therefore, this means that services that include the Internet radio may face a series of misfortunes for subjecting their operations to a demanding standard of the willing buyer-willing seller with extremely higher rates. On the contrary, others that include Sirius XM satellite radio are primarily associated with a balanced system and standard that makes such entities enjoy the lowest rates.

References

Cloud, K. (2021, January 15). How the AM-FM act seeks to cure an antiquated inequity in music copyright law. Washington Journal of Law, Technology & Arts. https://wjlta.com/2021/01/15/how-the-am-fm-act-seeks-to-cure-an-antiquated-inequity-in-music-copyright-law/

Copyright Licensing in Music Distribution, Reproduction, and Public Performance. (n.d.). Www.everycrsreport.com. Retrieved June 29, 2021, from https://www.everycrsreport.com/reports/RL33631.html

Jincheol Kim. (2008). Exemption of The Digital Performance Right In sound recordings In Webcasting. The Journal of Sports and Entertainment Law, 11(1), 239–254. https://doi.org/10.19051/kasel.2008.11.1.239

McIntyre, G. (2010). The Performance Rights Act: Radio Broadcasting Faces Major Challenge in Long Battle Against Music Licensing. Journal of Radio & Audio Media, 17(2), 135–150. https://doi.org/10.1080/19376529.2010.517817

Wang, L., & Shi, H. (2006). A Gradual Noisy Chaotic Neural Network for Solving the Broadcast Scheduling Problem in Packet Radio Networks. IEEE Transactions on Neural Networks, 17(4), 989–1000. https://doi.org/10.1109/tnn.2006.875976