Radio Royalty Deal Offers Hope for Industrywide Pact

Stations get a “free ride” on royalties, Ben Allison, a musician, told Congress. Clear Channel made a deal with Big Machine, Tayor Swift’s label.

From The New York Times:

For decades, the recording industry has lobbied Congress to change how radio stations pay royalties. The broadcasters have lobbied just as hard to preserve the status quo, making an agreement look all but impossible.

But last week, a groundbreaking deal by Clear Channel Communications, the country’s largest radio broadcaster, raised the possibility of a solution to the standoff through marketplace negotiations instead of political head-butting. It also put the spotlight on how federal copyright law keeps up with digital media.

The agreement, between Clear Channel and Big Machine, the record label behind Taylor Swift and other country acts, will for the first time allow a label to collect a royalty when its songs are played on the radio.

In the United States — and almost nowhere else — radio companies pay only songwriters and music publishers, not record companies. The system, dating back almost a century, is based on the idea that radio play has enough promotional value for performers that they do not also need to be paid royalties.

The arrangement has long irritated labels and performers; Frank Sinatra was a vocal opponent. But with record sales plummeting over the last decade, the labels have pursued royalties more urgently as an additional revenue stream.

“Terrestrial broadcasters have an inexplicable ‘free ride’ when it comes to performance royalties,” Ben Allison, a jazz musician and the governor of the New York chapter of the National Academy of Recording Arts and Sciences, the organization that produces the Grammys, told a House subcommittee last Wednesday at a hearing with music and technology executives called “The Future of Audio.”

“They are exempt from paying performers any royalties when they use our recordings to fuel their multibillion-dollar industry,” Mr. Allison continued. “This makes corporate radio the only business in America that can legally use another’s intellectual property without permission or compensation.”

So why did Clear Channel change its position, breaking ranks with its powerful lobbying group, the National Association of Broadcasters?

The answer apparently has nothing to do with politics; with Republicans expected to retain control of the House in this year’s elections, few in the industry predict a new Washington battle is likely. Rather, it has to do with digital music, and Clear Channel’s desire to reshape its business in anticipation of rapid changes in the marketplace.

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