Fair Play, Fair Pay – Not A Fair Fight

By Roger N. Behle, Jr.

Radio is not dead, at least not to those who create and distribute music. In fact, radio is still considered by some to be the primary means by which new music is introduced to the masses. And, given the importance of radio, those involved in the creation of music have long maintained that radio stations should be required to pay for playing their music. What most music industry outsiders do not know, however, is that radio stations have historically not had to pay, or more accurately, have not had to pay everyone for playing music over the air. For decades, radio stations have been exempt from paying recording artists and record labels; only songwriters and publishers have been paid when music is played (or, in copyright parlance, “performed”) on standard (non-digital) radio. That may all change if current legislation now pending before Congress is passed.

    Introduced in April of 2015, the Fair Play Fair Pay Act of 2015 (FPFPA) seeks to bring the U.S. into sync with the rest of the world by requiring, among other changes, radio stations to pay royalties to play “sound recordings” over the air. Under the U.S. Copyright Act, there are two distinct copyrights available to those who create music – a copyright for musical compositions (17 U.S.C. § 102(a)(2)) and a copyright for sound recordings (17 U.S.C. § 102(a)(7)).  Under current law, owners of copyrights in sound recordings (usually record companies, but sometimes also recording artists and producers) are not entitled to receive royalties for “non-digital” performances of their music over the air – they only have the exclusive right “to perform the copyrighted work publicly by means of a digital audio transmission.” (17 U.S.C. § 106(6)). The FPFPA will eliminate this disparity by striking the word “digital” from the statute; thus, a standard (non-digital) radio station would have to pay royalties in the same way that digital, satellite, or internet radio stations pay.

    The FPFPA would also establish some baseline fees that various different types of stations would pay, dependent in part on the “quality and nature” of the use and “the degree to which use of the service may substitute for or may promote the use of phonorecords by consumers.”  These rates would ultimately be set by a Copyright Royalty Board, applying a variety of different factors, including application of the “willing buyer/willing seller” standard used to set webcasting rates. The FPFPA would also extend these rights to pre-1972 sound recordings (the year in which sound records were first afforded copyright protection under the then-current Copyright Act), such that older sound recordings would be included within the royalty structure established for current sound recordings under the FPFPA. And, so as not to impose an undue burden on smaller stations, fees would be capped for some stations – for example, small stations with revenue under $1MM would pay $500 per year and an FFC-licensed public broadcast station would only pay up to $100. These are just a few of the FPFPA’s provisions.

    So, what’s not to like? Well, if you ask the National Association of Broadcasters (NAB), plenty. The NAB has successfully opposed other legislative attempts to add a performance right for sound recordings several times in the past.  In support of their position, opponents argue that airplay should be free – because it does nothing but help the careers of artists, especially new artists. The opponents further warn that a government-regulated pricing scheme would chill the airwaves, forcing many stations to play fewer songs, thereby giving artists – again, especially new artists – less airtime and less exposure to the masses. The mega-stars and record labels will get richer, and new artists will disappear into oblivion, say opponents. Interestingly, the popularity of other services – such as Pandora, Spotify, and Satellite Radio – do not appear to support such dire predictions, given that these services are already required to pay digital performance royalties, and there does not seem to be any shortage of new artists flourishing on these platforms.

    For the moment, it still appears as though the FPFPA has an uphill battle to passage. Recent voting on the Local Radio Freedom Act (labeled by some as the “Anti-FPFPA”) suggests a fairly robust opposition in both the House and Senate. It’s too soon to call, yet. But continuing changes in technology and the increasing availability of other music distribution platforms may ultimately force over-the-air radio stations to play by the same rules as their digital counterparts. For the moment, radio is far from dead.

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