A story in the Hollywood Reporter indicates that a coalition of record companies and associations representing performing artists are preparing to initiate a Congressional lobbying effort to push for a royalty for performance rights in sound recordings that would apply to broadcasters’ over-the-air transmissions, not just their Internet streams. Broadcasters currently pay performance royalties to ASCAP, BMI and SESAC for their over-the-air music programming – royalties that are paid to composers (or music publishing companies) for the use of the underlying musical composition. Digital operators (satellite radio, Internet radio, digital cable radio) pay royalties for the composition and also pay royalties for the sound recording, i.e. the actual performance as recorded on a record, CD, or digital download. The copyright for the sound recording is usually held by a record company. The performance right in a sound recording did not exist in the United States until 1995, and still applies only to digital transmissions. Obviously, if extended to broadcasting, this could result in huge expenses to broadcasters – amounts for which they probably have not planned.
This is not the first time that such a royalty has been mentioned. In introducing the PERFORM Act earlier this year, Senator Feinstein of California suggested that this legislation, which makes certain changes in the digital royalty standards that apply to various services as well as to other copyright license provisions, was only a first step in clarifying royalty issues. In statements made at the time, there were indications that she favored further legislation to adopt a sound recording performance right for broadcasters. At last week’s Future of Music Conference, David Carson, General Counsel of the Copyright Office, also spoke in favor of such a right – suggesting that if SoundExchange collected money from broadcasters they might not need to seek so much from Internet Radio companies (see our coverage of the Internet radio royalty issues, here).
Broadcasters need to be aware that such legislation is being planned, and should discuss the matter with their legislative representatives. If legislation was introduced and adopted, broadcasters might be subject to a process similar to the one that webcasters just went through, with the amount of the royalty uncertain until after a royalty proceeding. Knowing the concerns of webcasters after the decision that was rendered in their proceeding, where the sound recording royalty was valued at several times the royalty that webcasters pay to ASCAP, BMI and SESAC, broadcasters need to think about what that would do to their business and act accordingly.
Supplemental Note – 5-10-2007 – Apparently, the NAB is already engaged on the issue, sending a letter to each Congressional representative setting out its reasons for opposing any effort to impose a sound recording performance royalty on broadcasters. You can read a copy of the NAB’s letter here.