Performance Royalties Wouldn’t Hurt Most Indie Labels

In a guest editorial published at MusicRow.com today, Jeff Cohen, Dave Gibson and Laurie Spoon—the three heads of Nashville’s Savannah Music Group—came out strongly against a proposed performance royalty that would affect terrestrial radio.

The radio industry has been fighting hard against the idea of a performance royalty, which would mandate that artists, musicians and record labels be paid when a song is aired. Such a system already exists in Europe.

Savannah argues that a performance royalty would encourage radio stations to play less music than they currently do, and also that the music played by those stations in these newly-constricted playlists would be “…further concentrated on already established artists.”

What the radio industry (and the Music Row editorial) fails to point out, however, is that allowing mainstream radio to continue operating without a performance royalty puts emerging digital technology at a competitive disadvantage. That’s because digital radio is already subject to a performance royalty.

Why should a low-budget streaming radio station be subject to a performance royalty, while a mainstream station owned and operated by a major communications corporation such as Clear Channel is not?

It’s surprising to see such strong opposition to the proposed performance royalty coming from a tiny independent label such as Savannah, which has nothing to gain by protecting the interests of a major radio industry that will never play or support the label’s artists.

The fact that Savannah believes its opportunity to obtain spins on mainstream radio would be threatened by a performance royalty underscores a business philosophy that is certain to fail. Independent labels should focusing their efforts on utilizing digital technology and emerging platforms—where they have a much better chance of competing for airtime—to help potential fans discover their artists.

A performance royalty would force terrestrial radio to play by the same rules as digital radio, which cannot hurt the latter. And it’s highly unlikely that independent labels would see a decrease in already non-existant radio play due to such a royalty.

Radio playlists are already contracting, and have been for nearly two decades. There is no research to suggest that this trend will cease, regardless of whether or not a performance royalty is mandated.

Savannah did, however, put forth one smart idea in its editorial:

Should a performance royalty be mandated by Congress, artists and labels must have the opportunity to opt out and let their records by played free of charge by radio, with an appropriate reduction in the proposed tiered rate proportional to the amount of license free music played. Record companies and artists that don’t agree with charging radio for airplay should not be forced by the government to do so. [emphasis added]

If record companies were permitted to opt out of the performance royalty, radio stations looking to cut costs might show favor to music that could be played for free. If all labels opted out, the effect of the mandate as a whole would be nullified. However, it’s unlikely that major labels—which stand to gain a large amount of revenue from such a royalty—would opt out, even if doing so would prevent a decrease in total spins.

Of course, it’s equally unlikely that a radio station could save enough money by sprinkling in a few indie tracks to make “downgrading” their playlists worthwhile, but at least there would be some incentive to do so.