The Performance Rights Act

I love hearing about someone like Billy Corgan testifying before Congress.  This video is just outstanding.  Congressman John Conyers Jr. (D-MI) thinks Mr. Corgan is a poet.  Okay…. Anyhow, bald-headed spectacle aside, why did Mr. Corgan go to Washington?  To voice his support for the proposed Performance Rights Act, a bill currently working its way through both the House and the Senate.  After a failed attempt to pass the law in 2008, its proponents – which include members of both parties, the musicFIRST Coalition (an organization of artists like Corgan, BB King and Hall and Oats) and, naturally, the RIAA – took another shot and reintroduced the bill in February.

Here’s the basic idea.  Under the U.S. Copyright Act, a recorded song or other musical work consists of two completely separate copyrights: a copyright in the 1) sound recording, and 2) the underlying musical work (i.e. the composition), frequently referred to as the publishing copyright.  The Copyright Act provides the author of each copyright the exclusive right to reproduce the work, prepare derivative works, distribute copies of the work to the public, and display the work publicly.  With respect to the publishing copyright, the Copyright Act also ensures the right to perform the work publicly.  However, since the advent of commercial radio, the Copyright Act has not provided a right of performance to owners of a sound recording copyright.  With me so far?  This distinction is very important.  It means that every time a radio station plays a song, it must pay a royalty to the owner of the publishing copyright – usually the author or their music publishing company – but not the owner of the sound recording copyright – usually the musician(s) or the record label.

Why?  Well, look at the nature of commercial radio.  Playing a band’s song over the air is essentially free publicity for the band.  So the initial idea was that radio stations should not have to pay money to publicize a recording that the label and musician(s) hawk to the public.  Otherwise, it would be like requiring your wingman to buy you drinks all night.  They are there to help you meet ladies, so you should probably be nice to them.  If they happen to score some collateral action in the process (as commercial radio does by raising advertising money), well, that just means everyone is happy.  Thus, for many, many decades, everyone involved seemed to agree this made sense, and labels and radio stations peacefully co-existed.

But slowly, things have changed.  Concerned about the possibility that satellite and internet radio, with their ability to transmit crystal clear digital copies of recordings, would altogether replace the public’s demand for CDs, the RIAA successfully lobbied Congress to pass the Digital Performance in Sound Recordings Act.  The DPSRA requires satellite and internet stations to pay a royalty to the sound recording copyright holder each time they digitally “play” a song.  This constituted the first time that the Copyright Act provided any performance rights to sound recordings.  However, the DPSRA limited this right to “digital audio transmissions” and did not alter the right of terrestrial radio stations (i.e. AM/FM stations) to “perform” a sound recording without paying a royalty.

Now, the RIAA (and, of course, Mr. Corgan) wants to take that extra step and also require sound recording royalties from terrestrial radio stations for every spin.  Basically, what would happen is a sound recording performance rights organization, similar to BMI and ASCAP*, would collect royalties from radio stations and distribute them to its members.  The Copyright Royalty Board would set a standard royalty rate to be paid by the radio station every time it played a song.**  The current draft of the PRA does carve out a niche for smaller stations and college radio:  smaller radio stations – grossing less than $1.25 million per year – can pay a flat fee of $5,000 per year, while public and college radio stations could pay a flat fee of $1,000 per year.

* BMI and ASCAP are organizations representing music publishers and other owners of copyrights in musical works.  These “publishing rights organizations” collect royalties due each time a radio or television station plays one of its member’s songs.  These organizations are necessary because it would be virtually impossible for every radio station to separately negotiate with every composer or publisher.  Likewise, SoundExchange is an organization representing sound recording copyright holders with respect to royalties derived from the performance of members’ songs on satellite and internet radio.

** While this amount is an unknown, it would likely be a matter of pennies for every play. It might not seem like much, but just ask ASCAP – this can add up quickly.

So is the Performance Rights Act a good idea or not?  Well, that depends on whether you are a record label, a musician, or a radio station.

For most record labels – major or indie – and artists, the PRA potentially means a heretofore non-existent revenue stream.*  In this era of overall economic uncertainty, labels and musicians should probably consider any new revenue stream a godsend.  Another point is that many other countries already have laws similar to the PRA on their books.  However, since the U.S. Copyright Act doesn’t presently provide a right of performance to sound recording copyright owners, musicians typically do not receive royalties from international radio stations.  Therefore, the PRA conceivably represents a royalty stream from not only U.S. stations, but from radio stations around the world.

* One note to musicians and bands:  should the PRA pass and become law, carefully review your recording contract with your label to determine who keeps the sound recording performance royalty.

Unsurprisingly, many radio stations and broadcasters vehemently oppose the PRA, despite Mr. Corgan’s assurances that radio isn’t the bad guy.  Several commentators suggest that the PRA is simply an attempt by the RIAA and the major label system in general to grab as much money as they can before they wheeze their collective last gasp.  Organizations like the Free Radio Alliance and the National Association of Broadcasters go one step further to contend that the PRA essentially allows the recording industry to externalize onto radio stations the costs major labels have incurred as a result of their massive failure to keep up with consumer trends.  Moreover, many radio stations, particularly smaller stations and college radio, may not be able to afford even the lesser flat yearly fees.  Like everyone else, these stations are struggling, likely making little to no money whatsoever from playing (and thus promoting) the new Animal Collective record.  Yet the PRA would nickel and dime these stations just that much more.

So while the PRA would certainly help labels and musicians in the short term, in the long run it could have a seriously deleterious affect on music radio, one of, at least traditionally, the best promotional tools of the record industry.  One way or another, the Performance Rights Act, should it pass, will drastically alter the delicate symbiosis in place for decades between musicians and radio stations.