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.
For recording artists, royalties paid through record labels have historically been a primary income stream. As sales of physical CDs decline, recording artists seek new sources of music-related revenue.
Royalties from AM and FM Radio?
A new public performance royalty paid by AM and FM radio stations might become a new income stream for recording artists. More than once this year, the music industry has descended on Congress to testify as to why recording artists should receive royalties when their CDs are played on AM and FM radio. Under current law, only songwriters get paid when radio stations play CDs. Radio broadcasters strongly oppose paying such royalties to artists.
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.
Downloading music from providers like itunes and Napster is an area in which recording artists claim labels have given them the smallest piece of the royalty pie. Many record labels treat a music download like the sale of a physical CD which means that the record label pays the recording artist a royalty of about 12 to 16% of download revenue. Recording artists argue that a download is equivalent to a license meaning that the record label should split download income fifty-fifty with the recording artist. The Allman Brothers Band and other recording artists are currently pursuing the issue in a New York federal court lawsuit against Sony BMG.