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Yesterday, is there a coordinated effort focussing on the details behind radio  royalty fees? – wondered Kansas City session drummer and a2f2a.com member James Millard.

“And is there anything on whether or not an artist can waive those fees ?” – he asked, “because I was listening to Rush Limbaugh (I know most people don’t like Rush) and a caller asked him why he doesn’t include the music samples that airs live at the beginning of each radio segment or the satire musical pieces that air during the show with his podcast.”

Nashville entertainment lawyer Fred Wilhelms, of whom CounterPunch’s Dave Marsh once said, “If the corporate music industry had any ethics, Wilhelms would be its ‘ethicist-in-chief”, gave James a few things to think about, as did Canadian radio broadcasting graduate Chutney.

“I’m actually a radio broadcasting graduate in Canada”, said Chutney in an a2f2a.com comment post to James’ enquiry.

“As far as royalties and radio stations are concerned up here it’s actually a relatively fair situation”, he said, going on >>>

The CRTC has the mandate on these royalties and charges radio stations a percentage of their gross income as a flat royalty rate for all songs played. The station has to keep a log of all songs played throughout the year to divide the royalties amongst the correct artists. Realistically this is a cost of doing business and a relatively fair method although it does rule out independents, unless the independent is a SOCAN member AND is getting a lot of radio play. Currently no legislation is impacting online radio stations but I don’t think it’ll be long in coming.

I also think that these royalties should not be completely abolished. Radio stations choose to play songs that will build their listenership, not because some artists gave them their recording for free. If they don’t feel it’s going to build listenership they won’t play it. Maybe they will play it once or twice but unless it’s in regular rotation it really isn’t providing all that much promotional support for the artists. With this in mind your comment to need to “pay your bills” is a bit of an undersight. If a company is using my song to build their listener base and sell advertising space making them money why shouldn’t they pay me a bit of something to provide that listener base for them? Here’s where maybe an adjustment should be made in allowing artists to set their own royalty rate for use of their song. Sure let’s let the radio station play it for free for a week. If it ends up in regular rotation pay something…say even 10cents a play. Anyone who has regular play on a radio station gets at least 5+ plays a day. If you stay on rotation for a month on 10 or more stations that’s a decent bit of coin to help pay those bills.

It all boils down to artists taking care of their own business. Just as any other business owner takes care of their product we need to take care of ours and make money using valid methods. Should we be punishing consumers who have PAID for our work with copyright infringment? No. However if a project or company is using my material for their own personal financial gain then I expect to be able to come to an understanding with that project for some form of compensation. This is no different than any other business. If someone buys 500 hammers and wishes to resell them the hammer manufacturer made their money by selling the product in the first place. Tough thing with anything digital is that there are no supply limitations. It falls well beyond the scope of modern economics. Therefore a limitless supply will never allow pricing to be brought up no matter what the demand. With this in mind new tactics must be created to allow for the artist to “PAY THE BILLS” whatever way they can.

Said Fred in one of his typical You asked, and I’ll do my best to answer, in spades and in detail, responses >>>

What follows here is strictly limited to the US, and, as is the case with all legal analysis on the Internet, it is worth exactly what you are paying for it. If you are a broadcaster of any type seeking to determine your license obligations, get specific legal advice from your own attorney.

The OP asks if artists can waive radio fees. There are a number of different terms in there that need to be defined so that we are all talking about the same thing when it comes to finding answers.

“Artist” – Normally, we would be only using this term to refer to someone who actually creates content; i.e. composers and musicians, but because we are dealing with intellectual property, it is not the simple act of creation that invokes the right to grant or waive permission for use, it is the possession of the legal copyright in the creative works. That COULD be the musician and/or the songwriter, and/or it could be the publisher of the composition and/or the entity holding the copyright on the recorded work, as Devil’s Advocate correctly notes.

“Radio” – There are different rules for different media, so you have to specify which one you are talking about.

1. There is “terrestrial radio,” which we find on the AM/FM bands.

2. There is “internet radio,” which are non-interactive streams like Pandora, RadioParadise and Soma.fm.

3. There is “podcasting,” which, for our purposes, we can define as the distribution by download via specialized software of creative content. Podcasting has special rules that apply, and the Limbaugh example turns on those special rules.

“Fees” – Someone wanting to use a specific piece of music for a specific use may face the need to pursue up to three separate licenses, and pay three separate fees. There is the fee that goes to the music publisher (or other holder of the copyright in the composition) for use of the song. There is the fee that goes to the record company (or other holder of the copyright in the recorded performance). These two fees generally cover the right to “reproduce” the recording for distribution.

