American recording artists are popular everywhere. Whether it is Eminem, Shania Twain, Staind, 50 Cent, or 2Pac, innovation by American musicians sets the tone for music trends that permeate the rest of the world. If that is the case, then why are American artists still paid so poorly in the United States compared to artists residing in most other nations?
The United States drastically differs from other nations with respect to the payment of public performance royalties. However, that may soon change, in the artists’ favor and advocacy by and on behalf of artists and their representatives is instrumental in affecting that change.
The right to perform work publicly is one of the exclusive rights attributable to owners of copyrights under the US Copyright Act. Under the law, the songwriter is entitled to a “public performance royalty” (usually collected by ASCAP, BMI, or SESAC) for musical compositions (i.e., “songs”) that are broadcast over the radio, television, or Internet only. (Incidentally, note that songwriters in America do not get paid for their music that is publicly performed in theaters!). Additionally, American songwriters are entitled to payment for music that is played in certain public venues, such as a restaurant or a bar, provided certain specifications are met. For example, a restaurant needs to be over 2,000 square feet, and a bar over 3,750 square feet.
But, what about those who own the sound recordings of those songs, usually the record companies and those who perform the songs on the actual sound recording (the artists)? And, what about those who perform the songs on the actual sound recordings?
Under US Copyright Law, public performance royalties relating to sound recordings are only payable for the digital transmissions of those sound recordings. Aside from that, the US public performance royalty limits payment to the song publishers and “actual” songwriters of “songs.” In most other countries, however, two types of public performance royalties are payable, one relating to “songs” and one relating to “sound recordings.”
The first type of public performance royalty (which is recognized in the United States) is paid to the copyright holder of the musical composition or the “song” (i.e., songwriters and/or their publishers). The second type of public performance royalty (which is not recognized in the U.S. except digitally) is paid to the copyright holder of the sound recording (i.e., the record company or those who may own the masters) and its featured performers (i.e., the artist, session players, and back up vocalists).
Additionally, foreign countries that pay public performance royalties to sound recording copyright holders will not pay American artists the corresponding royalty even if an American artists’ music is played on radio or television in their countries or in their theaters. Technically speaking, there is an absence of “reciprocal right.” The rationale of such foreign countries is, since foreign artists do not receive public performance royalties when their songs are played publicly in the US, then those foreign countries should not have to pay US artists when their songs are publicly played abroad. Can we blame them?
Why is the United States so behind the times when it comes to paying performance royalties? Politics. The National Association of Broadcasters (“NAB”) is a very powerful lobbyist group which has effectively managed to keep legislators from amending the US Copyright Act to include the sound recording copyright holders’ right to receive public performance royalties in the US. If the Copyright Act was amended to provide payment for both types of public performance royalties (i.e., for both the musical composition and the sound recording), then the amount of money paid out by the US radio and television stations would basically double.
Under the Digital Millennium Copyright Act (“DMCA”), the federal legislature mandated that a license be obtained from copyright holders of sound recordings when those recordings are broadcast over the Internet (the “Webcasting License”). The Webcasting license provides that a royalty must be paid to the copyright holders of sound recordings, the artists that are featured on the sound recordings, and all session players and back up vocalists whose performances are also contained on the sound recordings. This Webcasting license requirement has opened the door for public performance monies to be paid to sound recording copyright holders in the States for other mediums including radio and television. And, progress is being made to that effect.
Further under the DMCA, the Copyright Arbitration Panel passed what is now referred to as the “Webcasting Royalty Act.” That act stipulates that music providers on the Internet (i.e., broadcasters and webcasters) must pay certain royalties to copyright holders of sound recordings as well as the artists and musicians featured on those sound recordings. The fees range anywhere from $0.0007 per stream per person (i.e., 7 cents per every 100 persons) for large broadcasters (defined as having at least $1 million in revenues) to $0.0002 per stream per person (i.e., 2 cents per every 100 persons) for non-profit broadcasters, such as religious organizations and colleges.
Currently SoundExchange, the largest collection agency, licenses, collects, and distributes public performance revenue for sound recording copyright holders from such digital distribution channels as cable, satellite, and webcast transmissions. Although webcasting monies can be collected directly or through the smaller lesser known digital collection agency, Royalty Logic, SoundExchange wields the most power and is the most innovative when it comes to being on the “cutting edge” of technology and the changing tides of the music industry.
In addition, SoundExchange is a not-for-profit organization whose board is comprised 50% of sound recording copyright owners (generally record company representatives) and 50% of artists and groups representing artists.
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Only a little over two years in existence, SoundExchange collected approximately $7.5 million in 2002 and is currently holding millions more in historic webcasting monies that it is waiting to pay out when all the federal regulations are finalized. For more information go to www.soundexchange.com.
With increasing consolidation of the music industry and the ever decreasing role of the major record companies in artist development, artists and their representatives need to continue the on-going fight for artist rights in the United States. The creation of new income streams such as the Webcasting Royalty and other forms of public performance income can increase an artist’s chances of success in music, even though he or she may not be signed to a major record label.
Dina LaPolt is an entertainment attorney at LaPolt Law, P.C. in Los Angeles. Her firm specializes in representing clients in the music, television, film, and book publishing industries as well as developing artists and bands. In addition to practicing law, Ms. LaPolt teaches in the UCLA music business program and is also on staff as a music contracts professor at the Musician’s Institute in Hollywood. She is an author and contributor to many music related and music business publications. She is frequently invited to speak on panels at music conferences all over the country, and sings and plays guitar in an all-girl band, Trophy Girl. For more information on Dina or her firm, go to www.LaPoltLaw.com.
