Recording Artists in Search of New Revenue Streams Push for Royalty Payments from AM and FM Radio

August 2, 2007 — This week the music industry descended on Congress to testify as to why recording artists should receive royalties when their CDs are played on AM and FM radio. Under current law, only songwriters get paid when radio stations play CDs.

“Songwriters have multiple music licensing opportunities and can often live on royalties from hit songs for decades,” explained Joy Butler, a Washington, DC-based entertainment attorney and the author of The Permission Seeker’s Guide Through the Legal Jungle, a book that explains the step-by-step licensing process for music and other creative works. “A recording artist’s royalties may dry up just a few years after release of a hit CD.”

For recording artists, royalties paid through record labels have historically been a primary income stream. As sales of physical CDs decline, recording artists are desperately seeking new sources of music-related revenue. A new public performance royalty paid by AM and FM radio stations might become one of those streams.

Other attempts at expanding revenue opportunities include a 36% gradual increase in royalties paid to labels and artists for use of their music on the internet. While these new internet music rates implemented by the Copyright Royalty Board (CRB) were to take effect on July 15, record labels are still negotiating the details with webcasters who claim the increased rates will destroy their businesses. Meanwhile, pending legislation before Congress that would nullify the rate increase is strong motivation for the record labels to reach a negotiated solution with webcasters.

“While recording artists and labels are fairly united in their pursuit of more income from radio and webcasting, the two are combatants in other revenue-generating endeavors,” said Butler. As an example, Butler points to Prince’s recent decision to distribute three million copies of his new CD, Planet Earth, as a free enclosure with a UK newspaper, the Mail. That deal resulted in Sony BMG backing out of its agreement to distribute Prince’s new CD in the U.K. Butler predicts that more superstar recording artists will form similar deals in which record labels have a diminished role.

Music downloads from providers like itunes and Napster is an area in which recording artists claim labels have given them the smallest piece of the royalty pie. Many record labels treat a music download like the sale of a physical CD which means that the record label pays the recording artist a royalty of about 12 to 16% of download revenue. Recording artists argue that a download is equivalent to a license meaning that the record label should split download income fifty-fifty with the recording artist. The Allman Brothers Band and other recording artists are currently pursuing the issue in a New York federal court lawsuit against Sony BMG.

FOR MORE INFORMATION
Attorney and author Joy R. Butler is available for interviews on this and other entertainment related topics. Contact her at (202) 309-2656 or visit her website at www.joybutler.com.