Written By: Adam Shelton
Research By: Matt Schroettnig
Edited By: Jesus M. Palomares
Managing Editor: Mary Anne Nash

If the best things in life are free, then it’s probably unfortunate that we often take for granted what is freely given. Since the advent of free radio broadcasting, radio stations have enjoyed a unique role in American culture–they tell us what to listen to. Radio promotes the artists whom we grow to love as music listeners. They even tell us who to love.

In the early twentieth century, artists, managers, and recording studios began to recognize value in songs’ copyrights. They formed collectives to catalogue, copyright, and collect royalty fees. Under the current agreement structure, the broadcasters (radio stations) that use the music pay fees to these copyright collectives, or “performance rights organizations.”

Years of litigation and publicity battles resulted in an agreement whereby radio stations paid royalties to a song’s composer, but had a “free pass” when it came to paying the performing artists. The artists were “compensated” with the benefits of good airtime. This free pass, however, faces a stiff challenge in new federal legislation: the Performance Rights Act. At first glance, this seems like a fair deal–pay the composer and the performer. But is “fairness” really the driving force behind this new bill?

A  B R I E F  H I S T O R Y  O F  M US I C  L I C E N S I N G

In 1914, the American Society of Composers, Authors and Publishers (“ASCAP”) was formed, with membership consisting of famed composers and songwriters of the day. Organizations like ASCAP act as intermediaries between copyright holders and those who used the copyrighted material publicly. ASCAP’s practical task was to monitor the airwaves for copyrighted songs and charge broadcasters fees for airing the song.

Initially, radio stations primarily broadcasted live performances and paid artists for each show. Over time, however, performers demanded higher wages, citing the broad reach of their performances. Eventually, broadcasters resorted to playing recorded performances instead of live ones. Together, the stations and ASCAP developed a royalty-collecting technique known as blanket licensing, whereby the stations paid flat royalty fees to play the music over a specified period of time.

From 1931-1939, ASCAP raised royalty fees for its copyright owners by 448%. In response, broadcasters created their own collective, known as Broadcast Music Incorporated (“BMI”). BMI housed copyrights for new, previously unrecorded genres of music such as folk, jazz, and later, rock and roll. BMI’s operation differed from ASCAP most significantly in that it took public domain songs, non-copyrighted material that is open for public use without charge, and broadcasted them for free. When ASCAP threatened to double rates again in 1940, the majority of broadcasters jumped to BMI. ASCAP assumed that the mob would soon return because they had the popular music. They were sorely mistaken. Even with “second tier” music playing, the competition was enough to break ASCAP’s stranglehold [at 7:00] on licensing fees, resulting in lowered royalty fees to compete with BMI.

As mentioned above, broadcasters have historically enjoyed a free pass with regard to paying performers, through their record labels. Currently, radio stations can play songs and must only send royalties to copyright collectives like BMI or ASCAP. The general assumption is that the artist benefits from increased sales and exposure arising from the playtime. If the songs become popular, a broadcaster can attract more sponsors, whereas the artists get their benefits from more exposure, an indirect monetary gain at best. But now, the artists are fighting back.

S O,  W H A T ‘ S  T H E  P E R F O R M A N C E  R I G H T S  A C T ?

Decades after ASCAP lost their monopoly of music rights, the Recording Industry Association of America (“RIAA”) is using new legislation to seize control. The RIAA is a conglomerate that represents recording labels and their contracted artists, collecting royalties for performances on their behalf. Prior agreements held that the exposure an artist and record label received from radio airtime was very beneficial to the label/artist, so stations did not compensate performers. In 2009, however, the RIAA successfully lobbied Congress to push a bill that requires broadcasters to pay the record companies a fair royalty fee in addition to the existing copyright collective royalties.

The Performance Rights Act is now up for vote in both houses of Congress. If passed, the law will require radio broadcasters to pay royalty fees to the RIAA based on the station’s revenue. Proponents of the bill are pushing a fairness rationale. The RIAA even used several moderately popular recording artists such as Sheryl Crow and will.i.am to testify before Congress. This fairness appeal hits home for the average consumer and legislator alike, most of whom do not understand how the industry functions. After all, it seems only fair that the performer be compensated for his work, right?

Most radio stations and many scholars agree that performers should be compensated fairly, but say ‘no’ to the bill because they claim that the record labels will truly enjoy the revenues from the proposed license fee increase, not the artists. Society is now a bit wiser to the reality that few artists enjoy large revenue from album sales. The contracts that bind artists to record labels typically provide very small percentages of profit to the performer. Performers make most of their money doing tours and through sponsorship deals. Record labels have not enjoyed as high of profits from CD sales, since illegally downloading free music on the Internet became popular.

Critics of the bill say it is a last resort ploy from a “dying industry” to gain some revenue back from radio stations. The fees that would be imposed may be manageable for large radio stations, even if the result is budget cuts and more commercials. The bill, however, will likely hurt small radio stations, which would be forced to upgrade their technology to track and document the performer of every song they play in order to compensate accordingly in compliance with the proposed bill. These additional costs would be especially difficult for college radio stations and minority-owned stations, which tend to have fewer financial resources.

Other critics suggest the proposed bill will destroy diversity on the airwaves. Because stations’ primary means of income is advertising, the biggest advertisers tend to buy slots where the more popular music is played. The bill seems to encourage stations to play only the most popular music, in order to gather sufficient advertising revenue. Consequently, the bill also hurts independent artists, whom radio stations would now be reluctant to play due to their lower advertising potential.

An example of the backlash against the proposed bill occurred in Texas, where a station refused to play songs from any artist associated with the RIAA. The CBS-owned station representative said the bill is an example of how the recording industry is reacting to its own “hemorrhaging business model by taxing radio stations under the banner of ‘artist rights.’” (Referring to the financial difficulties the recording industry has faced because of the “free” digital music on the Internet).

Additionally, since stations choose who they play, they also decide in part who is popular. Therefore, they affect music label revenues (and any artists fortunate enough to own their record labels). If the record labels truly want to decide whom “legally” gets promoted more, what better way to control revenues than to implement better pricing mechanisms to influence what artists a station plays?

A N  U N C E R T A I N  F U T U R E  F O R  R A D I O

Once thought to be one of the few industries with real resistance to economic downturns, radio’s future now seems uncertain. Stations may now suffer in the same struggles as internet, satellite, and cable radio, which all saw a similar “performer royalty fee” imposed on them in the last decade, and do not enjoy the attention and advertising support that broadcast radio does.

Consciously or not, society is shifting toward a rationalization of obtaining music for free. This crusade is led by the youth of our nation. Stanford Law professor Lawrence Lessig, an expert in copyright law, claims that a youth’s ability to remix and adopt music in his or her own way is the instrumental way of self-expression [at 12:35]. He argues that the record companies and ASCAP are attempting to stifle the creativity of a generation by implementing strict and unrealistic royalty laws. In 1996, for example, ASCAP threatened to file suit against the Girl Scouts of America for using a song at a camp without paying a royalty, because the group used the song in a “public” fashion by playing it for 214 young girls. ASCAP also threatened to hike royalty fees for ring tones, claiming that whenever they are played in public from an incoming call, they violate copyright laws. Luckily, the NY district court didn’t buy it.

Society is in a strange middle ground [at 18:12]. We want to respect the creative works that our artists create and compensate fairly. Conversely, many people no longer wish to pay for music, leaving a large portion of society literally shifted into lawlessness. But, if an enormous segment of society is living “against the law,” isn’t it time to consider changing that law? Only time will tell. So turn on your radio and stay tuned in to the debate. It won’t cost you anything . . . for now.