While hit recording artists get the
glamour, it is typically their songwriting counterparts who lock-in a
financially secure future. Songwriters have multiple music licensing opportunities
and can often live on royalties from hit songs for decades. In contrast, a recording artist’s royalties
may dry up just a few years after release of a hit CD.
Royalties from AM and FM Radio?
Royalties
from Webcasting?
Although
artists and record labels do not get compensated for AM and FM radio play, they
are compensated when their recordings are played online. This limited public
performance right for recordings is due to the Digital Performance Right and
Sound Recordings Act of 1995 which amended the Copyright Act. To date,
SoundExchange, the organization that collects webcasting royalties on behalf of
labels and artists, reports distributing over $77 Million to recording artists
and record labels.
Webcasters pay approximately 7¢ per
recording for every hundred listeners. If rate increases set by the Copyright Royalty Board go
through, this rate will increase 36% over a five year period and end at 19¢ per
recording for every hundred listeners in 2010. July 15, 2007 was the scheduled
effective date for the rate increase; however, record labels are still
negotiating the details with webcasters who claim the increased rates will
destroy their businesses. Meanwhile, the possibility that Congress may
intervene and pass legislation nullifying the
rate increase is strong motivation for the record labels to reach a negotiated
solution with webcasters.
Sometimes
Artists and Labels Play Well Together; Sometimes They Don’t
While
recording artists and labels are fairly united in their pursuit of more income
from radio and webcasting, the two are combatants in other revenue-generating
endeavors. For example, Prince’s distribution of three million copies of his CD, Planet
Earth, as a free enclosure with a UK newspaper, the Mail, resulted in Sony BMG backing out of its agreement to distribute Prince's new CD in the U.K. Other superstar recording artists forming similar
deals in which record labels have a diminished role include Madonna and her
deal with Live Nation/Artist Nation and RadioHead’s pay-what-you-want internet
distribution of its In Rainbow. The
music industry is likely to see more of these deals.