And there is the “public performance” license and fee. For Internet radio, there are two performance royalty fees, one for the composition, and one for the recorded performance. For “terrestrial radio” and “podcasts” there is currently just one public performance fee; for the publisher and composer, although there is currently a bill before Congress that would extend the performer’s royalty to terrestrial radio for artists and record company/copyright holders.

So, now that we’ve laid out the terminology, let’s try to answer the question.

The OP states that Rush Limbaugh has music on his terrestrial radio broadcasts but cannot offer the same music on his podcasts because of the prohibitive licensing fees.

Limbaugh does not have to pay license fees directly to the composer/publisher or artist/record company for playing music on his terrestrial radio show. For performance royalties on his terrestrial radio show Limbaugh pays blanket license fees to ASCAP, BMI and SESAC, the three composer/songwriter “performing rights organizations” (PROs) that allow him to play any piece of music written and published by any of their members without striking an individual deal for each individual song. Because Limbaugh’s show is a commercial enterprise, the fees for these licenses are based on the total advertising revenue of the terrestrial broadcasts, and on the relative amount of music used in the program. I have no idea what those advertising revenues are, so I have no way of estimating what the actual fees would be. I would guess that he is probably paying thousands of dollars a year to each PRO. The ironic thing is that the blanket license allows Limbaugh to play any piece of music covered by the PRO’s regardless of whether or not the composer agrees with Limbaugh’s politics. The same rights go to any entity that pays the blanket license fees, including fringe political and social groups. (Elsewhere in the world, creators may retain certain “moral rights” over some uses of their creations. The US only recognizes moral rights, and in a severely limited form, for graphic artworks.)

When it comes to his podcast, those PRO licenses don’t begin to cover Limbaugh’s legal obligations.

First of all, the owners of the copyrights in both the composition and the recording claim that a podcast is really a “reproduction” of their property, since a listener downloads the podcast and not only controls when they can hear it, but how often they can hear it. Because it is a “reproduction,” the PROs cannot offer licenses to cover the use. Limbaugh must then license each composition from the publisher. He must also license the use of the specific recording from the copyright holder, usually the record label. As these licenses are individually negotiated, the fees can range from minimal to substantial. While it is possible to negotiate a zero-fee license, it is highly unlikely to happen when the licensee is a money-making enterprise like Limbaugh’s program. I note that he charges an annual fee to access his podcasts through iTunes. In addition, he has to pay someone to negotiate all those individual licenses, and that’s going to run into substantial costs.

Now, to further confuse matters, the PRO’s have asserted that a podcast is not only a “reproduction,” but that it is ALSO a “performance,” which means there is ANOTHER license to be obtained, and ANOTHER fee to be paid to them, separate from the blanket fee that covered the original broadcast. While there has been a long running debate on the philosophical and technical basis for this argument, the PROs have some caselaw on their side. A number of observers think this morass of rights, obligations and fees is the primary reason why podcasts are still marginal players in the world of music economics.

If Limbaugh was doing his show as a streaming Internet broadcast, ala Pandora, he would not have to individually license the songs and recordings because, outside of the RIAA, no one is seriously arguing that an Internet broadcast is a “reproduction.” He would, however, have to pay performance royalties to both the PROs and to SoundExchange, as the US recognizes an artist’s right to performance royalties from Internet broadcasts, and the Copyright Office recognizes SoundExchange as the only authorized collection and distribution agent. The amount of the royalty is calculated on the basis of audience size and advertising revenue. Payment to SoundExchange is mandatory for all Internet broadcasts, and it covers all performers whether or not they are members of SoundExchange.

So, can someone tell Rush Limbaugh that he can play their music for free?

A songwriter can issue an individual waiver on performance royalties. As long as the waiver is filed with the songwriter’s PRO, it is valid. A songwriter willing to let ANYONE perform his music in public without royalties can do so by simply withdrawing the song from his PRO, or not joining one in the first place. Separate waivers would be needed for the terrestrial radio broadcast and the podcast.

The performing artist and whoever holds the copyright in the sound recording have nothing to waive on the terrestrial broadcast, as there is no performance royalty on their side of the equation. Yet. Congress is currently considering the Performance Rights Act that would create such a royalty.

Whether or not there could be waivers granted by those rightsholders is an open question that really depends on the legislation if it is passed. If the legislation looks anything like the law that created the royalty for Internet streaming broadcasts, the blanket license provisions the current law uses may make a waiver ineffectual. Right now, a performer/copyright holder can neither prevent an Internet broadcaster from using his or her recordings, nor effectively waive his or her rights to the performance royalty without signing an individual waiver with each and every Internet webcaster.

James’ inquiry seems to mix some of these obligations and categories, and it contains some statements that are open to dispute.

