We as casual music listeners take radio for granted. Want to catch up on The Tallest Man on Earth’s entire discography? Need some background music while getting ready for work? Looking for new artists? While everyone knows downloading music for free is illegal and immoral, streaming your favorite songs on your phone or tuning into your local radio station is a harmless way to rock out without buying anything. Except there’s no such thing as a free ride and countless music creators are paying the price.
First, a quick primer on how the system currently works. This article at The Week has a comprehensive breakdown, but basically there are two main groups that get paid for a song: the songwriter (and their publishing company) and the performer (along with their record label, if they have one). Both mechanical royalties (for purchased music, such as CD’s and legally downloaded digital copies) and performance royalties (for live, public or internet/streaming play of music) are set by federal government rate courts.
As far as hard numbers go, the current mechanical royalty fee for songwriters is 9.1 cents per song. Pandora pays out 70% of their revenue in royalties, although most of that money goes to recording companies. A recent ruling kept Pandora’s rate for performance royalties paid to ASCAP (American Society of Composers, Authors and Publishers) at 1.85% of its revenue. Traditional terrestrial radio pays 1.7% to songwriters and nothing to performers.
The two most important pieces of legislation currently being heard in Congress are the Songwriter Equity Act and the Free Market Royalty Act, with hopes for an eventual omnibus bill that would accomplish widespread reform for both songwriters and performers.
The Songwriter Equity Act, as the name implies, applies to songwriters and publishers, who generally get paid less than performers and record labels. It expands the criteria judges could use to set rates and encourages a simpler, more free market standard for negotiating compensation.
The Free Market Royalty Act is more comprehensive but similar. Basically, it requires terrestrial radio stations to pay performers for using their songs (just as streaming and satellite radios do) and opens up a free market between broadcasters and rights holders without government interference in the negotiations.
Proponents feel these changes are necessary to protect artists and ensure they’re paid fairly. This is especially important at a time when traditional forms of revenue, i.e. record sales, are at an all-time low.
A major concern, though, is that removing regulation wouldn’t allow a free market so much as it would allow the two big publishing companies, BMI and ASCAP, to set prices and stifle competition. There is also the fact that more than half of royalties don’t go to songwriters and musicians at all, but rather to publishers and record companies. Finally, if prices get too high they will cripple broadcasters, especially small radio stations and streaming services such as Pandora and Spotify, which are barely breaking even as is. If this happens, the entire music industry could suffer and end up making less money as a whole.
Any way you look at it, rules need to change and adapt. Hopefully a flexible, platform-agnostic system can be established that has protections in place for both licensors and licensees, one which encourages technological innovation while allowing artists to thrive.