Radio Industry Royalty Problem Self Made

Tuesday, June 3, 2014
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Radio Industry Royalty Problem Self Made

Yesterday, radio consultant Fred Jacobs wrote a commentary titled "Royal(ty) Pain." His opening sentences were as follows: "You have to hand it to SoundExchange. They always seem to come up with creative, inventive, and imaginative ways to try to extract money from the broadcast radio industry."

"...this royalty payment issue could have been held down to reasonable dollars had the radio industry joined with webcasters when the fight first got ugly in 2002."

The discussion then went to how "SoundExchange would do well to focus its efforts on creative partnership opportunities with its artists and the FM radio stations that have consistently supported them."

It ended with "A collaborative approach would be welcomed by a broadcast radio industry...."

Sorry, Fred. But there is quite a bit that you left out.

To clarify this topic, I wrote the following and offered it as a guest commentary. It was declined with "This is a complicated issue...." Sorry again, Fred. It's not really. And it all could have been avoided had the radio industry joined in the fight when the fight was fierce.

This is my answer to "Royal(ty) Pain".

The caveat to what follows is that I am NOT siding with SoundExchange; it has proven to be a money-sucking organization. Birthed by the RIAA, it became a non-profit in 2003.

But here are a few facts that seem to be missing from the "Royal(ty) Pain" story. Most important, and whether we're discussing music prior to 1972 or not, this royalty payment issue could have been held down to reasonable dollars had the radio industry joined with webcasters when the fight first got ugly in 2002. I was there, and here's what happened:

1) In 2002, when the first CARP met to decide rates which were retroactive to 1998, the webcasting industry begged, pleaded, hoped and prayed, that its broadcasting peers would help. The radio industry did nothing. Ditto in 2004 and 2007. My guess is it's because they hoped high royalty rates would drive pure plays out of business.

2) SoundExchange was a well-oiled lobbying machine up against a loose-knit organization of webcasters; because of this, the latter was blown out-of-the-water with each move it tried to make in the fight. That's why rates got as bad as they are.

3) Addressing Bob Bellin (in the comment section, with his), "The current system leaves no viable business model." Right! But here's what's printed as a footnote on page 19 of CARP's "Determination of Rates and Terms," issued in 2005. "It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant." As they saw their function, the judges were to determine an equitable rate for use of copyrighted material. Because SoundExchange personnel were familiar with arguing on this front, and webcasters were not (sic), the rate was set using one "willing buyer/willing seller" agreement - that which was structured by Yahoo! (a firm notorious for overpayment - think Mark Cuban being paid $3.7 billion for Broadcast.com).

4) Regarding Fred Jacob's comment of "radio has, is and always will be a better friend to artists" - times change. Broadcasters were warned countless times that they would be next on the list if staggering performance royalty rates were allowed. (Again, sic.) It makes me sick to think how often we pleaded with the radio industry to get involved in those early years, and how many times the internet radio community was ignored by the people who had the knowledge to defend back then. When we lobbied Congress in 2005 not one broadcaster was present. Same in 2007.

5) If SoundExchange cannot find an artist that deserves payment, SX keeps the money. How's that for an incentive to make artist payments? At one time there were over 6,000 names on a list of artists who could not be found. Some well-known artists were included. Though it's no longer there, SX posted that list at http://plays.soundexchange.com/jsp/unpaidArtistList.jsp.

The simple answer today is for radio to stop playing the songs of any artist demanding payment. Though it wouldn't do any good for a company like yours [Jacobs Media] which specializes in Classic Rock, it would open the door to thousands of quality indie artists who are willing to sign waivers for radio airplay. Not to be snarky but I don't recall your company or any other consultant, radio group, or management team saying "we need to fight these high performance royalty rates" back in 2005. Nor were those words uttered when we lobbied Congress, again, in 2007.

We all know that "top of mind" is required for a musician to sell their songs or tickets to concerts. Three weeks off the radio, all radio, and you'd find hundreds of these hold-outs begging to get back in - all willing to sign waivers (as I require from artists who are made available for free to radio at RRadioMusic.com).

You are correct. The radio industry made the Eagles and countless other groups. But let us not forget that all this music was cheap content for radio; and now that playlists have dwindled down to a few hundred major players, with scant airtime given the rest, it's not the same ballgame. Times change (sic).

Should an artist be paid? Yes. Once their music has proven to be an audience draw, not when that artist is seeking exposure in the early stage of their career. It's at that time when the radio station is taking the chance, when introducing a new act it's not sure the audience will accept.

Should SX be curtailed? Of course. But precedence is set, and there's going to be more of this hunting for the dollars by SoundExchange in the future.

The most urgent point to be made is that broadcasters in the U.S. are in a group of only 5 countries that do not make performance royalty payments. North Korea, China, Rwanda, and Iran are the others.

The reciprocity payments missed by U.S. artists because of this unbalanced payment of performance royalties is a huge card to play for SX. (I.E.: Adele, if played in the U.K. earns performance payments. She does not get it if her songs are played in the U.S. As payback, Madonna won't get performance royalty payments when her songs are played in the U.K.)

I am not for SoundExchange. But I also cannot sit and watch a revisionist radio industry history be written about how this inequity of payment got to where it's at. It started, and persists, because broadcasters refused to become involved in the fight when their expertise was desperately needed.

The U.S. radio industry may think it is safe on performance royalties - and it may well be for the time being. But, sooner or later this whole payment system is going to catch up with it. Now this is an issue of parity with other music-based businesses, not just a "how much should we pay the artists."

Choose to believe, or not. It's really that simple!

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