February 2008

Performance Royalties - Principle, Practice and Fairness.

Performance Royalties - Principle, Practice and Fairness.

The current US situation concerning radio and performance royalties - they are not a tax whatever propaganda put out by the National Association of Broadcasters may put out and are already paid in most other parts of the world - strikes us as akin a man threatening another with grenades whilst locked into a room together.

We would suggest this is a pretty stupid thing to do and that sums up our view of the approach currently being taken by the two sides. The question is what other options are available.

The Principle.

First let's briefly consider the issue of principle. On that basis there is in our view no argument - if copyright is to exist at all, this is an open-and-shut case. Royalties should apply.

But what about practice? Here the situation is also blindingly clear to us. Each side is in a troubled business and should the recording companies push too hard they could put stations out of business leaving the most likely gain going to lawyers rather than either radio or recording companies.

Whatever the two sides do, however, both will have to take their heads out of the sand sometime and recognize that technology has changed things for them irrevocably.

So where do we go from here to get a practicable and fair settlement?

The current legal situation.

With US law as it stands this matter has become an issue of clout rather than one of principle with NAB arguing the value to recording sales of promotion on the air and the RIAA denying this value.

We think there is a value and have already argued (RNW Mar 2007 comment) that the best way out would be to create different classes of copyright with different rates attaching - thus giving the recording industry a financial incentive to keep rates down to get extra airings over more expensive recordings: It also would provide a situation of willing sellers and buyers rather than the government-enforced same price for all recordings situation that now applies for streaming and download royalties.

This would also as it happens fairly speedily give a measurement of whether airplays have a promotional value and increase sales. It might also mean that artists have to realise that their future has also changed and that for many of them the most successful route could well be heavily promoted concert tours and merchandising on the back of recording success, whether the recordings go out on radio, via CDs or online.

The Elephant in the Room.

All of the above, except for a move to tours and merchandising as a much larger part of income, may of course be made irrelevant by the elephant in the room - the ability of people to download music from the Internet for free, whether or not this is legal.

This may not be as big a problem for the musicians as it is cracked up to be in view of the recent decisions by bands as prominent as Radiohead to put music out for download themselves and the comparative ease with which a group can nowadays put up a fairly sophisticated website.

It could however be a death knell for some of the recording companies who are not needed as much as before but we do not see that the way out for them is to choke radio to death.

Equally it could also be a death knell for some radio stations, particularly if a perception that they play only a very limited selection of music and do not give as good a service as internet providers gains deep roots.

The way forward for radio.

Absent a change in the one-price-fits-all royalty rules, we think that in principle radio should pay performance fees but we think the amounts should be comparatively modest.

We also think that it would be sensible of radio to be pro-active about developing local artists - and maybe the NAB for once could take a useful role in leading co-operative effort to do so as the medium has the advantage of being able to both boost local artists locally and potentially do so nationally: How about, for example some kind of weekly round-the-US "Best of local artists" programme that could be networked to give national publicity to up and coming local artists willing to forego royalty charges for say a year to gain the publicity and exposure?

Irrespective of royalty charges and the current state of the recording industry, we still think radio has a lot to bring artists but it has to stop riding on the back of another industry and think a little longer term - which means not only appealing to perceived valuable demographics but also attracting future listeners who, if they listen to one thing whilst young, may well tune to others later in life but are less likely to do so at all if they have got into the habit of ignoring the medium .

Unfortunately far too few US radio stations seem to think that far ahead - maybe a cost of Wall Street pressures as opposed to being owned by people interested in the medium?

What you think? Please E-mail your comments.

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