Talk about irony. Just one day after the 50th Anniversary of “The Day the Music Died”, legislation – the Performance Rights Act (PRA) – was introduced that could hasten the death of all music on over-the-air radio.

If you believe PRA supporters (including perhaps most prominently the Recording Industry Association of America), payment of copyright royalties for performance of sound recordings is nothing more than fair and just compensation for intellectual property. 

Opponents of the proposal – including the NAB, State Broadcast Associations and others – see it differently. In their view, it’s a new tax that would cripple broadcast radio. The opposition goes further: the ultimate effect of the PRA would also be disastrous for the recording artists and record companies who are pushing for its enactment. That’s because the revenues many recording artists and record labels seek in exchange for performance of their copyrighted recordings would be reduced, while the essentially free broadcast advertising of concerts (and related merchandise) that has existed for years would also dwindle, leaving everybody involved worse off than before. And the record industry would have no one to blame but itself.

Readers of this blog may recall that similar legislation was introduced in late 2007 (during the 110th Congress) as HR 4789 and S 2500. HR 4789 passed the House Judiciary Committee before time ran out on the bill; the Senate version did not advance. 

The current version of the PRA differs slightly from the 2007 flavors. Introduced in identical House and Senate bills on February 4, 2009, this year’s model must be taken seriously simply because it has the backing of key members of each chamber.  The primary co-sponsors of   S 379 are Senate Judiciary Committee Chairman Patrick Leahy D-VT) and the Ranking Member of that Committee, Orrin Hatch (R-UT), with Senators Dianne Feinstein (D-CA), Bob Corker (R-TN) and Barbara Boxer (D-CA) claiming original co-sponsorship.  HR 848 was introduced by House Judiciary Committee Chairman John Conyers (D-MI) and Darrell Issa (R-CA); other original co-sponsors are Howard Berman (D-CA), Marsha Blackburn (R-TN), Jane Harman (D-CA), John Shadegg (R-AZ), and Paul Hodes (D-NH). 

According to Senator Leahy’s Statement on Introduction, the PRA is intended to remedy two disparities: 

  • “When webcasters, satellite radio companies, or cable companies play music, and profit from its use, they compensate the performing artists.  Terrestrial broadcast radio is the only platform that still does not pay for the use of sound recordings.”
     
  • “[The United States] is the only Nation that is a member of the Organization for Economic Cooperation and Development but still does not compensate artists.  An unfortunate result of the lack of a performance right in the United States is that American artists are not compensated when their recordings are played abroad.”

A brief primer on copyright law as it applies to the music you hear on the radio may be in order here.  Every song heard on the radio or via an Internet stream consists of two copyrighted works.  There is the copyright in the “musical work”, which is the written music and lyrics (sometimes known as the “composition”).  Think sheet music – the notes and words in their unperformed state.  This copyright is most often owned by the songwriter (or his or her music publishing company, if the rights have been transferred). 

There is also a separate and distinct copyright in the “sound recording”, which is that version of the song you’re actually hearing.  This copyright vests in the actual performer (or his or her record label, if the rights have been transferred). 

Here’s an example that might assist the uninitiated in understanding the difference between the two:

The song “Yesterday”, according to the Guinness Book of World Records, has the most registered cover versions of any song in history (over 3,000 exist).  The copyright in the original musical work (before that right was later sold) was owned by the publishing company set up by its credited songwriters, John Lennon and Paul McCartney.  They, along with the rest of the Beatles, separately owned a copyright in the sound recording of “Yesterday” that we’re all familiar with. When Ray Charles recorded a version of “Yesterday” in 1967, he had to pay royalties (to the Lennon/McCartney publishing company) for use of the musical work, but he obtained his own copyright in his cover version.  Anyone who uses the Ray Charles version of “Yesterday” has to pay royalties to both Lennon/McCartney (for the underlying musical work) and to Ray Charles (for his particular performance as captured in that sound recording).

A crucial question at this point in the discussion is: what is a “use” of a copyrighted work? That is, what do you have to do with a musical work in order to subject yourself to the obligation to pay royalties? With some limited exceptions, any public performance of a musical work triggers that obligation: juke boxes, stadium PA systems, Internet streaming, satellite radio, Muzak services, etc., etc. They’re all public performances. And so, too, is broadcasting – with one major difference.

As noted above, public performance of a particular recording of a song involves two separate and distinct copyright interests, one in the underlying musical work, the other in the particular recorded performance. A single playing of a recording may constitute multiple “performances” or “uses” for copyright purposes. For example, if a radio station is simultaneously streaming its over-the-air programming onto the Internet, it would have to pay royalties:

            to ASCAP, BMI or SESAC, for performing the musical work over-the-air; and

            to ASCAP, BMI, or SESAC, for performing the musical work by streaming it; and

            to SoundExchange, Inc., for performing that particular recording by streaming it.

