In radio royalties rulings, Aussie, U.S. static

Matt Haddad, who recently completed the Web 2.0 and Entertainment Law miniterm, contributed to this post.

Artists, labels and entertainment lawyers in Australia have expressed frustration over a recent court ruling Down Under on payments for music played on the radio, even as their Yankee counterparts still are scratching their heads and smarting over U.S. appellate actions earlier this year that may have resolved a possible legal donnybrook on broadcast royalties but arguably also took cash out of the pockets of those on the creative side.

The Phonographic Performance Company of Australia most recently lost a High Court decision on the validity of the 1 percent royalty cap for radio broadcasters. The High Court last week declared constitutionally valid that cap, which the rights group denounced because it said it kept artists from receiving a fair price for use of sound recordings; the cap, effectively, allowed commercial radio stations to undervalue  content they provide.

The cap was imposed in 1969 under the Copyright Act and limits sums that Australia’s commercial radio stations must pay to artists and labels to not more than 1 percent of broadcasters’ annual gross income. Dan Rosen, chief of the rights group, called for changing the cap and said he and others would appeal “to all members of Parliament to support artists and make the necessary change to the Copyright Act … because there is no economic, social or moral justification for this price cap.”

He calls the coyright legislation outdated and unjust, saying it has led to a “situation where artists and labels have, for far too long, subsidized the commercial radio industry.” Considering the import of music in both the revenue and success of that industry, artists and labels should get better compensation, he said. He noted that artists and labels get much higher radio royalties in other countries, including the U.S.

But a U.S. District Court in New York, acting as a rate court, in January approved a settlement between the American Society of Composers, Authors and Publishers (ASCAP) and the Radio Music Licensing Committee (RMLC) That accord specifies the sums that radio stations will pay to ASCAP for music use through 2016.  Read about it now. Before January, 2010, ASCAP received a set fee from the broadcast industry and it increased annually under contract from January, 2004, to December, 2009 (see here).

This cost was borne by all commercial radio stations proportional to market size and technical coverage of each station, rather than individual station revenues.  Due to the bad economy, an increasing fee structure could not be supported so the parties started negotiations in 2009.  In 2010, an interim licensing agreement prevailed (see here).  David Oxenford, a longtime lawyer with broadcast clients, reviews the settlement here.

The new accord goes back to a system based on a more traditional percentage of revenue. From January, 2012, through December, 2016, ASCAP will receive 1.7% of “revenues subject to fee from radio broadcasting.”   This means ASCAP will be paid 1.7% of all the revenue that a station receives from advertising and promotions, minus 12% for commissions and collection costs.

There are technicalities, of course.  New media revenues arising solely from internet streaming are included in gross revenue calculations, while barter revenues and payments made to networks instead of the station are excluded in that math.  All revenue from HD programming initally is included in gross revenue; that is subject to reevaluation if HD revenue hits 25% or more by 2015.  ASCAP generally has agreed to a 30% reduction in fee structure. That’s great for broadcasters but can be a big ouch for fee recipients.

In Australia, it is little wonder why the rights group argues that broadcasters in Australia will get unfair benefit in that nation’s price cap. In most other countries, a fair market rate is negotiated and the rates vary from 1.5% to 4% of broadcasters’ annual gross income. Because of the Ausside cap, the broadcast license fee Down Under is 0.4% of the gross revenue of the commercial radio industry; this occurs, even though sound recordings drive the businesses.