Friday saw a first for a Radio Show, with a SoundExchange representative participating on a panel. No shots were fired and he got out of the building with no scars from his encounter with broadcasters.
In fact, SoundExchange Senior Counsel Colin Rushing told the gathering that he spends more of his time on the phone speaking with broadcasters than with anyone from the record companies. He urged station owners and managers to call with any problems or questions concerning the reporting and payment requirements for Internet streaming. Nobody at the record companies is anxious to sue radio stations, he said, they just want to get paid. So if stations are having compliance problems, particularly with the reporting of which songs have been streamed, it is possible to come to terms on a temporary waiver while legitimate technical problems are resolved.
Copyright attorney Kevin Goldberg of Fletcher, Heald & Hildreth, who represents broadcasters and was also a panelist, said SoundExchange has gotten much better over the years about negotiating problems. “The bookie doesn’t want to kill you. They just want to get paid,” he joked.
One small market broadcaster complained that even though he has instructed his streaming provider to cap his monthly usage, so that it will be impossible to ever exceed the cap of his $500 per year small market music license, he has to file the same paperwork every month and can’t even verify that his checks have been received by SoundExchange and he is in compliance. Rushing assured him that SoundExchange wants to upgrade its online user interface, but it’s more complicated than you might think and it’s also a budget issue.
In his opening remarks, Rushing noted that SoundExchange is already the “business partner” of broadcasters for streaming and he hopes to see that relationship expanded. That was an allusion to the Performance Rights Act debate, since SoundExchange hopes to be the entity to collect performance royalties from radio stations if and when they become a reality.
Royalties collected by SoundExchange from streaming, satellite radio and other digital audio services are distributed (after operating costs) 50% to the copyright owners, 45% to the featured artist and 5% to backup musicians. Increasingly, Rushing noted, that 50% share is not going to a record label, but to artists who have retained their own ownership of the master recording, so they actually get 95%. A similar split is proposed in PRA legislation.
Radio stations are already paying royalties to BMI, ASCAP and SESAC as the collection organizations for composers and music publishers. Rate negotiations with the two largest, ASCAP and BMI, were unsuccessful and both are now operating under interim fee schedules pending action by a federal rate court. Bill Velez, Executive Director of the Radio Music License Committee (RMLC), which negotiates for most radio broadcasters, isn’t expecting any quick resolution.
Velez said he doesn’t expect hearings to begin until early 2011. Unless there’s a settlement, it could be late 2011 or even into early 2012 before the rate court makes a decision. The RMLC is seeking five-year deals with BMI and ASCAP, so the contract period would be more than half way over before the rates are set. Whatever they are, they’ll be retroactive to January 1, 2010, since the previous contracts expired at the end of 2009.
Broadcasters got what they wanted in the previous contract terms – and are now regretting it. In an attempt to simplify the music license process for radio stations, the RMLC got BMI and ASCAP to agree to set fees, rather than a percentage of radio station revenues. Those set fees had been based on the expectation that radio revenues would continue to rise at an annual rate of 5-6%. “Unfortunately, as you all know, that did not materialize at all,” Velez noted.
By 2009, the last year of the previous contract, Velez said broadcasters were paying ASCAP and BMI each in excess of 2.5% of radio industry revenues. When the rates were a percentage of revenues ASCAP had been getting 1.615% and BMI 1.605%. The RMLC Executive Director now says the fixed fee was an experiment “that left a bad taste in everybody’s mouth.”
The interim fee schedules now in effect reduced radio music license fees by about $40 million each to BMI and ASCAP from what had been paid in 2009. The RMLC is seeking even greater reductions in the rate court proceeding. ASCAP has stated that it is seeking more, not less, from broadcasters, while BMI has not made a public statement on where it thinks the fees should be set.
If you think music licensing is a quagmire for radio stations, the copyright problems have only gotten more complex with most radio stations now operating on multiple platforms. Goldberg noted that podcasting is not covered under the statutory music license, so a mechanical copyright license is needed. And when it comes to videos, some parts of how the law applies are still being worked out. Goldberg said the easiest solution is to embed the authorized version of a music video from YouTube or another social network to avoid copyright problems. And there are myriad problems with what clip art sources can be used on each type of platform. If there’s a question of what the copyright law allows you to do, call your lawyer before you do it, not after, he warned.