NAB Announces that a Majority in Congress Have Signed on to the Local Radio Freedom Act – A Look at the Broadcast Performance Royalty Debate

The NAB recently announced that a majority of Congress has signed on to the Local Radio Freedom Act, the nonbinding resolution where Congressional representatives declare their opposition to the adoption of a broadcast performance royalty.  With that announcement, it is worth taking another look at what a broadcast performance royalty is and what might happen next.  We have been covering the arguments about a broadcast performance royalty for over 13 years, but it still bears consideration as I find that there are still broadcasters who do not fully understand the issues.

As we’ve written before, the royalties that broadcasters pay to ASCAP, BMI, SESAC and even GMR are paid for the public performance of musical compositions (or “musical works,” the words and music in a song).  These royalties are paid to the composers of music (and the copyright holders in the musical compositions, usually a publishing company). The broadcast performance royalty proposes that broadcasters also pay royalties for the public performance of sound recordings.  A sound recording is the actual recording of a musical composition by a singer or band.  Sound recording royalties are paid to the performers (and the copyright holders in the performances, usually the record labels). Broadcasters do pay these royalties now to SoundExchange when they stream their programming on the Internet. But in the US, other than digital audio services (like webcasters and music services like Pandora, Sirius XM, Spotify or Apple Music), over-the-air broadcasters and other businesses (like bars, restaurants, and retail establishments) who play sound recordings are not subject to a performance royalty for the performance of those sound recordings, though such royalties are paid in many other countries in the world.

For well over a decade, the music industry has been trying to get Congress to mandate a sound recording performance royalty for over the air broadcasting.  These efforts were most pronounced about a decade ago, where we wrote about some estimates of what the costs would be to the industry were such royalties imposed (see our articles here and here).  Even in more recent times, bills have been introduced that would potentially place significant financial burdens on broadcasters (see, for instance, our article here).  The proposal to impose these royalties continues to be pushed by the recording industry, with the proposed legislation most recently introduced in Congress last year (see our article here).  That bill seemed to be an attempt to ease the industry into the royalty by providing for minimal payments by noncommercial stations and stations with revenues of less than a million dollars.  However, that bill never advanced in Congress after its initial introduction.

The radio industry has continued to oppose these efforts, worried about the financial burden that could be imposed on the industry – particularly in light of current economic conditions.  Even the minimal royalties proposed in the recent bill are seen as simply a first step to higher fees similar to those that plague digital services and hamper their profitability.

But, as digital performances become more and more a part of the business of broadcasters, and the royalties that they impose become a bigger and bigger burden on the industry (see our article here on the SoundExchange royalties that are imposed on a radio station whose programming is provided through Alexa or other smart speaker technology), there has been some talk in the broadcast industry about a grand bargain with the recording industry that would impose some fees on over-the-air broadcast revenues in exchange for lower digital royalties (on a limited scale, some deals were done over 5 years ago big broadcast companies and certain record labels using this formula – see, for instance, our articles here and here).  Thus far, that talk about an industry-wide deal has been simply talk, and has not solidified into any concrete action except these limited deals reached years ago.

This is an issue that continues to be debated.  While the prospects of any action in the current Congress, which sits only through the end of this year, are slim (unless something is sneaked into some unrelated must-pass legislation), this will no doubt be an issue that will continue to be debated, so keep watching for developments.

Courtesy Broadcast Law Blog