Who gets paid when "Respect" is played on terrestrial radio? You might think it's Aretha Franklin, the artist whose soulfully commanding vocal made it one of the most indelible tunes of any era. Nope. Since the late Otis Redding wrote the song, his estate gets the spoils (as does his publisher). While no one would deny Otis his due, Aretha's performance is a huge part of that recording's success. Her contribution is recognized by satellite radio and webcasters, who pay a royalty to Aretha and her label when the tune is broadcast. Terrestrial radio, however, fails to compensate her.
Just like all other types of U.S. copyrighted works, sound recordings should have a performance right. Entertainment is America's number one export, yet the U.S. stands alone in the industrialized world by not requiring radio stations to pay for the use of copyrighted sound recordings -- putting us in such exalted company as North Korea, Iraq and Iran. Call it an axis of exploitation.
The new Congress should quickly redress this inequity. In this time of economic recession, it is especially important for the U.S. economy -- American artists and labels will not receive their share of foreign royalties until sound recordings have a performance right in the U.S.
The rationale for exempting radio from the performance right -- a perceived "mutually beneficial relationship" between broadcasters, performers and record companies -- if it ever existed, no longer exists. When it exempted terrestrial radio from the performance right in 1995, Congress said that both the radio and music industries would benefit because radio play promoted sales, and the U.S. recording industry was based on a sales model. Both the recording and broadcast industries have undergone fundamental changes since then. Because the underlying rationale for denying a broadcast performance right for recordings has changed, we must now re-examine this policy.
Since the Telecommunications Act of 1996, radio ownership has consolidated -- there are now radio chains, playlists have narrowed and advertising rates have nearly doubled. No longer made up of locally owned stations serving their local communities, the broadcast industry is now dominated by a few major national corporations; in virtually every market, 4 or fewer groups control 70% of the ad revenue. And, let's face it -- radio plays sound recordings not to promote the recordings but to sell advertising. Since broadcasters use performers to attract listeners to sell ads, shouldn't they pay something for the privilege?
Moreover, the promotional claim is irrelevant. Authors often see sales spikes when their books are made into movies, but no one would suggest that the writer shouldn't be paid when their work is translated to the screen because the film is "promotional." Sean Hannity is paid millions of dollars each year for his radio show. The radio program promotes his television show, but there's zero chance his corporate paymasters would let radio broadcast those shows for free. Apparently, broadcasters don't apply the same promotional logic to their own intellectual property.
"Retro" music, such as '80s hits and classic rock, might still be fun to listen to, but doesn't exactly set the charts aflame. These recordings provide radio stations with entire formats and revenue streams but do not result in commensurate sales for performers. The situation can have tragic consequences for older R&B and soul artists, American cultural icons who deserve and need compensation. Again, satellite radio and Internet broadcasters pay these performers, as do over-the-air broadcasters in every other industrialized nation -- why should U.S. terrestrial stations be exempt?
Like the broadcast industry, the recording industry has also undergone fundamental changes in the last decade. It is no longer based on a sales model. Increasingly, the public is turning to new ways of accessing music -- through webcasts, social networks, subscription services and other exciting services. The future of music is likely to be driven by "listens," rather than product purchases. When a "listen" is the consumptive use, broadcasters become competitors to copyright owners in providing "listens" to the public. And, if performers aren't adequately compensated for "listens," there may not be much new music left to listen to.
We need to encourage the development of new business models that satisfy consumers' demands. To do so, new services must be able to compete on a level playing field, and we need a radio public performance to make that happen. It is wrong for terrestrial radio to have a competitive advantage when competing for the same listeners.
The lack of a performance right not only hurts the artists but also harms the entire U.S. economy. At a time when we have a negative balance of trade, we fail to optimize one of the few bright spots -- U.S. recordings. Because we do not have a performance right in the U.S., performers and labels (and the U.S. economy) lose more than a hundred million dollars annually that is collected overseas for the broadcasts of U.S. recordings. To ensure that performers benefit, the royalties paid are split between labels and performers. And, these monies are directly paid to artists and not put through the labels' "accounting" system.
Without the talents of individual performers, compositions would just be notes on paper. The performance right for over-the-air radio will provide critical income to all musicians and vocalists -- from famous singers to backup players. It's high time broadcasters stopped being wrong on this crucial right.