Note that the broadcast of the sound recording would NOT trigger any obligation for the radio station to pay for the “performance” copyright under current law. That’s because broadcast stations have always been exempt from paying royalties for performing sound recordings over the air. The theory is that the broadcast of the work provides advertising to the performer. The exemption recognizes the essentially symbiotic relationship between recorded music and radio.  As discussed above, there exists no equivalent exemption from performance of sound recordings in digital format (via the Internet, digital download, on satellite radio, etc).  

Efforts to impose a performance right obligation on broadcasters have been made, and rejected, at least three times in the past (in 1971, 1976, and 1995).  The PRA tries again, proposing:

  • Application of the performance right in sound recordings for all audio transmissions, including over-the-air broadcasting.  This new performance right can have no adverse impact on the right of songwriters to recoup royalties for performance of their musical works. 
  • Broadcasters will not be subject to the “sound performance complements” applicable to digital performances (which include prohibitions on certain pre-announcing of songs, on the consecutive playing of songs by the same artist or from the same compact disc or the repeating of programs)
  • Broadcasters will be forced to pay performance right royalties at a rate set by the Copyright Royalty Board, with the following exceptions: 
    • Incidental performance of a sound recording (less than 30 seconds of music coming in or out of commercial or in the background of talk or news programming or during a commercial of less than 60 seconds’ duration) or performance of a sound recording during a religious service will not trigger payment of royalties for the performance. 
    • Small Commercial Broadcasters – defined as broadcasters with less than $1.25 million in gross annual revenues – can elect to pay a flat performance royalty fee of $ 5,000.00 per year.
    • Noncommercial broadcasters – defined as public, educational or religious broadcasters under Section 118 of the Copyright Act – can elect to pay a flat performance royalty fee of $ 1,000.00 per year.

Of course, the NAB and various State Broadcast Associations are already mounting a defensive effort.  NAB CEO David Rehr drafted this letter that has already been circulated to all Senators urging them to vote against S. 379 because it is nothing more than a “performance tax” that will put “at least half of” all royalties “directly into the pockets of the big record labels, funneling billions of dollars to companies based overseas.”  Mr. Rehr argues that “For more than 80 years, a symbiotic relationship has existed between local radio stations and the recording industry” that has resulted in “85 percent of listeners of all audio services [identifying] radio as the place where they first heard music that they purchased”.

Several State Broadcast Associations have jointly signed a resolution asking Congress to refrain from imposing “any new performance fee, tax, royalty or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings.”  In support of the resolution, the Associations argue, among other things, that: 

  • “Local radio stations already contribute more than $2.4 billion in value to the record labels and their performers by promoting their recorded music, concerts, merchandise and careers to an average of 235 million listeners per week.”
     
  • The imposition of a performance tax will harm local broadcasters’ abilities to serve the public interest by imposing additional financial obligations on an already financially weakened broadcast industry.  (They estimate that more radio stations – in addition to the 235 stations which have already gone dark – would be forced to go off the air, to change formats from music to talk, or to refrain from programming niche music formats.) 
     
  • The PRA is nothing more than a “bailout” of record labels and performers. 
     
  • There are key differences (a) between over-the-air radio and digital radio and (b) between the United States and foreign countries, in terms of the radio business and regulatory schemes. Those differences justify continued disparate treatment under copyright laws. 

While we do not agree that the PRA constitutes a “tax” (since a tax is generally charged by the government to serve the needs of the public, while these royalties would be paid in exchange for the use of another’s copyrighted materials), we do not believe that the PRA is the “right” answer, either.  Record labels and artists are compensated for the performance of their works in the form of the free advertising they receive each time a song is played.  This leads to purchase of CDs and, more importantly, sales of concert tickets and merchandise (the latter two benefitting  the performer, not the songwriter, if they are not one on the same).  Requiring payment of these royalties would provide a double benefit – and in many cases, it wouldn’t even be the performer that receives this double benefit, but the record label that often gets the lion’s share of the revenues.  Imposing this royalty at this time does not benefit anyone – well, certainly not those for whom the benefit is intended.  Indeed, it is most likely to victimize all when there is less overall music played on fewer radio stations in the end. And as the amount of music played plummets toward zero, so too will the royalties that artists could expect to be paid.

What’s fifty percent of zero again?  Oh yeah: zero.