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Paying the Piper

Music production revenues are down in no small part because there’s less money in the system.

Music production revenues are down in no small part because there’s less money in the system. The record labels have played their role in that trend by finding ways to steadily shave budgets over the past couple of decades, even before label income began its precipitous decline.

While consumers will pay, if modestly, for music, when they deem it convenient (iTunes, i.e.), there is a significant consumer perception that recorded music is free. Legal download income is rising, but not near fast enough to offset the losses in physical media sales. For independent artists that do not yet have established audiences, giving music away (internet streaming at least, if not actual file sharing) has become a de facto part of self-promotion.

Streaming media can offer a case whereby there’s a continued revenue stream for music content, albeit tiny, and it remains to be seen whether there’s enough advertising and/or subscription dollars in the model to adequately fund creators and sustain these services. Streaming can drive sales though, where the streaming playlist of a listener’s choice can reside on their portable player, a streaming subscription can supplant the need to actually make a purchase. While a mechanism exists for artists to be compensated for use of their intellectual property by commercial streaming services, income from streaming is tiny.

Of course, artists have been giving music away for promotion since the first radio DJ spun a platter. As I write, a Performance Rights bill has passed out of committee, but is unlikely to be acted upon in Congress before year’s end. This bill would, for the first time in the U.S., mandate performance royalties from terrestrial radio broadcasters. The argument by broadcasters to maintain the status quo is based on the traditional, mutually beneficial model whereby recordings were used for free, given the promotional value of said usage. When radio was the primary vehicle for musical promotion, an engine driving sales, this arrangement worked, even if there were fully functional models elsewhere in the world where performance royalties were paid for radio airplay. The massive efforts by record labels (historically, a core function) to achieve radio play for their rosters are evidence of that promotional value.

Radio, and over-the-air broadcasting in general, faces an uncertain future. Radio now competes in, and the business of radio has suffered from, a crowded and splintered media environment. If and when we achieve a state of national broadband availability, and assuming the model for access to such usage becomes as transparent as has cellular phone roaming, broadcasting as we know it, most specifically radio as the “portable” format, may functionally disintegrate. The weasel word “may” is necessary, as while a logical construct can be developed for this outcome, it is far from certain. The demise of radio has been prematurely predicted a number of times.

While radio broadcasters fear performance rights royalty mandates as another nail in their coffin (additional expense will have an affect on their bottom line), the traditional model is no longer the status quo for most genres of music; the argument against performance royalties based upon mutual symbiosis no longer stands up to scrutiny. Songwriters and publishers have long received such royalty performance payments. Are artist contributions any less worthy of intellectual property compensation than writers and publishers? From an IP perspective, there is no valid argument that would result in a “yes” answer to that question.

I could also make a case for engineering contributions being worthy of consideration as creative intellectual property, but that’s a discussion for another day. While performance royalties would not be a universal panacea, the music production community would be happy enough for now to simply see their clients have an additional revenue stream that can be used to help pay a fair wage for engineering services.