The Fight Over Music Royalties

In November, the Ben Allison Quartet finished a sold-out three-night stint at Birdland. The performance featured music from the bassist’s latest offering, Moments Inside. Allison wrote seven of the album’s eight songs. Their laid-back grooves could easily appear on playlists at jazz stations across the US, but if they air on AM/FM radio he’ll only be compensated as their composer and lose out on royalties paid for their performance.

For years, Allison has worked to change this practice, which has been enshrined in terrestrial radio’s business model since its early beginnings, when broadcasting music on air was deemed to be promotion of the artists, which meant paying them was unnecessary. In 2012, during his tenure as board president of the New York chapter of the Recording Academy (the organization behind the Grammy Awards), Allison tested before the House Subcommittee on Communications and Technology on the future of audio.

“Terrestrial broadcasters have an inexplicable ‘free ride’ when it comes to performance royalties,” said Allison, an assistant professor at the New School in New York, where he teaches music entrepreneurship and social engagement. “All of the other platforms, internet, satellite, and broadcast cable, pay a performance royalty [to performance-rights organizations like ASCAP and BMI] for sound recordings, regardless of promotion. Every other country in the developed world has such a right … This makes corporate radio the only business in America that can legally use another’s intellectual property without permission or compensation.”

In February, the fight for performance royalties was renewed by the musicFIRST Coalition, an advocacy group comprising artists and record labels. Led by former New York Congressman Joe Crowley, the group is lobbying Congress to pass the American Music Fairness Act, which will require radio stations to pay artists when their songs are played. “It’s so important for us to fight to ensure that everyone gets paid fairly for the work that they do,” said Crowley, musicFIRST’s chairman, ahead of a hearing before the House Judiciary Committee on the proposed legislation.

The National Association of Broadcasters, which represents over 5,200 radio stations, has consistently opposed similar proposals, arguing that a performance royalty will financially harm local stations and could put them out of business. NAB has also said the music industry discounts the promotional value that radio creates for artists and their music. In his House testimony, NAB president and CEO Curtis LeGeyt said that 234 members of the House and Senate are cosponsors of the Local Radio Freedom Act, which “recognizes our unique value and opposes any new performance fee on broadcast radio.”

Crowley countered by noting that the American Music Fairness Act has protections for local stations that would allow them to play unlimited music for $500 a year. This would apply to stations with less than $1.5 million in annual revenue and a parent company that makes less than $10 million in annual revenue.

Former US Rep. Joe Crowley is now chairman of the musicFIRST Coalition. (photo: US House Office of Photography)

For many artists, the ongoing tussle over performance royalties highlights a growing consensus that the current payment system is insufficient both in the level of compensation provided and in the accuracy of calculating what artists are owed. “There’s no question that music creators feel their work is undervalued,” said Maureen Droney, senior managing director, producers and engineers wing, of the Recording Academy.

Case in point: Spotify, which has been prominently criticized for paying fractions of pennies to recording artists. The streaming service declined a request for comment. According to its website, Spotify does not pay artists or songwriters directly; Instead it pays rightsholders such as record labels and distributors, which then pay creators based on agreements with the holders—who, the site rights claims, generally receive two-thirds of every dollar Spotify makes from music.

Over the past two decades, due in part to the rise of file-sharing and digital piracy and a corresponding shrinkage in the sales of physical media,[t]Here’s been a persistent devaluation of music to where customers largely see the value of music as zero,” said George Howard, associate professor of music business and management at Berklee College of Music in Boston. “The problem with that is that in customers’ hearts they know that’s not true.”

Howard is among those critical of Spotify and other streaming services for their minuscule payment models. His solution: Artists should go on offense and grab a seat at the table. “It’s like the great writer William Gibson says—’The future is already here, it’s just not even distributed.’ There is plenty of money out there. We’re just not distributing it accurately.”

“It’s like the great writer William Gibson says—’The future is already here, it’s just not even distributed.” — George Howard

There do seem to be signs of hope on this front, however. Recently, SoundExchange, which collects and distributes digital performance royalties to more than 250,000 recording artists and master rights owners with registered accounts, saw a 17% increase in revenue from ad-supported services and an 8% increase from subscription services. “As a result, creators will receive hundreds of millions of dollars more from streaming,” said Sean Glover, SoundExchange’s director of industry engagement.

Glover added that the organization also supports the efforts to make AM/FM radio pay artists, and that SoundExchange works with the Copyright Royalty Board, which sets streaming rates in the US “to ensure creators get the highest possible performance royalty through their rate-setting procedures.”

“One way artists and bands leave money on the table is by not registering with SoundExchange,” the Recording Academy’s Droney said. “It’s free to sign up, and there may be money there for you.”

Unforced errors like this are understandable, though. As the digital landscape for music distribution continues to change and expand, it’s difficult for artists to keep pace with how they’re paid. “The music business is complicated,” acknowledged Kris Ahrend, CEO of the Mechanical Licensing Collective (MLC), which ensures that songwriters and music publishers get mechanical royalties when their songs are played by streaming services in the United States. (Before the streaming era, all mechanicals were generated from the purchase of either downloads or physical copies of recordings.) “And creators often don’t initially understand all the different rights they possess when they create a song or recording.”

Ahrend’s advice for artists is that they make sure all the organizations that pay them have accurate data for their work: a song’s title, its writer or writers, and the percentage of earnings each writer can claim, for example. “If your data is not accurate,” he said, “you’re probably not going to get paid accurately, and you may not get paid at all.”

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