Performers step up pressure for US radio royalties

US record companies and performing artists are increasing pressure on Congress to close a century-old provision in copyright law that exempts AM/FM radio broadcasters from paying royalties to artists and performers, a loophole they say is unjust in a time of declining music industry revenues.

Legislation to be introduced on Monday by Representative Jerrold Nadler would force radio stations to pay artists royalties for the use of sound recordings, in addition to the royalties they currently pay to songwriters and composers. Broadcasters say that the proposal would constitute an unfair increase in content costs for local radio stations.

"This bizarre anomaly of broadcasters not paying artists and labels for the use of their music on AM/FM radio has got to end. Their arguments against paying grow more and more unjustifiable and outdated," said Cary Sherman, president of the Recording Industry Association of America.

Record labels and artists have long complained about the exemption. But urgency to close it has grown amid plummeting music industry revenues, down to $6.97bn in 2014, and the transition from an ownership model centred on CD and MP3 sales to an access model where listeners tune in via online radio or streaming services such as Spotify and Pandora.

Broadcasters earn about $17bn annually in advertising revenues, yet spend only 4 per cent of that on royalty payouts. By comparison, Pandora spent half of its $1bn in 2014 revenue in royalties, while Spotify claims it pays 70 per cent of its revenue as royalties.<

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But the National Association of Broadcasters, which represents radio station owners such as iHeartMedia and Cumulus, opposes the proposal, saying that it would do little help fix a music licensing framework in dire need of a rework.

"It is disappointing that this bill retreads years-old policy positions rather than advancing the copyright dialogue through policies that help grow the entire music ecosystem," said Dennis Wharton, NAB senior vice-president.

Broadcasters contend that they are not freeloading. They pay $350m in royalties to songwriters and publishers and $60m in digital royalties each year, and say that the bill does not guarantee any improvement in artists' welfare. Blaming the plight of performers on the recording industry, they point to recent lawsuits filed by artists against their record labels over unpaid royalties.

The NAB insists that AM/FM radio offers greater promotional value to artists than other platforms, because radio exposure induces listeners to buy music, highlighting a study by Nielsen SoundScan that shows radio airplay as a statistically significant driver of music sales and on-demand streaming.

<>But supporters of an AM/FM performance right point out that the US is the only one of 34 OECD countries to not compensate artists for radio sound recordings.

This arrangement is at odds with international reciprocity agreements - meaning that even when a US artist's song is played over radio in a country with a performance right, the artist still does not receive compensation.

"This 'exception' causes us to lose around $100m in royalties from other countries, royalties that could flow to US performers," said Rich Bengloff, president of the American Association of Independent Music.

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