Big Radio: Deal with Us on Performance Rights Before It’s Too Late

December 28, 2017

Ray Hair  -  AFM International President

If you’ve been tuned in to the Federation’s congressional lobbying efforts, you know that our campaign for a performance right in AM/FM analog radio has been at the top of our legislative agenda for many years.

The Fair Play Fair Pay Act, reintroduced as HR 1836 into the US House of Representatives in March of last year by Representatives Marsha Blackburn (R-TN) and Jerry Nadler (D-NY), would require broadcasters to pay artists, including nonfeatured session musicians and singers and record labels, when their recordings are played over the air on AM/FM radio. The United States is the only major economic country in the world that does not embrace a performance right for recording artists and musicians in traditional analog radio broadcasting. The Fair Play Fair Pay Act enjoys bi-partisan support, co-sponsored by 23 Democrats and seven Republicans.

Radio broadcasters have pushed back forcefully against AM/FM royalties for recording artists and musicians, pointing to the promotional value derived from airplay. To be fair, broadcasters pay royalties to SoundExchange for simulcast streaming of broadcasts, but they complain that those rates, set by the Copyright Royalty Board, are too high.

Since the dawn of radio nearly a century ago, US copyright law has included a performance right for songwriters and music publishers when songs are aired over traditional analog radio. Each year, songwriters and publishers receive their share of billions in rights money collected from broadcasters, while the musicians who made the music receive nothing.

Fair Pay Fair Play was also reintroduced against a surge of activity from several quarters in Congress advocating for broader copyright law reform. Against that background, and at the urging of House Judiciary Committee Chair Bob Goodlatte (R-VA), representatives from the National Association of Broadcasters and from the musicFirst Coalition, including the Federation, the Recording Industry, A2IM, SoundExchange, and the Recording Academy, have engaged in earnest discussions aimed at reaching an agreement on a terrestrial radio performance right that might be included in an omnibus copyright reform bill for consideration later this year.

While a constructive dialogue between music creator stakeholders and broadcasters toward resolving a framework for AM/FM performance right is certainly a positive development, particularly when the conversation is moderated by influential members of Congress, changes in the way people listen to music—the transition away from traditional radio toward digital formats and streaming—are weakening radio’s market dominance, perhaps also eroding the historic influence that has enabled radio to stave off performance rights for musicians for nearly a century.

Larry Miller, director of the Steinhardt Music Business Program at New York University, in his August 2017 whitepaper entitled Paradigm Shift: Why Radio Must Adapt to the Rise of Digital, examines several factors, some of which I’ve summarized below. These factors have caused traditional radio to fall behind in listenership as music-loving consumers have moved on to mobile smartphone consumption through digital services like SiriusXM, Spotify, Apple Music, Pandora, and YouTube.

Historically, throughout the evolution of technology from the 1920s, across the turn of the century, toward the convergence of digital production and distribution, radio continued to be competitive with new entertainment mediums. With the advent of television and cable TV, radio flourished with emphasis on local content, and from the 1930s, the car radio. Until recently, the automobile was a listening location where radio enjoyed a virtual monopoly.

Today, with the arrival of the “connected car,” new autos that are fully digitally-compatible, equipped with Internet access and wireless local area networks, allow the sharing of the Internet with other devices inside and outside the vehicle. Taking a cue from the popularity of the pre-installed satellite radio option, which has existed for more than a decade, car manufacturers now pre-install digital music services in connected cars. Carmakers are also pre-installing media interface systems, such as Android Auto, which copy mobile device displays to vehicular digital dashboards to provide seamless transition from personal smartphone to in-car Internet use.

Miller notes in his whitepaper, “Previously, radio was insulated from disruption by its stranglehold on in-car listening. The car is ceasing to be radio’s walled garden of captive audiences and limited choices. As the dashboard reconfigures around connectivity with advanced digital services, the connected car and its multiple audio offerings may be the greatest threat to AM/FM radio broadcasting, with 75% of new cars expected to be connected by 2020.”

Where connectivity has become a threat to radio broadcasting, music-listening consumers, increasingly attuned to digital streaming services, have migrated to other platforms. And despite radio’s attempt to establish a digital footprint by simulcasting radio station content by streaming it online, Miller cites a recent Bridge Radio study that shows the change in broadcast radio “favoriteness” since 2001. “Broadcast radio has thus far seen a 33% attrition of favoriteness. Thirty percent of the attrition has been attributed to online music streaming, which includes Internet on-demand services like Spotify and YouTube. Internet Radio [like SiriusXM] accounted for 15% attrition. Less than 2% of the attrition can be attributed to AM/FM simulcast streams.

So the handwriting is on the wall for big radio. It is quickly losing current and future audiences to digital consuming music lovers, whose message couldn’t be clearer. Tomorrow’s cars are leaving yesterday’s radio in the dust.

Radio, to survive, must fork out some of its $15 billion annual advertising revenue to transition and reposition itself in the digital marketplace. To do that, it will necessarily need to make peace with America’s music creators and strike a deal on performance rights that covers AM/FM radio and also provides an incentive to invest in digital services.

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