Why is it that Internet, satellite, and cable radio broadcasters pay performance royalties for the sound recordings they play, and American over-the-air “terrestrial” AM and FM broadcasters do not? The answer isn’t particularly satisfying for artists, record labels, and anyone who thinks the government shouldn’t be in the business of impeding new technologies.
For decades, terrestrial broadcasters have been exempt from paying a performance royalty to the owners of sound recordings, who are typically record labels and recording artists. By contrast, with the growth of digital transmissions in the 1990s and the accompanying concerns about the decline of music sales, Congress passed legislation imposing royalty obligations on the newer audio broadcast technologies. Under the resulting system, the rates today vary widely depending on how sound recordings are transmitted to listeners.
For example, some providers of audio-only channels available via cable or satellite television service currently pay performance royalties of 7.5% of gross revenue, Sirius XM satellite radio currently pays 8% of gross revenue, and Internet radio services, depending on their size, can be compelled to pay as much as 50% or more of revenue. To make matters even more confusing, these rates are evolving over time in complex and only sometimes predictable ways.
During the past several decades, proposals to end the terrestrial broadcasters’ performance royalty exemption have repeatedly been floated. The most recent significant legislative push to end the exemption came in 2009, when both the House and Senate Judiciary Committees passed versions of a bill called the Performance Rights Act. Neither bill received a vote by the full House or Senate.
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