The Point Is…Concerns of a Music Loving Radio Fan

 One of the most highly anticipated sessions at the Conclave Learning Conference this past week was the Friday Royalties and Performance Fees for terrestrial radio discussion. This one had all the signs of being highly combustible, and for the most part it did produce some great sound bites.

A quick bit of history. One of our players, incorporated in 2003, Sound Exchange is designated by the U.S. Copyright Office to collect and distribute digital performance royalties for featured recording artists and sound recording copyright owners (usually a record label) when their sound recordings are performed on digital cable and satellite television music, internet and satellite radio. SoundExchange currently represents over 3,500 record labels and over 31,000 featured artists and whose members include both signed and unsigned recording artists; small, medium and large independent record companies; and major label groups and artist-owned labels.

The other of our players is the National Association of Broadcasters (NAB). The National Association of Broadcasters is a trade association that advocates on behalf of more than 8,300 free, local radio and television stations and also broadcast networks before Congress, the Federal Communications Commission and the Courts

The current debate and the reason for the session at the Conclave Learning Conference centers on pending legislation that would require terrestrial radio broadcasters pay a performance fee. This performance fee is designed to pay performers of the music on a per play basis and is already paid by online, satellite and cable stations. In short, this is a new fee, or “tax” as the NAB’s David Rehr likes to say, to broadcasters. (Radio, like digital media, currently pays royalties to writers via BMI, ASCAP and SESAC.) Broadcasters and the NAB feel that due to the promotional nature of the medium, they should be exempt from the fee. Sound Exchange disagrees and, that like other entities including online and satellite, radio should pony up. Those are the facts in a very small nutshell. (More can be found here and here.)

The session produced some brief volleys between the two sides inspiring
quotes like David Rehr’s “I’d rather cut my own throat than negotiate”
for a performance royalty. In actuality, there was very little actual
discussion or debate between the opposing sides. Both sides, with a few
exceptions chose to make statements to the audience instead.

In fact,
there was quite a bit of laughing and chat between these brief volleys.
However, it is quite clear this debate will continue for at least the
next 3 years. Many will make a bunch of money over the course of the
battle…and I don’t mean artists and musicians or radio. (More on that
later.) In the end a fee will be levied and paid. When that “end” will
be and what that fee will be is what has yet to be seen.

Clearly, the fair thing (I know, this is bureaucracy at work so fair is
not necessarily part of the equation.) is that artists and musicians
make a solid living doing what they love while not bankrupting the
media that is their conduit to do so. What I fear is that we take our
eye off the ball while waging this battle. That “ball” is making sure
that we maintain satisfied and passionate audiences who want to consume
this music on whatever medium they choose to use.

For radio, we need to dedicate money to building audience through
improving content with or without music, and marketing that content.
Radio is already cutting budgets in this area. Where do you think the
fighting of a performance fee or the fee itself will come from? Radio,
in a world with ever increasing choices, marketing of your product is
more important than ever.

For online, we need to establish a fee that will not break the bank of
all of the smaller and independent music providers. These providers are
the backbone of the online music community.

Finally, all media will need to carefully monitor Sound Exchange and
any other entity chosen by the government to collect fees of any kind.
Here’s why; In it’s 2007 Annual report, for example, Sound Exchange
notes collections of $141,546, 442 and royalty distributions of
$36,235,714. That leaves over $105 million in collected fees sitting in
the Sound Exchange coffers. Okay, by law, they must distribute this
money within three years. However, should they not be able to find
those to whom the money should be awarded, Sound Exchange can absorb it
into it’s operating budget. Not bad coin should they not find some poor
session player who backed up Toto.

I spoke briefly with Michael Huppe, the representative from Sound
Exchange at the Conclave Learning Conference, about the surplus of
cash. He told me that Sound Exchange has every intention of searching
beyond the 3 year mark to make sure fees get into the right hands. I’m
inclined to believe him because while that money is sitting waiting to
be distributed Sound Exchange invests it in ”money markets, discounted
notes, corporate and government bonds.” In fact, in 2007 alone, Sound
Exchange earned $3,488,360 from these investments. A good bit of change
using someone else’s dough. It serves Sound Exchange quite well to take
their time distributing funds.

In a bureaucratic agency like Sound Exchange it is very easy to adopt a
“conspiracy theory” mentality but we have the ability to monitor this
non-profit organization and hopefully by legal means, make sure it
doesn’t take advantage of policies that are meant to help artists and

Look, I come from radio and have a great deal of interest, personally
and professionally, in the continued success of broadcast radio, the
delivery of music and the fair and equal payment of artists and
musicians. Does radio deliver unequaled promotion of music to a large
audience allowing for the producers of that music to make money via
music sales, ticket sales and merchandise? YES!  With the growth of the
online music space has radio’s hold on that ability been impacted? YES!
As the current business model of the music industry continues to
crumble do artists and musicians deserve to seek new forms of revenue
from their work? YES! Should we make a distinction between different
types of music delivery services? Good luck.

Radio, online, satellite, cable and Sound Exchange; this must not
result in screwing up, or even bankrupting, the ways in which writers,
producers, artists and musicians reach their audience, fixing the music
industry, or funding a bureaucracy. This is about fair pay for the
makers and performers of the music we love.

Or did that get lost somewhere along the way?


  1. The money SE makes on pure interest is just a drop in the bucket – next time you’re speaking with Michael Huppe, be sure to ask him how much money SoundExchange has already absorbed into their own operating budget via royalty forfeiture. And then please let us know if you get a straight answer.

  2. Alant,

    Much to my point…

    Interest, investments and “undistributed” or forfeited royalties are all cause for close scrutiny of any entity charged with representing artists and labels.

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