New ASCAP royalties are on their way to radio broadcasters. ASCAP and the Radio Music Licensing Committee (RMLC) have just announced that they have reached an agreement in principal to return to the percentage of revenue royalties that for so long were paid by radio stations to ASCAP and BMI – a system that
On Tuesday, just before the Senate recesses for its summer vacation, an abridged version of the Senate Judiciary Committee held a hearing on the proposed sound recording performance royalty for over-the-air radio. Internet radio royalties were also encompassed in this discussion, principally concerning the issue of "platform parity", i.e. whether all music services subject to the sound recording performance royalty should pay a royalty determined by the same standard, or perhaps even the same royalty. We’ve already written this week about some of the issues surrounding the broadcast performance royalty (why it’s still being considered given that a majority of the House of Representatives has already signed a resolution against the royalty, here, and discussing the likely amount of the royalty were it to be adopted, here). Neither of these issues was discussed in depth at the hearing. But a multitude of other issues were raised in the hearing. and we’ll address many of them over the next few days. But first, today, a summary of the issues raised.
First, it should be made clear that there was not a full committee in attendance. While a few Senators came and went without saying a word, questions were asked or comments made by only 5 Senators of the 19 on the Committee. So judging how the full committee feels about the issues raised when only 5 Senators (4 of them Democrats) asked questions may not be a fair assessment of how the committee as a whole feels about the issues raised. But, broadcasters should take warning that all of the Democratic Senators in attendance seemed to be sympathetic to the idea of adopting a broadcast performance royalty. However, it must be noted that all also seemed somewhat sympathetic to the concerns about the financial impact of the royalty on broadcasters. Just as members of the House have cautioned broadcasters to negotiate on a royalty before one is imposed on them, Senator Leahy of Vermont, the Chairman of the Committee, echoed those sentiments, promising that "legislation will move" on this issue – meaning that the issue will not simply fade away, despite the signatures on the NAB petition opposing the performance royalty.
One of the fundamental questions that surrounds the proposed broadcast performance royalty for the use of sound recordings by over-the-air (or the "performance tax" as it has been labeled by the NAB) is how much it could it cost a broadcaster? Right now, that question is difficult to determine, as the pending bills do not themselves provide any details as to what the fees would be, except for noncommercial entities and for small broadcasters for whom fixed yearly fees are proposed. For a broadcaster with a station having over $1.25 million in yearly revenues, the current Congressional bills leave the amount of the royalty to be determined by the Copyright Royalty Board. In the current Senate draft of the bill, the amount to be paid would be based on the "willing buyer willing seller" standard that has been so controversial for Internet Radio companies. But the hearing to be held by the Senate Judiciary Committee tomorrow will address, among other issues, the question of "platform parity," i.e whether all companies subject to the sound recording performance royalty should pay a comparable rate, so we may see that proposal change as it did in the House version, to some form of the 801(b) standard (about which we wrote here and here).
We will write about the differing rates paid by differing music services in the next few days, especially as it becomes clear as to what rates for Internet radio royalties were agreed to under the most recent settlements with webcasters pursuant to the Webcaster Settlement Act. But even without a detailed analysis of all of the rates that have been agreed to, certain trends can be seen as to what SoundExchange, on behalf of the artists and copyright holders, believes to be a fair royalty for the use of their music. And that number is likely to be a "Substantial" one, as suggested by a recent Congressional Budget Office review of the cost to broadcasters of the proposed performance royalty.
Even though the National Association of Broadcasters has been successful in getting about 240 Congressional Representatives (far more than a majority of the House of Representatives) to sign onto a resolution opposing the adoption of a performance royalty for the use of sound recordings by broadcasters in their over-the-air programming, the efforts to enact that legislation have not died. In fact, if anything, these efforts by the recording industry and related associations have intensified – and will be reflected in a hearing to be held by the Senate Judiciary Committee on Tuesday afternoon. While I’ve seen some commentary suggesting that this is a futile effort because of the signatures on the NAB resolution, there are many reasons that broadcasters must continue to be wary of the imposition of the royalty, and why they must keep up efforts to stop it from being enacted if they fear its potential impact.
