The White House recently offered its recommendations on copyright law, including the creation of a public performance right for sound recordings. This proposal has prompted an avalanche of complaints from various parties, especially radio broadcasters, record companies and performing artists. The tacit agreement between record companies, recording artists and radio broadcasters had been simple: free publicity in exchange for free music. This model worked well for many artists, who praise broadcast radio for vaulting them into stardom. Radio industry types, represented by the National Association of Broadcasters, object to this right as an “onerous, jobs-killing fee on America’s hometown radio stations.” This is an unusually strong condemnation from a powerful group that has been largely successful in lobbying Congress to prevent passage of legislation to create a performance right.

The proposed Performance Rights Act (HR-848) was a congressional bill that failed in 2009. For sound recordings, the act would have created the exclusive right “to perform the copyrighted work publicly by means of an audio transmission” into section 106(6) of the Copyright Act of 1976. The lack of a public performance right also means that U.S. labels and artists cannot receive reciprocal payments from other countries.

Record companies and recording artists (represented by the Recording Industry Association of America) would have the most to gain if this right were created, since they would start receiving royalties when stations play their recordings. RIAA stated approved of the the White House recommendation that “would finally close a longstanding and unfair loophole in copyright law that denies compensation to artists and record labels when their music is played over terrestrial radio.”

Those favoring this right say that the era has passed of royalty-free music, in exchange for free promotion of the music on the radio. Instead, they argue consumers tap the Internet to find and get music. For webcasts, there has been a public performance right for “digital audio transmissions” since 1995, and the Copyright Office just published an updated pricing schedule. Proponents say requiring royalties for sound recordings on the radio is merely establishing “parity” with the webcast pricing models. Follow the link for a great analysis of the webcasting royalty rates, including a schedule of how much the royalties will rise in years to come and descriptions of exceptions for smaller broadcasters. Also, click here for more background on music licensing in digital media.

Current Developments

Will a public performance right help save record labels as we know them? The answer is unclear. The White House, in its White Paper, focused on the absence of payments from other countries to labels and artists. But this is only one element of the financial woes facing record labels. The industry confronts the realities of an economy in which records going platinum is the exception and sales revenues are in steady decline. To supplement income, record companies are diversifying, including selling merchandise. Any added revenue would help but it is unlikely a performance right would bring the industry back to its glory financial days.

Cloud-based music lockers also may undercut the public performance right by further slashing radio’s relevance in the music industry. Amazon just announced a service in which users can upload and listen to music via the web and smartphones. Google and Apple are said to be hot on Amazon’s heels with their own plans, likely integrated into their mobile operating systems — Android and iOS. With so many user-customizable alternatives to radio, music lockers could diminish the need for terrestrial radio and a performance right. Music lockers presumably would be governed by digital audio transmission provisions in place.

But the broadcasters have come forward with their own pitch for a foothold in smartphone land. While remaining “100 percent opposed to the performance fee legislation” the industry group has lobbied for congressionally mandated HD radio chips in mobile phones, proposing a term sheet that requires that a percentage of phones have these built in before getting behind a limited performance right.