Blog — Administration & Lobbying

February 03, 2016

Will the Music Industry Crank Up Its Lobbying After Copyright Ruling?

By Alison Grass

On December 16, 2015 the Copyright Royalty Board (CRB), a panel of three federal copyright judges, set new copyright rates for internet radio stations and companies that offer online music streaming services. The ruling comes as the various factions of the music industry – songwriters, performing artists, record labels, and broadcasters – battle on Capitol Hill  over the rules dictating how money flows in the music economy.

The decision primarily affects how much money songwriters and performers receive from online radio stations that stream music. Though Internet-radio companies are generally content with the ruling, SoundExchange, a trade association that facilitates payments for digital performance royalties to performance artists and copyright holders, called the CRB’s decision “deeply disappointing” in a press release. As Politico’s Alex Byers and Kate Tummarello noted, the dissatisfaction among this faction of the music industry “is likely to only encourage the music industry to redouble its efforts on Capitol Hill.”

So, what would it mean if the industry amplified its lobbying in 2016?

In 2015, the creative side of the industry -- record companies, studios, and performing artists -- spent $12.7 million on lobbying. Though they lobbied on a variety of topics, copyright issues were a major concern for music producers.

The Recording Industry Association of America (RIAA), which represents record companies, was easily the top spender, putting $4.7 million into lobbying. The RIAA’s efforts included lobbying on performance rights for sound recordings and issues regarding sound recordings made before 1972. The Universal Music Group, a conglomerate that owns dozens of record labels, was second, spending $2.2 million. Among other things, the company lobbied on music licensing issues, online piracy, and the Trans Pacific Partnership.

SoundExchange, a key player in the fight surrounding the CRB ruling, spent $960,000 on lobbying in 2015. The nonprofit wanted the CRB to increase the copyright rate to be between 25 and 29 cents per 100 streams. Instead, the new rule requires webcasting companies to pay 17 cents per 100 free, ad-supported listens, a three cent increase from its previous rate, and 22 cents per 100 streams for subscription based, no-ad platforms, a three cent decline.          

The broadcasters, who ultimately have to pay the royalties, also spent heavily on lobbying in 2015. The National Association of Broadcasters, which represents both TV and radio broadcasters, spent $17.4 million on lobbying in 2015. After the CRB ruling was announced, the trade association said in a statement that it was “pleased that streaming rates have begun to move in the right direction.” Radio giant iHeartMedia spent $4.4 million on lobbying during 2015, which included a focus on copyright issues affecting webcasters. Billboard described the CRB ruling as a “big win” for the company, which will see its rates for webcasting through iHeartRadio decline by 32 percent thanks to the rule.

Pandora spent $1.3 million on lobbying in 2015, focusing on copyright issues and targeting the CRB.  The company, which predominantly earns money through ad-supported webcasting, saw its stock price rise after the decision was announced, even though the company will have to pay a higher rate on most of its streaming content. Pandora CEO Brian McAndrews responded positively to the new rates. “This is a balanced rate that we can work with and grow from,” he said in a statement.

Pandora has been at the center of battles over royalties for streaming music in recent years. In 2012, the company backed the Internet Radio Fairness Act, legislation that would have lowered the compulsory license fees that webcasters pay to be in line with the rates paid by satellite and cable operators. Critics of the bill dubbed it the “Pandora Bailout Bill,” saying it would rob money from musicians to benefit Wall Street shareholders. In 2013, however, Pandora decided not to focus its energy on the passage of the legislation and averted its attention to the CRB. This may be why Pandora was one of the only organizations to report directly lobbying the Library of Congress, the agency tasked with managing the CRB, in 2015.

Though the new rates went into effect January 1, 2016, the issue of royalty rates for streaming music is far from settled. SoundExchange has promised to “review the decision closely” and consider its options for future action while Pandora is expected to increase its efforts to license music directly from record labels. The National Academy of Recording Arts and Sciences, which organizes the Grammy awards, may join the party too. The group just announced a new political action committee and royalty rates for streaming music will be one of its top issues. The continuing fight is music to lobbyists’ ears.

 

 

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