When he says of fans “To them, copyright legislation means they can’t listen to the music they paid for the way they want to listen to it,” that really doesn’t involve listening to the radio, where what they have “paid” is measured in terms of attention, and if they are listening to the radio, you have to presume that is the way they want to listen to music.

Copyright law, in and of itself, doesn’t affect the way we “want to listen” to music, especially if we have actually paid for it. Copyright law is simply a system by which the authority to control distribution of copies of creative works is reserved to specific individuals or entities. Possession of a copyright in a song or a sound recording may give you the right to control distribution of copies, but when it comes to play on the radio, the existence of blanket licenses pretty much limits the copyright holder’s rights to the right to be compensated for the performance.

James goes on to say “But I’ve said that when artists start allowing radio stations to play our songs without paying fees then we will finally be free of the major recording companies.” I doubt this conclusion, greatly. Record companies do not receive payment for radio play now, except on the Internet. As noted above, songwriters and publishers can already issue waivers. On terrestrial radio, artists don’t need to issue waivers because they presently have nothing to waive. Technically, they can waive performance royalty rights to Internet use of their recordings (if they hold the copyrights), but they have to do so on a station by station basis.

James continues “The impression is that the royalties must be paid to the collection agency or the RIAA if a featured artist is involved and MUST be paid, without exception, to independent artists as well (the specific example of independent artist on the show is a satirist, don’t know if the is relevant or not).”

Royalties will be due to the PRO unless the songwriter/publisher waives them. There are no royalties payable to the RIAA, which is a trade group and not a collection agency. I cannot figure out what the rest of that sentence means.

So it really is the question of the cost of the direct licenses from the publishers and record companies for the podcast use of the music that is at the crux of Limbaugh’s decision not to use music on podcasts.

In framing future discussion on this issue, it will probably make sense to remember the fundamental philosophy at work. That theory is that if someone, like Limbaugh, uses music as part of his successful commercial enterprises, he ought to pay the creators in recognition of the value that music adds to the enterprise. It isn’t really that radical an idea. Current independent artists like James feel that radio provides free advertising for him, and that can certainly be a trade-off for artists like him, but only if the user identifies the artist so that the listener can find more of the artist’s work, and, more importantly, only if the artist is in a position to actually use that free advertising. For artists who are retired, or dead, free advertising doesn’t mean much, so there needs to be another way of compensation for those uses.

We may eventually get to a day when there will be a unified license scheme for creative works; where someone seeking to use music for commercial gain will be able to clear all rights at a single clearinghouse and sign one agreement and use the music or the visual work or the text as wanted. When we get there, it will also probably be a lot easier to coordinate a blanket waiver policy for individual creators. Right now, the entire regime is far too fragmented (and the interests of the varies parties far too disparate) for such unity to exist.

When Limbaugh says that that the cost is too “outrageous” for him to license the recordings for podcasts and remain profitable, I think he’s engaging in a bit of hyperbole (as hard as that may be to believe for someone as well known for understatement as Limbaugh.) It is, without a doubt, an increase in cost, but the number of podcasts that do license music and continue to be profitable would seem to belie his claim that the cost itself is unbearable. Yes, it is an extra cost, and yes, it takes extra work to do it. The question, as always, is whether or not you think music adds sufficient value to your broadcast to be worth the time and expense to license it. Limbaugh says it isn’t.

“Chutney’s comments deserve a great deal of consideration in any deeper discussion of the issue”, says Fred, adding:

“Theory is a wonderful thing, but the practical application of theory is where the artist will live or die. Chutney nails several of the most issues in this regard, and what he says rings true.”

“This all came about because of a conversation I had with a band mate”, says James in an a2f2a.com comment post, going on, adding:

“We were talking about different ways that we could promote our music. Then we starting talking about what might be done to help independent artists as a whole. The discussion turned to a co-op type organization that would help independent bands get radio play when he said ‘hey, what if we just start our own radio station’.

“Now, I’m not a businessman but the idea was really… different. An artist owned station that only played independent artists. I’m not sure that I really want to run a radio station but we’re just brainstorming and researching at this point. But when I heard Limbaugh’s comments, I started thinking that if there was such a thing as an artist owned radio station that just played independent artists, having to pay the same royalty fees that big radio pays to big music would seriously hurt our ability to get our music to our fans over the radio. But like I said, I’m not a businessman so I’m not sure how one would even put together an artist co-op to start a radio station but Limbaugh’s comments on royalties really got thinking about how much radio does pay big music. And that’s another point, radio pays big music for big music’s advertising airtime. I’ll save that complaint for later.”

You can contact Fred at fred.wilhelms @ gmail dot com.