The Royalty Pain

June 5, 2014

Peter Smyth

The Copyright Royalty Board (CRB), the body in charge of the royalty payments for online radio, is again preparing to make changes in the rules that govern what we pay for simulcasting our stations online. It issued a long list of proposed changes to the reporting requirements that will make the administration of our royalty payments even more tedious than it presently is. The suggestions come primarily from SoundExchange, the independent digital rights organization responsible for collecting and distributing royalty payments for the digital performance of sound recordings, and would require more details and specifics about each song played, a shorter time period in which to file reports, the imposition of late fees, and the mandatory use of something called an ISRC code, which is a unique code identifying a particular sound recording and is difficult to find.

More significantly, SoundExchange has joined with other members of the music industry in an effort called “Project 72 – Respect All Music”.    This is an attempt to make Pandora and SiriusXM pay royalties on songs recorded before 1972, which both of them assert are not covered by the present statutes. The majority of broadcasters probably have not even heard of this loophole.

Unfortunately, all of this wrangling and lobbying continues to polarize and create more friction between the creators and popularizers of contemporary music.  The music industry is once again experiencing a transition in its delivery system, from downloads and purchases of songs at sites like iTunes toward a more convenient stream of music, whether selected by the customer or a curator. Everyone knows that the recording industry has wrestled with its business model since the advent of Napster and once again it sure looks like they are attempting to wrest revenues from the online popularizers.

The music industry folks fail to appreciate that both broadcast and online radio are facing our own challenges alongside theirs. We have seen the migration of listening to online devices, and have borne the financial burdens of increasing royalty payments and broadband usage because we know we need to be wherever our listeners want us to be. We have seen the emergence of newer competitors providing more personalized playlists than a radio broadcast; we have seen the usage patterns for services such as Pandora and satellite radio continue to disrupt habits and fragment listenership. But all SoundExchange seems to see are new sources of revenues.

We believe in the marketplace of innovation and we believe equally in our ongoing relationship with our listeners. Despite all the new technology, broadcast radio still is, far and away, the primary source for new music discovery for the vast majority of the public.    The radio industry continues to search for reasonable agreements with music creators and labels to rationalize our partnerships and take the longer view that both sides need to find the win/win solution.

But now an industry organization that reaped in excess of $550 million dollars in revenues for musicians is looking to the Copyright Office– the government– to “Respect All Music”?   How about respecting those of us who have popularized and continue to expose the back catalog of artists and have contributed to the longevity and success of their careers?

How about respecting – and working to alleviate – the work that radio stations across the country must engage in to satisfy arcane and demanding data reporting requirements so that we can then calculate how many thousands of dollars we owe for the privilege of breaking even on our online streams? How about providing online tools that make it easier for us to do our jobs?

How about focusing on the long term health and success of both industries, and raising our sights to collaborate creatively, rather than arguing like siblings about what data fields have to be filled in and how many reports must be filed?

The one thing I know is that placing our fates in the hands of a government agency whose primary contribution to date has been imposing ever more burdensome requirements is the worst of all possible outcomes. It diverts precious resources from our primary business – entertaining our listeners with great music – to the drudgery of paperwork and raises the very real possibility that we will no longer be able to justify the expense, in dollars and person-hours, of streaming.  The past eleven years of warring words has been frustrating and counterproductive for all concerned. The music industry, the radio industry, and all of our collective listeners deserve better.