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The Biggest Corporate Piracy Scam in History
By Eric de Fontenay (Founder & Publisher)
(more articles from this author)
2003-04-10
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It seems that my last editorial "It's Now Time For Radio To Pay Up!" has attracted some praise, though mostly confusion. Several questioned whether I was suggesting a new compulsory royalty since broadcasters were already paying performing rights organizations (PROs) such as ASCAP, BMI & SESAC. One reader even suggested that PROs might need to share the royalties they collect with record labels and musicians.

First, the PROs represent songwriters, lyricists, composers, and publishers upon whose behalf they collect performance royalties from radio/TV broadcasters as well as public performances. What they do not represent are record labels and recorded artists, nor do they collect royalties from the use of their sound recordings. It is the royalties associated with the right to perform/broadcast a sound recording that I was referring to when suggesting that radio should pay up.

And why is no one collecting this royalty? As American Federation of Musicians (AFM) President Thomas F. Lee explained to me when discussing the direct collection of royalties from digital performances: "In 1960, AFM and AFTRA started working for the creation of a performance right that would provide royalty payments to the musicians and singer when their recordings were broadcast on the radio. Unfortunately, we were able to get nowhere because of the broadcast lobby [National Association of Broadcasters (NAB)] which are enormously powerful."

The result is that under section 114 of the 1976 Copyright Act, non-subscription broadcast were made exempt from public performance rights on the sound recording. The exemption was later extended to cover non-interactive and non-subscription digital audio transmissions in the 1995 Digital Performance Right in Sound Recordings Act (DPRA). But thankfully, Congress backtracked in the 1998 Digital Millennium Copyright Act (DMCA), eliminating the exemptions under DPRA to cover the host of webcasters that had emerged in the interim. While this meant that radio broadcasters would finally be paying artists for use of their recorded material, it only applied to their webcast and simulcast activities, not their core and profitable broadcast operations. To put it bluntly, what radio broadcasters do legally over-the-air is in many ways what those four college students recently sued by the RIAA are accused of doing.

Were radio broadcasters appreciative of the continued Congressional support for corporate piracy? Hardly, as they fought tooth-&-nail, from the Copyright Office to the federal courts, to repeal their sole statutory obligation clearly spelled out under DMCA towards artists. As National Association of Broadcasters President & CEO Edward O. Fritts noted: "Broadcasters currently pay in excess of $300 million annually in music licensing fees to compensate songwriters and music publishers. Any additional fee to compensate record companies would be unfair and unreasonable."

If we assumed for simplicity's sake that those "unfair and unreasonable" royalties were equal to the $300 million paid to the PROs, that would represent over $120 million and $30 million in DIRECT annual payments (no recoupments) to recorded artists and non-featured vocalists/musicians under the royalty split specified under DMCA. Compare that to just Clear Channel Radio, with revenues of $3.72 billion and EBITDA (revenue less divisional operating expenses and corporate expenses) of $1.59 billion for 2002.

Is what I'm suggesting radical? Not only do broadcasters the world 'round pay performance rights on the sound recording, the Copyright Board of Canada ruled last week that commercial radio stations must pay mechanical rights for the reproductions of music made for broadcasting, referred to as the ephemeral copy. While I may have some contention with imposing a royalty on the ephemeral copy - this is a new compulsory royalty as it is otherwise exempt in the US and EU - the decision reinforces the fundamental idea that radio broadcasters should not be exempt from the same obligations imposed on the society for the use and enjoyment of music.

Related MusicDish e-Journal Articles:
» Another Victory for Artists' Rights: Direct Collection of Royalties from Digital Performances (2001-11-26)
» One Online Tax Break We Don't Need (2001-08-07)

Related News from Mi2N:
» CAB Disappointed By Copyright Board's Decision On Reproduction Of Musical Works
» DiMA And RIAA Submit Joint Royalty Proposal


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