In July, the terms of the recent agreement on royalty payments reached between performers and record labels, on the one hand, and "pureplay" webcasters, on the other hand, were published in the Federal Register (the publication in which federal regulations are documented).  This marks the beginning of a 30-day period in which webcasters can opt-in to participate in this deal, as opposed to pay the rates for webcasters established by the Copyright Royalty Board.  This news drives home the fact that a clear regime is being established to compensate labels and artists for playing their recordings on digital services, while there is no such payment regime for playing the recordings on broadcast radio.  There is currently proposed legislation, called the Performance Rights Act, to change this by requiring broadcasters to pay a royalty for playing records.  Webcasters, labels and a number of artist representative groups (like SoundExchange, which represents labels and performers) are for it.  Radio broadcasters are against it.  Looking at the blogs out there, a lot of people appear to think this is yet another money grab by the labels that will put small radio stations out of business.

First, full disclosure.   I have represented record labels and music publishing companies over the years.  I have also represented the occasional recording artist.  I have never represented a radio station.  Take that information any way you want. 

From the blogs I have read, I think there is a lot of confusion about all the rights involved.  So I thought I would try to clarify a few things.

A musical recording implicates two copyrights.  There is a copyright in the song and a separate copyright in the recording of a song.  "New York, New York" – one song copyright, lots of different recording copyrights (aren't we lucky).

In the US, broadcast radio stations do pay royalties to songwriters and song owners to play music over the air.  The owner of a song is called a music publisher.  Very often the writer of a song is not the owner. The writer, however, as well as the music publisher, still collects royalties from radio play.  This royalty is called a performance royalty because it is a payment for the right to "perform" the song by playing it on the radio.  The right to perform a song is a recognized right under the copyright law, and so a radio station has to pay a royalty to play a song on the air.  These royalties are collected in the US by ASCAP, BMI and SESAC, which you may have heard of.

That takes care of the copyright in the song, but what about the copyright in the recording?  Until recently, the US copyright law did not recognize any performance right for recordings.  So when a radio station played a record, it had to pay the songwriter and the song owner on the song copyright, but it did not have to pay the owner of the recording anything.  In 1995, legislation was passed that recognized a performance right for recordings performed over digital services only (basically, satellite radio, cable radio and webcasting).  The legislation did not extend the recording performance right to broadcast radio.  As a result of this legislation, to play a record, operators of digital services now have to pay the songwriter, the song owner and the owner of the recording.  Operators of broadcast radio, to play that same record, only have to pay the songwriter and the song owner, not the owner of the recording.
What about the performers on the recording?  Well, for those performers who are not the songwriters, the only way they get compensated for any of this is through the royalty that is now paid for the digital performance of the recording.  That money is now collected and distributed directly to the performers (as well as owners of the recording, i.e. the labels) by an entity called SoundExchange, which a lot of people have not heard of, yet.

I'm simplifying, but that's the way it works now in the US.  The owners of digital services say that broadcast radio now has an unfair advantage, since they don't have to pay the owner of the recording.  The broadcast radio stations say the Performance Rights Act will add significant additional cost at a time when they are already economically threatened, and will ultimately result in smaller (most innovative, cooler, edgier, pick your adjective) stations going out of business. 

One interesting point that I haven't heard much about is what effect the new Act would have outside the US.  In virtually every country outside the US a radio broadcaster must pay the owner of the recording to play a record on the air.  The US virtually stands alone in not recognizing this right under its copyright laws.  But in the international copyright world, countries operate on the reciprocity principal, meaning they only treat our recordings as well as we treat theirs.  In the US, performers (unless they are also the songwriters), no matter where they're from, do not get a performance royalty for playing their records on the air.   So, in the rest of the world, US performers do not get any cash for airplay, while performers from virtually everywhere else do.  Presumably, if the Act is passed, US labels and performers will not only start getting royalties for airplay in the US, but the royalty money will also start flowing from around the world.

There are other arguments against the new proposed Act.  For example, some people say that the cost of collecting will be high and will not ultimately result in performers making much more money.  Others say the owner of the recording already benefits when a radio station broadcasts it, because it promotes more sales.  I have to say I never understood these objections.  Don't they apply to digital play as well?  And digital services have to pay.

So is the proposed Act fair?  Read it and decide for yourself.