How can this legislation be enacted if a majority of the House of Representatives have signed the resolution stating their opposition? First, it is important to recognize that the NAB resolution, The Local Radio Freedom Act, is nonbinding. Congressional representatives who have signed on to the resolution can take credit with their local broadcasters for having done so. When the time comes for a vote on proposed legislation, it’s possible that these same Representatives could change their mind, or be pressured by artists and labels in their districts to vote differently from their previously expressed sentiments. With a long way to go in this session of Congress, facing a vote on the royalty and seeing how committed these Representatives are to the positions that they have taken on the resolution is still a real possibility. The legislation imposing the royalty (or the "performance tax" in the words of the NAB) has passed the House Judiciary Committee, and the Speaker of the House has not yet specifically stated that the bill will not come to a full House vote, even though she has been pressed to do so by broadcast interests.
In recent months, SESAC has been writing letters to broadcasters who are streaming their signals on the Internet, asking for royalties for the performance of SESAC music on their websites. More than one broadcaster has asked me why they have any obligation to SESAC when they are already paying SoundExchange for the music that they stream. In fact, SoundExchange and SESAC are paid for different rights, and thus the payments to SoundExchange have no impact on the obligations that are owed to SESAC. SESAC, along with ASCAP and BMI, represent the composers of music in collecting royalties for the public performance of their compositions. SoundExchange, on the other hand, represents the performers of the music (and the copyright holders in those performances – usually the record companies). In the online digital world, the SoundExchange fees cover the public performance of these recordings by particular performers (referred to as "sound recordings"). For an Internet radio company, or the online stream of a terrestrial radio station, payments must be made for both the composition and the sound recording.
To illustrate the difference between the two rights, let’s look at an example. On a CD released a few years ago, singer Madeleine Peyroux did a cover version of the Bob Dylan song "You’re Gonna Make Me Lonesome When You Go." For that song, the public performance of the composition (i.e. Dylan’s words and music) is licensed through SESAC. The actual "sound recording" of Peyroux’s version of the song would be licensed through SoundExchange, with the royalties being split between Peyroux and her record label (with backing singers and musicians receiving a small share of the SoundExchange royalty).
The House of Representatives Judiciary Committee today approved a bill that would impose, for the first time, a royalty on radio broadcasters for the public performance of sound recordings in their over-the-air broadcasts. if this bill were to be adopted by the full House of Representatives and the Senate, and signed by the President, broadcasters would have to pay for the use of sound recordings (the actual recording of a song by a particular musical artist) in addition to the royalties that they already pay to ASCAP, BMI and SESAC for the public performance of the underlying musical composition. While, from the discussion at the hearing today, the bill is much amended from the original bill (about which we wrote, here) to try to address some of the issue that have been raised by critics, the Committee made clear that there were still issues that needed to be addressed – preferably through negotiations between broadcasters and the recording industry – before the bill would move on to the full House for consideration. It was, as Representative Shelia Jackson Lee of Texas stated, still a "work in progress." In fact, the Committee asked that the General Accounting Office conduct an expedited study of the impact of this legislation on radio and on musicians – but it did not wait for that study before approving the bill – despite requests from some royalty opponents that it do so.
While I have not yet seen a copy of the amended bill that Congressman John Conyers, the Chairman of the Committee, said had been completed only a few hours before the hearing, the statements made at the hearing set out some details of the changes made to the original version of the bill. First, changes were made to reduce the impact on small broadcasters – reducing royalties to as little as $500 for stations that make less than $100,000 in yearly gross revenues. Interestingly, Representative Zoe Lofgren pointed out that, in a bill that means to address the perceived inequality in royalties, a small webcaster with $100,000 in revenues would be paying $10,000 in royalties – 20 times what is proposed for the small broadcaster. And the small broadcaster who would pay $5000 for revenues up to $1.25 million in revenue would be paying 1/30th of the amount paid by a small webcaster making that same amount of revenue.