[This post was written by CD Baby CEO Tracy Maddux.]
The United States is among only four countries in the world that do not pay artists for radio airplay. The other three countries are North Korea, Iran, and China.
How can a country that allows art to be made available for commercial use without any compensation for the artist be in any way progressive? And what are the consequences for our artists and their art?
First, let’s look at how it came to be that artists don’t get a share of radio revenues. The punchline is that the Copyright Act of 1909 governs the way copyrights are used in terrestrial radio today. Yes, that’s a law that was passed 107 years ago. What didn’t exist 107 years ago was an industry that commercialized recorded music. At the time, music was monetized through the sale of sheet music. Music recording was a nascent art, not even possible until Thomas Edison invented the phonograph about 30 years before. Artists weren’t selling records in 1909. They were just figuring out that there was an industry there at all, and probably how to pay for their next meal.
In fact, songwriters do get a share of radio revenues today, just not the performers and supporting artists. In practice that means every time you hear the 1967 Aretha Franklin recording of ‘Respect’ on the radio, a song written by Otis Redding, the estate of Otis Redding gets paid, but Aretha Franklin earns nothing. Where is the respect indeed?
Let’s set aside Aretha and Otis for a second and talk about the independent and emerging artist. I’m lucky enough to be in the business of helping these artists distribute, promote and monetize their music. I can speak firsthand of artists we support succeeding in performance mediums other than terrestrial radio, such as CD and vinyl sales, placing music on TV, and streaming, where the money they made did something magical… it enabled them to create more art.
Along the way, the money artists make from their music does some other important things. I know of one case where the money from a TV commercial placement helped an artist get her mortgage current so she could keep her home. In another case I know of an artist who used the money he made from iTunes download sales to pay for car repairs so he could get to work. The money artists make from their art makes their lives better and their art makes our lives better.
Getting back to 2016 and why we need change, let’s consider the economic damage wrought on the U.S. economy by a measure passed in 1909 that can only be viewed as draconian by modern standards.
The United States is the largest exporter of music in the world. But in the U.S. we don’t pay any artists, regardless of their national origin, for the use of their music on our radio waves. Because we’ve failed to modernize our copyright laws, can you guess how the other nations treat our artists? They treat us exactly as we treat them – they use our artists’ music for free. When an artist from France gets a spin on a German radio station, she gets paid a royalty for the use of her recording. An American artists played on a French or German radio station gets nothing.
About 80% of the world’s population lives outside of the U.S., China, Iran and North Korea. Much of that world is growing faster, becoming economically more vibrant and, sadly, listening to U.S.-based artists for free while paying artists in the rest of the world. The economic damage wrought on the U.S. and its music makers by bad law is substantial.
Why has this injustice been allowed to continue?
In a word: lobbyists. More specifically, the lobbyists for big radio use money, misdirection, and obfuscation to protect the out-sized profits of the terrestrial radio industry at the expense of performing artists. After hearing “Respect” on the radio, you probably heard a commercial. For the right to broadcast that commercial to you, an advertiser paid a substantial sum of money to the radio broadcaster to air that commercial and sell you on the idea of buying, say, a new car or a mobile phone plan.
Ok, let’s talk about the money.
It’s not like these radio companies are attempting to validate a new business model like Pandora or Spotify, who by the way have yet to prove they can make money at streaming and who have lost a pile of money so far attempting to do so. (And who pay royalties to performers). No, Big Radio is very profitable. Let’s take one publicly traded, all-American radio company, Entercom Entertainment based outside of Philadelphia, PA. In its fiscal year ending 9/30/2015, Entercom had gross revenues of about $400 million and generated about $95 million in earnings before tax. Entercom made that money by advertising to listeners who tuned in to hear talk radio, sporting events and, yes, sound recordings. The radio hosts and sports teams got paid by Entercom, as did the songwriters; the performing artists did not.
In the U.S., terrestrial radio is a multi-billion dollar industry that is more profitable than it is in the rest of the world because it pays no performance royalties to artists. From those excess earnings it pays lobbyists to help keep an antiquated law enacted in 1909 in place. It’s a vicious cycle that victimizes artists and preserves for broadcast radio a competitive advantage against other new and emerging forms of broadcast such as satellite and streaming services, that all pay royalties to artists for the use of their recordings.
I’m a business person, so I in no way mean to impugn the profit motive. It’s a good thing for the U.S. economy that big radio makes money, employs tens of thousands of people and supports our tax base. I believe that should continue. But it’s equally important that we pay artists so that they can continue to create art.
This is where misdirection comes in. The Big Radio lobbyists say that any attempt to compel radio to pay royalties on sound recordings is a cash grab by labels and artists. They argue that there is promotional value that the artists derive from radio using their recordings that help artists sell records. But with the advent of Internet radio (which, by the way, pays royalties to artists), downloads and streaming, record industry revenues have dropped by more than half since peaking 1999. It’s simply not true that radio is the only place artists can get ‘free’ promotion and it’s not true that the recording music industry is awash in cash, protected by the same antiquated laws that Big Radio is. The only major label that actually made money in 2014 was Universal Music Group, and only because it sold its stake in Beats to Apple for billions of dollars.
It’s time for Big Radio to pay artists a royalty on the recordings they use to attract listeners and sell advertising.
It’s time that a neutral royalty board is created to establish equitable royalty rates, as has already been done for Internet and Satellite radio. The answer is something like the bi-partisan legislation introduced last year by Congressman Jerrold Nadler of New York and Congresswoman Marsha Blackburn of Tennessee. The ink wasn’t dry on H.R. 1733 before the radio broadcast lobbyists decried it ‘A Music Label Cash Grab,’ in the words of Daily Caller Staff Writer Victor Nava. This is where the obfuscation really started.
Big Radio argued that such legislation would put tiny broadcasters in rural and college communities that support the local arts out of business. But Big Radio , and its lobbyists clearly didn’t actually read H.R. 1733 which provided that radio stations with less than $1 million per year in gross revenue would pay a total royalty of no more than $500 for the use of recordings.
Royalty boards do great work all over the world to mediate interests and find a middle ground where both artist and broadcaster participate in the ecosystem. In my opinion, the royalty board that recently established a new, fairer rate for webcasting (this affects Internet broadcasts from providers like Sirius XM) didn’t go far enough, but at least it increased the royalty and indexed it for inflation – two solid moves in the right direction. Not to be repetitive, but artists participate in the terrestrial radio market at a rate of ZERO today for the use of their sound recordings. Any move to pay artists would be a move in the right direction. Fair pay for fair play, if you will.
There are three concepts that we must enact through legislation to enable much needed reform for the benefit of all artists:
1. Participation. Artists need to have their copyrights respected and need to earn a rate established by an independent rate board, as they do everywhere else their recordings are used for the economic benefit of a corporation.
2. Fairness. Both the broadcaster and artists must benefit from the system, not one party benefiting to the detriment of the other.
3. Export. The system must compensate the works of all artists no matter where they reside. The rest of the world will reciprocate and compensate U.S.-based artists, which in turn increases our artists’ industry, earnings, and tax base.
We all win when art is created in a fair way that compensates the artist and enables a healthy worldwide broadcast industry.
I’m fired up on behalf of the independent artists that we support and I’m committed to making 2016 the year we fix a 100-year-old inequity. If you believe, as I do, that there should be Fair Pay for Fair Play, get online and find the Music First Coalition. They make it extremely easy for you to send your local Congressional representative a request to support H.R. 1733.
You know how else I’m going to support independent artists in 2016?
I’m going to turn off the radio.
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