“We Can Work It Out:” A Chance to Level the Playing Field for Radio Broadcasters

June 16, 2012

The music industry has changed dramatically during the last fifteen years. In particular, the rise of digital broadcasting illustrates the great disparity that currently exists in the royalty rate scheme for the radio broadcast industry. The current scheme dictates that Internet, satellite, and cable radio broadcasters pay royalties to both the song composer and the artist when a song is aired on their service, but terrestrial radio only pays sound recording royalties to the composer. This disparity is not the result of sound legal principles. The rationale for terrestrial radio’s exemption was that the promotional value the artists received from having AM/FM stations play their songs provided all the compensation they deserved. However, in light of the current state of the music industry, this rationale no longer justifies terrestrial radio’s exemption. New legislation pending in Congress seeks to remedy this unfairness by removing the statutory exemption for terrestrial radio broadcasters. In addition, the House and Senate versions have been amended to include the application of the first three factors of the “801(b)” standard to determine royalty rates for all radio broadcast platforms and replace the myriad regulations under which the industry currently operates under. Including this standard in the legislation is vital in addressing the current disparity in royalty payments. However, as it currently stands, the legislation fails to include one important factor of the “801(b)” standard, and Congress should amend the legislation to include this factor before passing the bill.