Radio Stations Are Not Responsible For The Music Industry’s Business Challenges

Peggy Binzel Spokesperson, Free Radio Alliance

Earlier this week, Peter Fricke asserted in his post that radio stations “pay no royalties for the music they broadcast.” Let’s set the record straight: radio stations pay hundreds of millions of dollars in royalty payments every year. These revenues make their way to authors, composers and, mostly, to the music labels. The labels ink contracts with their performing artists, which govern how revenue from all sources, including the sale of concert tickets, merchandise and recorded music is divided.

Is it different from the compensation system for satellite-delivered and streaming music? Yes, and when radio stations stream they pay in accordance with the streaming rules like all others. But, because over-the-air radio’s system is different does not consequently make the system unfair. Business models evolve to fit the circumstances in any industry and the music industry is no exception.

To that point, the relationship between radio, the music industry and performing artists has been more than 80 years in the making. That’s billions in royalty payments and hundreds of thousands of private contracts built around the current rules, not to mention the value to scores and scores of artists who have become famous through radio play. Some record labels have been trying to change just one part of this complex, interlinked eighty-year-old system. Not surprisingly, they want only a change that would funnel hundreds of millions more per year in royalty payments revenue to themselves from radio stations across the country.

It’s worth stepping back to analyze the “problem.” Record label revenues have dropped significantly with the advent of digital distribution. This has absolutely nothing to do with over-the-air play of music by radio stations across America; they’re just the potential piggy bank.

The digital revolution has been just that – revolutionary to many business models including the music industry’s. That’s not a bad thing. Not unless, of course, you’re one of the businesses that enjoyed protected status and benefited from limited competition under the old regime.

As for consumers, digital distribution of music has been a home run with more and more choices available to them no matter how they may consume music. That’s partly because the record labels can no longer get away with dictating the terms by which consumers get music. Does anybody want to go back to the days when you had to buy an entire album, eight-track or CD to get the one song you really wanted?

The truth is that when music fans had the chance to break free from the recording industry’s blatantly anti-consumer policies, they did. And with gusto.

Consumers have a limited willingness and ability to pay for music, which is why advertiser-supported models continue to thrive even alongside pay-only models. Now, not only are consumers in charge of what they listen to and how, but digital distribution has eliminated some of the “fat” in the industry. It’s gone and it’s not coming back. That’s why the record labels are trying so hard to get Congress to funnel millions of dollars more in radio station revenues to them.

Artists haven’t been suing radio stations to stop playing their music but a whole lot of them have been suing record labels for keeping too much of the money. If the record labels got everything they are asking Congress to give them, the bulk of the new found money would go to the labels, themselves, followed by big-name artists who already make millions. For the other ninety-five percent of artists, crumbs. Just like today.

Radio stations continue to be the most important way, by far, that artists are introduced to the fans who will buy their music, attend their concerts and purchase their merchandise. Consumers have never had access to more music. If you’re a music fan or a member of Congress who represents music fans, you’ve got to figure that something about the current system must be working.

Peggy Binzel is spokesperson for the Free Radio Alliance, a coalition advocating to keep radio and other businesses that play recorded music strong for communities across the nation by opposing a performance tax.