Can music royalties be fair to both artists and broadcasters?

by Paul Riismandel

I’ve been trying to wrap my head around the issue of music royalties lately. Although it’s a complex soup of policy, contracts, ethics and economics, it’s also quite clear to me that royalties will have a defining effect on all aspects of radio this decade. That’s because radio, musicians and record labels are in an inextricable relationship, all fighting over money, which is key to their individual survival.

A couple of weeks ago producer and musician Nigel Godrich announced on twitter that his band Atoms for Peace is pulling its music from Spotify in protest of the service’s royalty payments to artists. Bandmate and Radiohead frontman Thom Yorke elaborated in a follow-up tweet, “Make no mistake new artists you discover on #Spotify will no get paid. meanwhile shareholders will shortly being rolling in it. Simples.”

David Lowery of the bands Cracker and Camper Van Beethoven tallied up the royalties he received from Pandora for his most popular song, “Low.” Lowery says he was paid just $16.89 for 1,159,000 plays of the song in the second quarter of the year. (Though it should be noted that blogger Michael Degusta recrunched Lowery’s numbers and came up with a total figure closer to $1300.)

For his part Pandora CEO Tim Westergren responded in a blog post that the company should pay “about $1,370” for a million plays. He goes on to point out that it’s still more money than a broadcast station pays, writing, “If major market FM stations paid the same rates as Pandora, based on audience, some would be paying thousands of dollars for every song they played. How much do they pay performers right now? Zero.”

Now, broadcast radio does currently play royalties to songwriters via BMI and ASCAP. Lowery reported that he received $1,522 in songwriting royalties from all commercial radio plays during the same quarter.

However, it is still true that broadcaster do not pay royalties to performers, by law. That’s why musicians’ groups and the recording industry have advocated for terrestrial stations to start paying up. Last week Democratic Rep. Melvin Watt from North Carolina announced that he plans to introduce just such a bill before the August recess..

Any online or terrestrial broadcaster is free to negotiate their own deals with record labels and artists, and Clear Channel has taken an alternate path. The company has announced agreements with Fleetwood Mac and the country music Big Machine label group to pay for terrestrial airplay in exchange for lower rates for online streams on iHeartRadio.

For its part Pandora bought its own terrestrial station in Rapid City, SD as part of an effort to lower its royalty payments. Broadcasters–like Clear Channel–pay less for their station’s online streams than pure-play internet services like Pandora. Of course, given that many artists are already unhappy with their payments from Pandora, this move won’t make them any happier.

I have strong sympathy for musicians who are most often squeezed between the record labels and the broadcasters. The effect that the internet and digitization have had on the music industry arguably has affected artists more than any other players, reducing their income from recorded music, and pushing them to other often less reliably income streams. I don’t blame them at all for seeking better payments from the likes of Spotify, Pandora and terrestrial radio.

At the same time, in the case of services that are not on-demand (Pandora, internet and terrestrial radio) I also see how increased royalties would be a burden, especially on smaller broadcasters without the margins of a Clear Channel.

The assumption behind terrestrial radio’s exemption from performance royalties has been that airplay drives music sales, putting artists and stations in symbiotic relationship. That same assumption is not carried by policy online – all stations pay performance royalties for their internet streams. Which, of course, begs the question on the validity of that assumption. Why would terrestrial radio have so much more promotional value than internet radio? I see no easy answer.

From my own listening experience, I use internet radio–even Pandora–similarly to terrestrial. My music purchases are influenced about equally.

Spotify is an entirely different animal. It’s much more of a replacement for buying music, and so I am significantly more sympathetic to artists’ demands for better deals from Spotify.

Since Spotify strikes individual deals with labels, there is ostensibly negotiating power for artists and labels to get more. But in this arrangement few artists have the individual negotiating power, and are at the mercy of labels.

Despite my vacillating, the one thing that is clear is that the small broadcasters, independent artists and the vast majority of musicians who are not multi-platinum certified are at the greatest risk. I agree that artists should receive a fair share of income from their music, and I am convinced that most current royalty deals do not provide this. I don’t see how Clear Channel or CBS Radio do not have the resources to pay performance royalties, especially given that Clear Channel is willing to strike independent deals. But I also see how this could be a burden for independent and noncommercial stations that are just hanging on fiscally.

Yet, it seems as though this as much a problem with the labels as with broadcasters. One artist who likely would agree is Aimee Mann, who is suing a company called MediaNet, which wholesales digital music to online services like Yahoo Music and Songza. Mann’s lawsuit claims that not all of MediaNet’s music is properly licensed, and that the company has willfully infringed on the copyright of around 120 of her songs. Damages could run as high as $18 million.

Mann says that she signed a contract with that company in 2003 to distribute her music, but sent a termination notice in 2005. But she alleges the company did not cease distributing her music, but has not paid her royalties since 2005.

How this case and the overall issue of music royalties are resolved will have tremendous consequences for the future of radio and music. As a lover of both radio and music I’ll certainly be watching, trying to make sense of it. What I hope for is a equitable outcome that protects artists but not at the expense of the most innovative broadcasters who are most likely to benefit independent and cutting-edge musicians.

Is that too much to ask? Drop us a line and let us know.