Historic Radio Performance Royalty Deal Just the Start?

Billboard reported on the agreement announced yesterday for the first ever US performance royalties for terrestrial radio airplay between Clear Channel Media & Entertainment and independent record company Big Machine Label Group. Clear Channel is the largest owner of radio stations. Big Machine’s roster includes major artists such as Taylor Swift and Rascal Flatts.

This is historic because copyright law doesn’t require payment of these royalties. No royalties for the recorded performances, the records, have ever been paid to artists or record companies each time a particular record is played on the air. Very recent changes have required certain digital radio services to pay a performance royalty under some of the most complicated provisions and procedures in copyright law. 17 U.S.C. §114(d)-(j). Digital radio is widely regarded as only about 2% of the total radio market.

Artists and record companies have long sought a performance royalty for playing their recordings. Big Machine is an important independent label with country music stars, and terrestrial radio is probably more important to country music than any other genre. Specific terms of the deal have not been revealed beyond the fact that the royalty is tied to advertising rather than being a predetermined percentage paid for each spin.

This private agreement covers only the tip of the tip of the iceberg of interests wanting a performance royalty. Music industry voices have already vowed to keep fighting for a royalty established by legislation. Initial speculation about Clear Channel’s motivation to make history has keyed on the idea of heading off such legislation creating rates determined by government proceedings rather than private agreement.

Compared to when the internet was not a source of music, this is hardly the ideal time for terrestrial radio to add another expense against revenues challenged by so many other options. From an accounting perspective, the Big Machine agreement should not start an avalanche of similar agreements throughout the industry. Terrestrial radio will have no legal obligation to follow this lead unless the law changes,. 

Can artists and record labels find ways to favor stations giving them a performance royalty to such an extent that competitors feel they must go along? Will Congress be more receptive to enacting a terrestrial performance royalty right despite the growing pressures on terrestrial radio? What ever happens, the historic Clear Channel / Big Machine deal will certainly play some part.

About Craig Pinkus

Craig Pinkus is a partner in the Intellectual Property Group. He also is a member of the Litigation and the Sports, Entertainment and Media Groups. He assists clients with a broad range of disputes and transactions involving all areas of intellectual property, entertainment, and other complex business arrangements. He has conducted trials and arbitrations throughout the United States and has argued appeals before the Seventh, Sixth and Federal Circuit Courts of Appeal, the Indiana appellate courts, and United States Supreme Court.
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