Op-Ed by Michael Huppe, President and CEO of SoundExchange
On Monday, a group of radio broadcasters penned a letter in support of the National Association of Broadcasters' (NAB) push for deregulation of the $14 billion radio industry. Their letter was based on the NAB's petition to the FCC this past June, in which the NAB sought to allow expanded broadcaster ownership of radio stations (i.e., increased consolidation) throughout the country. The NAB's justification: broadcasters must adjust their business model to the realities of the new streaming world.
As a representative of the many creative parties who help craft music, we are frequently on the opposite side of issues from the NAB. And while I can't comment on NAB's specific requests, I was delighted to find so much common ground in their FCC filing in June.
For background, traditional radio benefits from the biggest sweetheart deal in U.S. copyright law that allows broadcasters to play every recording in the world without paying artists a dime. As everyone knows, these tracks "draw the crowd," which allow radio stations to sell billions of dollars in advertising every year, but radio pays exactly "nothing" to the creators that drive their programming. And yet, all of radio's competitors do pay the recording artist. Making matters worse, radio's special exemption doesn't exist anywhere else in the developed world; it's an injustice found only in the United States.
However, with the NAB's filing at the FCC this summer, I was pleased and heartened to see that big radio is now looking to adjust their rules to today's circumstances. We support the updating of radio's business model and agree with much of the NAB's perspective.
First, the NAB laments that radio's current rules "have not kept pace with the transformation of the marketplace" and that regulations "were adopted [when] streaming services like Pandora and Spotify didn't exist." We couldn't agree more. The law should update its treatment of radio in light of digital platforms that, coincidentally, pay artists fair market value for their work.
Second, the NAB argues that "the notion of what constitutes a competitor to radio" should include newer services like SiriusXM and internet streamers and that radio "must be able to compete on a level playing field" with these companies. We totally agree. Modern radio does compete with these streaming services and all of them should play by the same rules -- which means radio should pay for the music, just like everyone else.
Most telling: the NAB complains about "outdated rules that apply only to radio" and asks the government to quit treating them by a different standard. They don't want rules for radio that are not shared equally by their streaming competitors. Bravo -- they are absolutely right! Broadcast radio is the only platform that can use music without paying for it -- and they should no longer be eligible for this special "outdated" exemption in the digital age. Big Radio should play by the same rules.
The irony of all this is that broadcast radio is still a huge financial juggernaut in the music economy; it's not like radio can't afford to pay recording artists. Nobody makes more money from recorded music than the $14 billion radio industry. Radio revenue blows away that earned by competitors like SiriusXM ($5.4 billion) and online streaming services ($6.2 billion in total). Music radio revenue has risen by nearly $40 million since 2013 and the number of music stations has increased every year for the past five years.
So, I'm pleased that the NAB is coming around. I agree with the NAB that the law should "finally adopt rules reflecting competitive reality in today's audio marketplace" and should "level the playing field" for all entities in the music economy.
If radio truly wants to modernize, it can start by taking a giant leap into the 21st century and paying all music creators fairly for their work. Stop treating artists like 17th century indentured servants, just so radio can reap bigger profits. If radio wants to have rules that reflect the music industry of today, then that should apply across the board.
We should resolve this gaping unfairness to artists before we begin talking about allowing radio to consolidate even further.
Michael Huppe is President and CEO of SoundExchange, the non-profit organization that has distributed more than $5 billion in digital performance royalties to recording artists and rights owners since its inception in 2003.