The bottom line is that performers possess a right to the fruits of their labor and creativity.

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Under current law, songwriters, music producers and others receive royalty payments when their songs are played on AM-FM terrestrial radio. 

The performers themselves, however, receive no such compensation except via a Byzantine licensing maze. 

Meanwhile, under current law performers do receive compensation when their songs are played by digital broadcasters – Internet, satellite or cable mediums, for example. 

Yet the terrestrial radio broadcasters remain exempt by law from paying that same compensation. 

In other words, AM-FM radio enjoys a special government carve-out.  That discrepancy contravenes a basic sense of fairness, and derives from antiquated regulations imposed decades ago to stop “payola” – pay-for-play concerns no longer relevant due to technological change and today’s market realities. 

Proposed legislation before Congress, however, seeks to rectify that anomaly. 

The Free Market Royalty Act (FMRA) aims to finally bring to an end terrestrial AM-FM radio’s special government exemption from paying performance rights, which performance artists are currently free to negotiate with other modes of broadcast.  As set forth in the bill itself, FMRA aims “to provide copyright owners in sound recordings with the exclusive right to negotiate in the marketplace the performance of their works to the public by means of an audio transmission, and for other purposes.” 

Sounds fair enough, and straightforward enough.  Some, however, oppose this common-sense legislation. 

Some opponents of FMRA falsely claim that the bill would suddenly “regulate the market,” but the truth is that the market is already regulated in a discriminatory manner, as set forth above.  Accordingly, FMRA simply levels the playing field for all rights holders and forms of transmission, finally allowing performers to negotiate with terrestrial radio broadcasters more freely.   

Given that choice, some performers might opt to allow stations to play their music for free, hoping to reap the benefit of air play and publicity.  Other artists might opt to seek the same type of payment already paid to songwriters, producers and others by terrestrial radio stations.  Either way, FMRA allows artists that choice, rather than having the current regulatory regime imposed upon them.  That is, after all, the essence of the free market:  bargained-for negotiation and mutual agreement.  The status quo, in contrast, amounts to a cronyist niche for AM-FM radio to avoid negotiating artist performance rights that other methods of broadcast like Internet, satellite and cable entities must already do. 

Other FMRA opponents falsely allege that the bill creates some sort of new “tax.”  In a National Review piece this month entitled “Obama Pals in Music Business Aim to Cash In,” Neil McCabe makes that claim, but it doesn’t withstand facial scrutiny.  To his credit, Mr. McCabe acknowledges that, “Many Americans would be surprised to learn that while writers, producers and others may get a royalty when a song is played, the performers do not.”  Unfortunately, he then proceeds to descend into ad hominem attacks and guilt by association – even spuriously throwing in Kathleen Sibelius’s name for good measure – in alleging that FMRA would impose a “tax.” 

A tax, however, is a compulsory payment to government, whereas the royalties at issue here are voluntary payments for the right to broadcast another’s creation.  Accordingly, no less an anti-tax authority than Grover Norquist of Americans for Tax Reform has refuted the allegation that FMRA somehow creates a “tax”: 

“[W]hat is proposed is not, in fact, a tax but a royalty.  The definition of a tax is the transfer of wealth from a household or business to the government.  Taxes aren’t voluntary; paying a royalty is.  It is completely within the rights of broadcasters to decide not to pay for the use of a performer’s song by simply not using the song.  This may not be an ideal option, but these songs actually are the property of someone else…  Just as dishonest as calling a tax a fee or fine, so too is it wrong to apply the word ‘tax’ to a royalty payment.  Creating the negative perception that this legislation creates a new tax may be convenient in the short term and assist opponents in gaining political support;  in the long run it is incredibly unhelpful to those who work to reduce the burden of government in our everyday lives.” 

The bottom line is that performers possess a right to the fruits of their labor and creativity.  Indeed, they already receive payment from non-terrestrial radio stations, reflecting that same concept of fairness.  With no animosity whatsoever toward terrestrial radio stations, their current special regulatory carve-out is unjustified.  FMRA simply corrects that imbalance.