04/01/2015

Performance Tax & Music Licensing Issues

RESOURCES

Talking Points Performance Tax Talking Points In Their Own Words Artists Labels Response To Musicfirst Letter

Text of Legislation Senate Concurrent Resolution 4 - Supporting the Local Radio Freedom Act House Concurrent Resolution 17 - Supporting the Local Radio Freedom Act House Resolution 1733

Industry Resources NoPerformanceTax.org NAB ASCAP/BMI Issue Sheet Resolution Of The Fifty State Broadcasters Associations In Opposition To A New “Performance Tax” Nielson Study Radio Airplay And Music Sales

Local Facts and Figures Mdcd Localism Paper Maryland And Delaware Economic Impact Study

Congress is likely to consider changes to copyright law that impact music licensing fees for radio broadcasters—including both over-the-air broadcasts and Internet transmissions (webcasting).

Under current law, radio broadcasters pay composers and publishers copyright fees for music played over the air. These fees are administered by ASCAP, BMI, and SESAC. Radio broadcasters also pay a performance fee for music that they stream or “webcast” over the Internet. Those rates are set by the Copyright Royalty Board.

Fortunately, radio stations do not have to pay a performance fee to record companies and performing artists for music played over the air. Congress has long recognized the economic value that recording artists and record labels receive from the free airplay provided by radio stations. Free airplay exposes new music and artists, and helps drive record sales, concert ticket sales, and merchandise sales.

There have been several proposals in Congress to change the current status of music licensing fees in ways that could impact broadcasters:

• Performance Tax – There is a continued effort by record labels and artists to impose a new performance tax on radio stations for music played over-the-air. The performance tax is in addition to the fees paid to songwriters and composers (who receive less of a direct economic benefit from free airplay).
• Webcasting Fees – There have been efforts to both decrease and increase the burden of webcasting fees. Radio broadcasters support a decrease in these fees because they are often cost-prohibitive, and, again, labels and artists benefit from the fee airplay.
• Pre-1972 Recordings – Currently, radio stations and webcasters do not pay performance royalty fees for pre-1972 recordings streamed over the Internet. Last year, Representative George Holding (R-NC) introduced the RESPECT Act (H.R. 4772) that would extend the performance royalty on streaming and subscription services to pre-1972 recordings. Although this issue only affects streaming music over the Internet, it would mark another step forward for performance tax advocates.
• ASCAP/BMI Fees – There are efforts underway to increase the royalties paid to music publishers through ASCAP and BMI, including the “Songwriter Equity Act,” which was introduced by Representative Doug Collins (R-GA) last year. The impact of this proposal could negatively affect broadcasters and webcasters because they likely would be left to shoulder part of the rate increases. Further, there are efforts to eliminate the consent decree that prevents ASCAP and BMI from raising the rates due to alleged antitrust concerns. These consent decrees allow local radio and television stations to fairly and efficiently license music that is publicly performed within their programming (including within coverage of live local events, movies and television shows, and advertisements). MDCD recently wrote a letter to Senator Chris Coons supporting the continued operation of the consent decree.

Additional Background on the Performance Tax
Record companies want Congress to impose a new statutory “performance fee” to require local radio broadcasters to pay record companies and recording artists for playing music over the air.  This Congress, Representative Nadler (D-NY) has introduced the "Fair Play, Fair Pay Act of 2015 (H.R. 1733) that would impose a new performance fee

Broadcasters have fiercely opposed proposals to impose such a new fee--which they consider a "performance tax"--on local radio stations  A new performance tax would impose unnecessary and unfair financial burdens on the local commercial radio stations in Maryland and Delaware that contribute directly to thousands of jobs across the State and provide local news, weather, and public safety programming. It also would give a government-mandated economic windfall to record companies and performers who already receive untold value from the free airplay of their music on the radio.

Fortunately, Congress has rejected repeated efforts by record companies to pass any performance tax legislation. For decades—and through many Congressional hearings—Congress has long recognized that radio stations and artists and labels have thrived in a mutually beneficial system of free airplay and free promotion. During this time spanning more than 80 years, record companies and performers have reaped huge benefits from the free advertising and promotion they receive when local radio broadcasters play their music over the air. This free airplay—which touches 240 million listeners every week—provides the recording industry increased popularity, visibility, and record sales.

The current system has provided untold amount of free promotion for artist and labels—leading to record sales, concert sales, and merchandise sales. Even the artists recognize the immeasurable value that accrues from free radio promotion. See the document “In Their Own Words” which includes quotes from many label executive and artists about the value of free radio airplay.

Despite this mutually beneficial system, record companies have renewed their efforts to urge Congress to impose a performance tax on local radio broadcasters. Part of what is driving this effort is that record companies are struggling in the marketplace to adapt their business model to the digital age. But this is no basis to invoke the government to impose a new fee on local radio stations—who, ironically, remain the labels’ greatest promotional tools.

The economic benefits record companies and performers receive from free airplay is evidence that the marketplace is working. A performance fee on local radio stations amounts to little more than a new tax and a government-mandated redistribution of revenue from one private industry to another. Indeed, forcing stations to pay record labels misunderstands the marketplace. Record companies sometimes try to pay cash to radio station disc jockeys and station managers to play their records. That is the best measure of how critical airplay on local stations is to the success of a record and concert attendance. It is the ultimate irony that record companies now want Congress to require stations to pay them!

Anti-Performance Tax Resolution – the Local Radio Freedom Act

Two Congressmen—Mike Conaway (R-TX) and Gene Green (D-TX)—have introduced an anti-performance tax resolution (the “Local Radio Freedom Act”) during the last several Congresses. Last year, the resolution garnered more than 230 co-sponsors in the House. That overwhelming, bipartisan opposition to the concept of a performance tax has proved critical in defeating any performance tax legislation. This Congress, the Local Radio Freedom Act is H. Cons. Res. 17 and Sen. Con. Res. 4 .

Pro-Performance Tax - the "Fair Play, Fair Pay Act of 2015"

The Nadler bill imposes a performance fee on local stations, and the amount of the fee would be set by the Copyright Royalty Judges. The bill includes a $500 cap for stations who revenues are less than $1 million, but that cap does not sufficiently protect broadcasters from future royalty increases, revenue floors, or additional administration costs if a performance fee is imposed.     

History of the MDCD Delegation Members on Performance Fee Legislation

Representative Andy Harris (R-MD), Representative John Sarbanes (D-MD), and Senator Barbara Mikulski (D-MD) are the members of the Maryland Delegation that have cosponsored the anti-performance tax resolution (Local Radio Freedom Act) in support of radio broadcasters.

Representative Dutch Ruppersberger (D-MD), Representative Elijah Cummings (D-MD) and Representative John Carney (D-DE) have cosponsored the Local resolution in previous years.   
Senator Ben Cardin (D) and House Minority Whip Steny Hoyer have supported a performance tax on radio broadcasters in the past, and Whip Hoyer is co-chair of the House Recording Artists and Sciences Caucus). Despite differing with broadcasters on this particular issue, they have been supportive of local broadcasters on other issues.  

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ACTION ITEM – Call your Members of Congress and encourage them to cosponsor the Local Radio Freedom Act. Use the attached Talking Points and Congressional Directory to assist you or call the government affairs hotline at 410-653-4122.