The PJ Tatler

The RIAA's Latest Money Grab Should Be Defeated

The Recording Industry Association of America is lining up their high-priced lobbyists, congressional allies and the outside groups that have benefited from their generous contributions for a major offensive to require AM and FM broadcast stations to to pay royalty fees for the music they play on the air. Congressman Mel Watt (D-NC) has introduced legislation that would not only require broadcasters to pay royalties for airplay, but his bill gives government sanctioned power to the recording industry to collude, set prices and functionally prohibit individual labels from negotiating independently. This effort will overturn a century-old understanding that songs played on broadcast radio are a form of free promotion and advertising that benefits the artists as much as the radio stations. This money grab should be defeated.

There is little debate that much of the recording industry’s profits derive from music played on broadcast radio. Whether it be songs by new artists being played for the first time to the general public, or songs that have been played tens of thousands of times sustaining the careers of older performers, broadcast radio is the most effective medium for artists to promote their material. Music played on the air leads to CD and iTunes sales that are parlayed into ringtones purchases and profit-making concert tours. Every week, broadcast radio reaches 243 million Americans. Air play to these consumers determines whether a song is a bust or the next “Blurred Lines.” A song played on the radio is the equivalent of a paid commercial played on the same station — except the artist gets to run their ad for free.

The radio broadcast model has made record companies and their executives billions of dollars. But the advent of iTunes and Internet radio stations like Pandora has revenue in decline. Record companies can no longer force the public to pay $16 dollars for a whole album just to hear a song they like. So rather than evolve, corporate executives have turned to the government to create them a new revenue stream. They want the publicity benefits of air-play while forcing the radio stations to pay for the privilege of promoting their songs.

Corporate executives and their lobbyists are coming to Congress to argue that playing their songs on broadcast radio without compensation is a violation of their property rights. This is an argument specifically crafted to sound appealing to conservatives, but it shouldn’t.

We have yet to hear one musician demand that radio stations stop playing their music. In 2009, during consideration of legislation similar to the Watt bill, Senator Cornyn (R-TX) offered an amendment to create a “do not play” list and allow any artist to opt out of having their music played on air. Instead of a new fee on radio, the amendment gave any copyright owner the ability to simply withhold their music from broadcast radio airplay. This amendment failed of course, because this debate isn’t really about property rights. Its about propping up an outdated business model.

There is a better solution than a government mandated royalty fee — using the power of the free market to negotiate comprehensive licensing agreements that recognize and encompass the multi-platform nature of the music industry today. If left alone, the industry is already evolving towards this market based solution. Recently, Clear Channel Communications and Warner Music group signed a deal that pays Warner artists royalties for airplay in exchange for a restructuring of the stratospheric royalty rates set by the government for streaming music. The Clear Channel/Warner deal is a classic win-win deal produced in the free market with all parties are allowed to negotiate openly and fairly. Unlike legislation that props up one industry at the expense of the other through a one size fits all government mandate, these private market agreements balance the interests of both sides. Congress should favor private market solutions over government mandates that bail out one industry at the expense of another.