Record Labels, Radio ready to rumble

The woes of the recorded music industry have been well documented. Sales of CDs thus far this year are down 20% compared to last year. Revenues from digital distribution continue to grow but not enough to prevent further downsizing. All of which is why the labels are turning over every rock looking for additional revenue streams such as licensing their music video catalogues, to getting into the advertising business to creating all sorts of derivative products around an artist and a release.

This is the backdrop against which we are hearing rumblings about the labels trying to get a performance right from radio so that they’d be paid royalties from the use of their music on terrestrial radio, just as the music publishers, songwriters and composers receive a royalty whenever a song gets played.

Business is booming for the latter group, since as I’ve written in the past, more people are consuming music than ever before. Labels and artists should get a chance to reap some of these rewards too.

First some background: Satellite radio pays about 7% of its revenues to the labels and artists, while internet radio webcasters pay anywhere from 12% to many times this rate depending on how you’re counting. What does terrestrial radio pay? Zip. Nada. Through a historical accident, terrestrial radio has paid royalties to songwriters and publishers, typically collected by a society such as ASCAP, BMI and SESAC, but not to the labels and performing artists.

Incidentally, business is booming for these societies from their burgeoning licensing revenue .

The LA Times has a good rundown of this, and mentions how the legal battle may be more in the labels’ favor this time around given the troubles of the record industry and the fact that satellite and internet radio have to pay such royalties (as does most of the rest of the world’s terrestrial radio stations).

The labels have tried to claim this performance right in the past but have found themselves outmatched politically by the powerful broadcasters. Chris Castle has the money quote from the LAT article: “The old saying is the reason broadcasters don’t pay a performance royalty is there’s a radio station in every congressional district and a record company in three.”

But now with powerful groups like the RIAA on their side, the labels may have their day. There will be rhetoric from both sides with the record companies trotting out starving artists to make their case while the broadcasters try to brand this as an extra “performance tax,” which they know will be anathema to many in Congress, and noting how they provide a promotional medium for the labels. (

This makes no sense to me. Call me an apologist for the labels but if you take my product and build a business out of it, I should be able to get paid for it or choose to let you use my product for free in exchange for the promotion I’d get. But that should be my choice. The government shouldn’t determine my business model by not letting me charge you for its use.

What should really happen is for the government to be neutral on this and let the industries determine the price of playing music on terrestrial radio in the free market . It may be that the labels get a windfall from this, or that they decide that the price is ‘zero’ or even that the broadcasters actually demand a per-play royalty going the other way, in which the labels would have to pay for every time a radio station plays one of their songs. It would be a wonderful thing to let the market decide the price of playing music over the air. Now that’s a negotiation I would tune in for.

[Raghav “Rags” Gupta is VP of Consumer Services & Partnerships at Brightcove, where he has worked since ’05, prior to which he was a senior executive at Live365. His blog can be found at www.ragsgupta.com . The views expressed here are personal and do not necessarily reflect those of any Company with which he is or has been affiliated.]

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