Public Performance Right Hearing on the Hill

Yesterday (March 10, 2009), the House Judiciary Committee held a hearing on the Public Performance Right for Sound Recordings, which featured testimony from folks on all sides of the issue, including one bona fide rock star (no, President Obama didn’t stop by).

Billy Corgan of Smashing Pumpkins joined Mitch Bainwol (Chairman and CEO, RIAA), Paul Almeida (President, Department for Professional Employees, AFL-CIO), W. Lawrence Patrick (President, Patrick Communications), Stan Liebowitz, Ph.D. (Ashbel Smith Distinguished Professor of Managerial Economics, University of Texas at Dallas) and Steve Newbury (Chairman of the Radio Board, National Association of Broadcasters) to present their views on the Public Performance Right.

This Performance Right would pay performing artists and sound copyright owners for the use of their music on terrestrial radio. Here’s an example: if you hear Aretha Franklin’s version of "Respect" on U.S. radio, only the songwriter (Otis Redding) and the publisher receive payment; Aretha (and her label) are left out. Compare that with the situation in just about every other industrialized nation, where performing artists receive payment for the use of their work on over-the-air broadcasts.

FMC supports a Public Performance Right for terrestrial radio for a number of reasons — it would compensate deserving performing artists; it would establish a better balance between new services and traditional radio; it would create another revenue stream for copyright holders and performers, including the thousands of independent labels whose songs receive airplay every year. It would also enable U.S. artists to get paid when other countries broadcast their work. Millions of dollars of foreign performance royalties that could be distributed to US performers are currently left on the table – or go into other countries’ arts and culture coffers — because the US has no terrestrial performance right. For more information, you should check out our Public Performance Right fact sheet, and Ann Chaitovitz’s Op-Ed in Huffington Post.
This issue goes back to practically the dawn of radio. The broadcasters have long held that the airplay creates “promotional value,” which in turn drives record sales; therefore, they shouldn’t have to pay for using performers’ music. The debate has gotten even hotter in the digital era due to the fact that satellite radio, webcasters, and cable music stations pay the performer and recording copyright owner via SoundExchange, as well as paying the songwriter and publisher through ASCAP/BMI/SESAC.

Like the royalty breakdown for the digital Performance Right, the royalty breakdown for the terrestrial Performance Right goes like this: for non-interactive licenses, the featured performing artist receives 45 percent, the sound copyright owner (again, usually the label) gets 50 percent and the backing musicians and vocalists split the rest. This money does not come from the songwriter and publisher’s portion; it cannot be recouped and does not even go through the label.

It’s worth noting that Billy Corgan, who supports the Performance Right for terrestrial radio, is not only the featured performer, but also the songwriter and co-copyright owner for most of his band’s material. In his testimony, he was clear about how terrestrial radio benefited his own career, but didn’t mince words about what he sees as a skewed compensation structure. “From my perspective, this issue is one of fundamental fairness,” he said. “If the performance of a song has value to a particular terrestrial radio station in its airing, I believe it is only right to compensate those performers who have created this work. Simply put, if a station plays a song, both the author and the performer should be paid. These particular performances must have value to the stations or they wouldn’t be playing them.”

Steve Newbury, representing the National Association of Broadcasters — who have so far successfully beat back attempts to enact a performance right for radio — invoked poor market conditions and promotion for artists as reasons to keep things as they are. “Local radio stations provide new and emerging artists with needed exposure and access to a listening audience,” he said. “Record companies and their artists benefit not just from radio airplay, but also from on-air interviews and promotions of local concerts and new albums.” Yet one of the fastest growing segments of commercial radio is classic rock, which plays music that long ago passed its promotional “sell-by” date. There’s nothing saying that all music would even have to have the same rate — oldies formats might end up paying less then the stations that spin the latest cuts. The rate set for an artist’s debut might be lower than the rate for an established superstar.

It’s also interesting that whenever the Public Performance Right is discussed, the broadcasters bring up their supposed commitment to localism and diversity, which, in this era of hyper-consolidation and cookie-cutter playlists, smells a bit fishy.

As expected, the RIAA (and by extension, the major labels) took a bit of a bashing from both members of the Committee and those witnesses who are against the Performance Right. But it’s important to mention (as RIAA CEO Mitch Bainwol did in the question-answer period) that the big labels are only one segment of the industry — there are a lot of indies out there. The American Association of Independent Music — an indie label trade group — actively supports the enactment of a performance right, too.

The language in the House bill contains some notable improvements over the legislation introduced last year. First, it includes additional language to protect songwriters’ royalties and to ensure that these royalties cannot and will not reduce the amount of songwriter royalties. This is important, as songwriters depend on radio play as a major source of revenue.

It also closes an important loophole that the labels could have used to hurt performers. The current bill requires that terrestrial stations pay the designated collecting agent (probably SoundExchange) 50 percent of royalties due under any license granted by a copyright owner. The designated agent will then distribute the 50 percent directly to the artists. This provision prevents the labels from doing direct license deals with the broadcasters and collecting the artists’ portion. Unfortunately, this provision is limited to direct licensing of terrestrial stations and not internet, satellite and cable transmissions. We strongly support this provision but believe it should be expanded to include ALL direct licenses of music transmissions otherwise subject to the statutory license.

All in all, it was a fascinating hearing, even if it didn’t hint at any forthcoming compromises between factions. Head to the House Judiciary Committee site to see testimony from all the witnesses. You can also read a nicely balanced play-by-play at Coolfer.