Performance Royalties – The First Domino Tumbles

Until recently, musicians and record companies have had a mutually-beneficial agreement with radio stations.   No money needed to change hands because the artists and record companies got free publicity and the radio stations got free product.

With music moving to the internet and the change in media ownership rules, however, that delicate balance has shifted.  Record companies have lost out to file-sharing.  Big money now owns most of the broadcast spectrum.

Radio has never paid royalties to the artists, which made sense when radio was little mom and pop companies.  But you can see why it’s an issue now, because big money media companies like Clear Channel, SiriusXM, Cox, Entercom, Emmis, etc. are making millions off the product.  And consumers want the music for free from the internet.  Someone has to pay.

It’s not going so well for internet broadcasters.  Last year Pandora paid 54% of its income in royalty payments.

What the Recording Industry Wants

Currently, the recording industry is desperately trying to get Congress to legislate new royalty payments by media companies.  It’s the Republicans who are pushing for the royalties (the “no new taxes” peeps want new taxes on radio stations).  The recording industry isn’t selling records anymore so they’re going after media’s revenue.  The big-name artists hardly need more revenue, but the huge underbelly of working artists are starving out here.  Does anyone really believe the artists will benefit if the recording companies collect the royalties for them?   It’s the trickle-down theory that doesn’t work in corporate America either.  Too many managers take their cut off the top.

Of course, the work of the artists is the product, and both the radio industry and the recording industry have always made revenue off them.  In classical music, the record companies charge the artists a scandalous amount to buy their own CDs to sell at concerts.  Some of the big name record companies will record an artist and then fail to produce the recording but won’t let the artist have it either.

Demanding Royalties Will Backfire — Just Ask the Classical Stations

The classical radio stations still have a great relationship with the artists.  We support each other, with one critical exception: live orchestral music.

American orchestra players and their union demand huge royalties before they will allow radio stations to air their live orchestral performances.

This demand for royalties has kept American orchestras off the air for decades.  Even now, it costs hundreds of thousands of dollars a year in musician payments to broadcast the NY Philharmonic, the Chicago Symphony, and the San Francisco Symphony.  The less-wealthy orchestras?  Fuhgettaboutit.  No way can they afford those royalties.   The musicians’ payments are not coming from radio stations.  The orchestra has to raise the money to pay them.

Why this matters

The new revenue-sharing deal made by Clear Channel and Big Machine Records is the first crack in the dam for requiring royalty payments to artists by radio stations.   It might be affordable to Clear Channel, but classical radio operates on a tiny margin, understaffed and underpaid.  I was on-air fulltime at a classical station where I made $8 an hour or less the whole six years I was there.  Yet I knocked myself out to promote for the musicians.

The classical music world can serve as a cautionary tale to these greedy businesses who want the radio stations to pay royalties.  Royalty payments have kept the American orchestras off the air for years.  Orchestras aren’t recording much anymore, and the only American orchestras on the air are the ones that can afford to pay big bucks to the artists, so on the radio we’re hearing mostly foreign orchestras that don’t pay their musicians as well.

I don’t want to deny musicians their income, but if an underpaid classical station has to pay royalties to the record companies, it will either stop broadcasting or start taking money to air certain artists, i.e., pay-to-play.

If we get a Republican administration and the royalty payments are legislated, they could very easily put the fragile classical radio stations out of business.