Digital Royalties Pt. I

story by Chris Florio

For the working musician there are so many issues, possibilities and opportunities on the internet it’s easy to feel completely overwhelmed. In this article and its second part next month we will examine and simplify one of these issues - royalties for digital broadcast. There are now very specific laws about web broadcasts and they differ greatly from those governing traditional radio broadcast.

The main difference is that traditional radio is considered a broadcast of a performance only and is therefore subject solely to copyright laws regarding performance. These copyright protections cover only the writers of the music that is being broadcast, not the performers. When a song is played on the radio and tracked by Performance Rights Organizations (PROs) like ASCAP, BMI, and SESAC the royalties are paid to the owners of the musical composition. This is usually the publisher and the songwriter. So, for example, if you were in a four-piece band and two of the members wrote a song that was receiving airplay, those two members would receive royalties from their PRO. The other two bandmembers who performed on, but did not write the song, would make no money from the airplay. This type of royalty is confusingly called a “performance” royalty, not because the performers are being paid, but because the radio station is paying for the right to give a public performance of the writer’s composition.

All players on the performance do usually receive a “mechanical” royalty. This is for the right to reproduce copies of the performance. Traditionally, these reproductions have been in the form of records, tapes, or CDs. When a recording is sold, mechanical royalties are paid to the owners of the composition (again this is usually the writer(s)/publisher), but in this case they are also paid to the owners of the rights to the sound recording (usually the performers and/or the record label).

Even though there are some flaws with this traditional way of doing things, it has always been very clear who gets paid when. For a performance, such as a radio broadcast, performance royalties are paid, while for a reproduction such as a CD, mechanical royalties are paid.

However regulating royalty payments for internet broadcasts suddenly created a lot of ambiguity. For example if during the course of listening to a web radio broadcast files were downloaded to the end users machine, even if only to the browsers cache, is it considered a reproduction? What if it the digital audio is only temporarily stored in RAM?

Under the 1995 Digital Performance Right in Sound Recordings Act (DPRA), Congress granted a performance right for the digital transmission of sound recordings. This means that legally any web broadcast of copyrighted material must pay both performance and mechanical royalties to the respective copyright owners. This is also true for other digital broadcast technologies such as satellite radio.

When the DRPA became law, there was already a mechanism in place for performance royalties. ASCAP, BMI, and SESAC handle those just as they do for more traditional performance. However, there was no infrastructure in place for mechanical royalties since this traditionally has been done by the record labels.

A nonprofit organization called SoundExchange was created for this purpose (www.soundexchange.org). Soundexchange collects license fees for all applicable digital transmissions and distributes royalties to the performers and to the owners of the sound recording.

If your music is being broadcast digitally and SoundExchange tracks it, they will pay royalties regardless of whether or not you are a member (as long as they can find you). Your chances of being paid will significantly increase if you become a member, which is free.

You will be even more likely to find out about web performances of your music and be paid for them if you take advantage of SoundExchange's new service called the “PLAYS” system. This free service allows you to search their database by artist name, song title, album or label to see if there are any documented digital performances of your music. You will receive royalties for any plays that you find and report to SoundExchange. ?There are a number of stories of artists receiving unexpected checks for thousands of dollars because their music was being played in heavy rotation on websites based in countries where the artists didn’t even know they had a following. More commonly the payments are small and incremental, but if you are continually making new music and putting it out to the world, this new source of income is one that should be tracked and cultivated. There may artists reading this now who will be living off this income in a few years time.

Next month we will look a little closer at the current and proposed laws regulating internet royalties, and examine the controversy surrounding these issues from the points of view of artists, webcasters, PROs, the recording industry, and others.