Are Radio Royalties Fair?

Royalties and Payments










(from Billboard, September 27, 2013)

Digital music platforms are growing fast, and there is a question of fairness as royalties are being established. Part of this argument concerns the performance rights for sound recordings. Broadcast radio is only required to pay for the use of the musical work while digital radio is required to pay for the use of sound recordings and musical works. Opinions on this seem to be split.

The amount of royalties that each pay is a different side to this argument that poses the question, “Are digital radio royalties less fair than broadcast radio royalties?” Songwriters and publishers get roughly the same royalty from both broadcast and Internet radio. David Touve of the University of Virginia estimates ASCAP collects the same amount of royalties, 18 cents per 1,000 impressions, from both broadcast radio and Pandora. This means that both Pandora and broadcast radio generate the same amount of royalties per individual listener for each performance.

These two different listening platforms pay the same royalty rates because they pay royalties in two different formats. Pandora pays per impression while broadcast radio pay a percent-of-revenue fee. Touve started with ASCAP’s disclosure that 1,000 plays on Pandora pays 8 cents to songwriters and composers. While taking into account the publisher’s share and ASCAP’s 11.6% expense ratio (in 2012), he arrived at an all-in figure of 18 cents per 1,000 plays, or $0.00018 per stream. To calculate broadcast radio’s royalty, Touve took into account estimated PRO collections in 2012 ($385 million), the number of monthly broadcast radio listeners in 2012 (200 million, per Arbitron), average weekly radio listener hours in 2012 (14.46, per RAB), and an assumed 12 songs per listening hour.

The last factor as to why broadcast radio pays more is the difference in size. It is an ongoing debate as to what is fair and unfair.