Thursday, March 5, 2009

The Performance Rights Act, H. R. 848, S. 379

Many people like to blame Shawn Fanning. While Mr. Fanning’s creation of the specific computer code that became commercially known as Napster was not inevitable, digital file sharing was. As equally inevitable are our current struggles regarding how to adapt—both socially and economically—to digital technology.

One attempt at adaptation is the most recent version of the Performance Rights Act currently before both houses of Congress. To me, one of the most interesting aspects of the legislative process is the demarcation of battle lines within an industry impacted by a specific piece of legislation. The many versions of The Performance Rights Act has created its share of feuds within the music industry.

The purpose of the bill is simple: require standard AM and FM radio stations (technically known as “terrestrial radio” to distinguish them from Internet and satellite radio) to pay performers royalties for the broadcast of their recorded music. Up until now, terrestrial radio stations paid only the songwriter a royalty.

The airplay of songs, so the theory goes, promotes album sales and that is how the artist and their label receive compensation for their creative efforts. Indeed that theory worked well into the late 1990’s. As we all know, the advent of digital technology made that theory about as useful as the one about the earth being flat.

Of course you can easily see the conflict this legislation created. Artists and their record labels (e.g., Warner Bros. Music, Sony/BMG, Universal Music, EMI, etc.) are supportive of monetizing the airplay of their music. But terrestrial radio is, of course, opposed to paying royalties on music they have been using free for years. To complicate matters, every business in the nation is reassessing and cutting back on advertising.

Yet, there was, at the beginning of the drafting stages of this bill, another not-so-obvious conflict that arose. The songwriting community joined terrestrial radio in opposition to the performance royalty. Songwriters and their music publishers were concerned that a performance royalty could cause a reduction in their royalty payments from terrestrial radio.

To address the concerns of the songwriting community, the drafters of the Performance Rights Act inserted Section 5 into the Act. Section 5 mandates that the songwriters’ royalties “shall not be reduced or adversely affected in any respect” by the implementation of the performance royalty. Thus the drafters limited the opposition to the bill.

Considering that the two major streams of revenue for a songwriter and their music publisher are the sale of music (which we all know is shrinking daily) and radio royalties, the insertion of Section 5 into the bill was critical.

So, where do you stand? Let me know by answering the survey on the right. I will let you know where I stand on the bill next week.