According to a letter from the Copyright Office that has recently been made public, the economic troubles of broadcasters, which have been used to argue against the imposition of a performance royalty for the use of sound recordings by radio stations, are cyclical and are largely over.  Thus, argues the letter, the improvement in the fortunes of radio stations merits a reexamination of whether the Performance Rights Act imposing such a royalty should be adopted.  The letter contrasts the reportedly good news for radio broadcasters with the Copyright Office’s view of the plight of the record industry, which is deemed to be more permanent, based on the pervasive nature of illegal downloading.  Given the Copyright Office’s concern with the fate of the record companies, and their need to establish a more stable revenue source through payments of fees from the users of music to replace the sales of music that have declined so dramatically, the Copyright Office suggests that further review, with an eye toward adoption of the performance royalty, is merited.  This letter was addressed to the US General Accounting Office, which in February issued a report concluding that the imposition of a performance royalty would have a negative impact on the radio broadcast industry, as it has been hard hit by both fundamental changes in competition and from downturns in the business cycle, and that the imposition of the royalty would cause some stations to go out of business and others to cease playing music.  But the GAO promised a further review of certain issues, and the Copyright Office had not weighed in before the initial GAO report, this letter was prompted. 

The Copyright Office has long been on record as supporting the imposition of a performance royalty in sound recordings in the United States – not just for radio, but for all industries that use music.  This would match the performance royalty in the musical composition, as collected by ASCAP, BMI and SESAC, for the public performance of musical compositions not only by radio, but also by television, cable television, in bars and restaurants and stadiums, and in virtually any other location where music is used in a public setting.  Thus, it should come as no surprise that the Copyright Office would take the position that it does in this letter.  What is perhaps surprising is that the letter seems to go beyond a legal document setting forth the legal justifications for the imposition of the royalty, and instead has the tone of an advocacy piece that takes a firm position in support of the recording industry over the interests of broadcasters, and one which advocates only the position of the recording industry.

One question which the Copyright Office letter raises is that of who the copyright laws are intended to protect.  We have touched on this issue before.  Some have advocated the position that the Copyright Laws are intended to protect the public by encouraging the dissemination of artistic and literary creations.  They are not necessarily meant to protect the copyright holder, especially where that copyright holder is not in fact the creator of the work in question.  The Copyright Office’s letter focuses primarily on the interests of the record companies, without considering the impact on the creators of the sound recordings – the musicians themselves.  Are the musicians served by the imposition of a performance royalty?  While the Copyright Office suggests that broadcasters no longer have the promotional impact on the sales of music that they once had, as sales of music have so dramatically decreased and as there are other sources of music discovery, there is no assessment of whether artists themselves still value radio play for the exposure of their music to mass audiences, or whether the performance royalty will have any impact on the creation and dissemination of new musical works.  The NAB has argued that broadcast airplay is still very important to artists, in separating their music from the tens of  thousands of recorded songs released every year.  Some statistics have suggested that there is now more recorded music available than ever before – even without a broadcast performance royalty – and it is often radio that still has a significant impact on those who become mass-appeal artists, and those who are ignored.

The Copyright Office also suggests that the GAO be careful in estimates that they are supposed to be deriving as to how much the royalty would cost broadcasters if it was imposed, based on the Copyright Royalty Board decisions for other services.  The Copyright Office suggests that the GAO note, in any such estimate, that it is being provided without the benefit of any hearing testimony before the Copyright Royalty Judges from broadcasters or the recording industry as to how much that royalty should be.  Obviously, as there is no law yet adopted, and unless and until there is a law and the final rules for the administration of any new royalty are adopted, there will be no hearings before the CRJs.  However, from past Copyright Royalty Board decisions, an estimate of what those royalties might be, using the standards set out in the pending bill, can be made.  As we have written before, only in cases using a standard different than that proposed here, has the recording industry been satisfied with a royalty of less than 15% of gross revenues.

Obviously, this is the Broadcast Law Blog, and the author of this piece represents broadcasters.  But it is clear that the Copyright Offices letter demonstrates how polarizing this issue can be, as even a government agency can seemingly end up taking sides in the debate.  This issue is not one which is going away, so broadcasters need to continue to be engaged and vigilant in this debate.  Moreover, as we have written before, it is possible that there will be attempts to voluntarily resolve the issue before any final Congressional resolution – so watch as this matter plays out in coming months.