When the pandemic upended the music industry, musicians live-streamed on services like Instagram Live, Zoom and Twitch to recoup lost concert revenue. They pivoted from fully equipped record label studios to furnishing their own in-home recording studios. Revenue from studio-recorded music also did not appear to suffer, given the ubiquity of streaming services and other similar platforms, because virtually everyone was online anyway.
Conversely, terrestrial radio stations did not provide a revenue stream, as they only pay songwriters to play their music; they are not required to pay performance royalties to the performers. For example, Rihanna would not receive royalties if a radio station played her recording of “Same Ol’ Mistakes,” a cover of Tame Impala’s “New Person, Same Old Mistakes.” However, Tame Impala’s principal songwriter Kevin Parker would be entitled to such royalties. Many musicians have deemed this patently unfair for U.S. airplay. Most other developed countries have laws that require some level of compensation for performers played on AM/FM radio.
On June 24, 2021, U.S. Representatives Darrell Issa (R-CA) and Ted Deutch (D-FL) introduced the American Music Fairness Act (“AMFA”), which aims to pay royalties to performers when their songs are played on terrestrial radio. Here we explore the bill itself, as well as its implications for artists and radio stations in the U.S.
What Exactly Does the AMFA Purport to Do?
The AMFA was drafted in response to the Local Radio Freedom Act, a competing bill that would reaffirm the current royalty-free broadcasting framework for local television and radio stations, which was recently revived after decades of dormancy. The two bills highlight a historic battle between large radio corporations and music creators, but the AMFA attempts to strike a compromise.
The primary focus of the AMFA is closing the gap that exempts terrestrial radio stations from playing music without paying royalties. Proceedings under the Copyright Royalty Board (“CRB”) would begin “as soon as practicable” after the date of enactment of the law and would remain in effect until December 31, 2028. The CRB would determine royalty rates and deadlines, and royalties would then be distributed per the established deadlines. Proceedings to adjust rates and due dates would occur every five years.
Smaller broadcasters would receive special treatment. To qualify for such special treatment, a radio station would need to 1) accrue individual revenue of less than $1.5 million in a year; 2) aggregate less than $10 million in revenue in conjunction with its owners, operators or direct controllers; and 3) provide written certifications to a CRB-designated nonprofit collective, which would distribute receipts from licensed transmissions. As the bill is currently drafted, these qualified broadcasters would pay a yearly flat fee, as opposed to the royalty rates standardized by the CRB, based on their annual revenue or status as a public broadcasting entity. For example, radio stations that generate less than $100,000 in revenue would pay $10 per year. However, public broadcasting stations generating between $100,000 and $1.5 million in revenue would pay $100 per year, whereas non-public broadcasting stations would pay $500.
Additionally, stations playing music pursuant to previously granted compulsory licenses would have to pay 50% of the required royalties to the CRB-designated collective for statutory licensing receipts. The collective would then distribute those payments proportionately among the featured and non-featured performers on each sound recording, i.e., those that play a more prominent role in a recording versus those “behind the curtain.”
The AMFA would ensure equitable outcomes by distributing royalties to recording artists without diminishing the pool for copyright owners. First, the bill states that nothing would adversely affect the rights or royalties payable to songwriters and copyright owners of musical works (i.e., those who authored the elements of the musical composition). During CRB allocation proceedings, Judges have the discretion to review arguments from both parties. Artists before the CRB might present evidence of their streams of revenue and status in the market to bolster their cases. For example, Taylor Swift may secure a greater share of royalties, given her pop icon status and contributions to the industry.
What Does This Mean for Artists and Radio Stations?
As currently drafted, the AMFA would create a new revenue stream for musical recording artists, including any individuals who collaborated on a particular recording. This means that producers, featured musicians, backup vocalists and the like would be entitled to revenue from radio airplay in the same manner as streaming services.
The recently enacted Music Modernization Act (“MMA”) also codified a royalty payment system for music producers and sound engineers, but the AMFA fortifies the protection of producers’ rights. Performers would also receive royalties (that they do not currently earn) from airplay of cover versions of other artists’ songs. Moreover, the MMA ensured royalties for owners of works created before February 1972 (also known as “legacy artists”), but non-featured musicians and vocalists only receive 2.5% of all royalties earned from digital music streams, unless they sign a separate agreement. With the AMFA, these individuals would receive royalties from local and national radio airplay as well. While traditional radio play increased during the peak of the pandemic, it has long been a significant source of listenership for pre-1972 recordings. Accordingly, the AMFA could present a boon to these legacy artists.
If the AMFA becomes law, major corporate radio stations may have to substantially readjust their budgets to account for these new royalty payments, and smaller stations that may fall within the exemptions should maintain a scrupulous record of their revenue. The Local Radio Freedom Act could provide another avenue for radio stations to maintain the status quo, but despite initial bipartisan support, it is unclear if the Senate will proceed further in approving the bill.
Conclusion
The AMFA is simply a proposed law. Concerned parties now have an opportunity to contact their local Congressional representatives with their comments about the bill. If the bill does become law, recording artists who may take advantage of the AMFA should contact a copyright attorney to ensure a fair share of licensing revenue. We will continue to monitor the developments of the AMFA and Local Radio Freedom Act, and we look forward to sharing more details in future insights.