Is Traditional Radio Next to Pay?

The music industry says it’s time for traditional radio to pay up for playing songs for free.

The $20 billion radio industry has been getting off scot-free for the last 80-plus years of its existence when it comes to paying music labels and singers. The music industry thinks there’s no better time to collect its bill as album sales are continuing to suffer.

In fact, some in the music industry say traditional radio is to blame for lackluster revenue – maybe odd, considering radio has been viewed as a necessary marketing expense that gets songs and albums sold.

Stan Liebowitz, the director of the Center for the Analysis of Property Rights & Innovation at the University of Texas at Dallas, disagrees.

"I am not disputing that radio is very good in picking which songs are going to become very popular," he said in a study published earlier this year, according to Business Week. "But if radio didn’t exist, we could see a 50 percent to 60 percent increase in record sales."

Liebowitz explained that people would purchase more CDs or digital recordings if they didn’t have a free radio to listen to in their cars.

Those who want the radio industry to pay royalties think the free exposure by FM and AM isn’t worth so much because many listeners now get their music fix over the Internet or through satellite broadcasters like XM and Sirius. Also, satellite and Web broadcasts already pay performance royalties so they say it doesn’t make sense that traditional radio should be exempt.

So, 133 singers, musicians and industry organizations have formed the musicFIRST coalition in hopes of changing the Digital Millenium Copyright Act of 1998, which allows only songwriters and composers to receive royalty payments from radio play.

"What we are asking is that performers do get a full royalty," musicFIRST Executive Director Mark Kadesh told Business Week. "Almost the entire rest of the world does it" that way.

Coalition representatives have met with House Judiciary Committee Chairman John Conyers and the coalition told the magazine that the House is expected to look into the issue at some point in July.

Traditional radio thinks musicFIRST doesn’t have a case and that its claims are in fact, ridiculous.

"A performance tax on radio makes no sense," Andy Levin, chief legal officer at Clear Channel Communications, said in a statement. "Congress has recognized for more than 70 years that the record labels receive a substantial benefit from the airing of their music on free radio. They are basically receiving free advertising. This idea is just plain backwards. They should be paying us to play their music. Unfortunately, that’s against the law."

It’s bad timing for terrestrial radio as traditional radio companies saw a rise of 0.5 percent in revenue last year. This year reportedly hasn’t seen a profit yet.