Performance Tax on Radio: Will it help or hurt the Music Industry?

Local terrestrial radio has long since played a prominent role in the promotion of artists. The deal between radio and record labels has always been free radio play, free promotion for their artists. However, within the past decade a digital revolution has occurred, knocking the original business model of record labels off balance. Music consumers are now pirating all of their music via peer-to-peer sites such as Limewire, BitTorrent and Mediafire rather than buying artist’s albums in stores or digitally online. The Recording Industry Association of America (RIAA) has stated a decrease in revenue over the last ten years with album sales decreasing by about 8% each year (Goldman, 2010). This leaves record labels clambering for ways to make a profit in this newly digitized music business. In comes the possibility of the RIAA putting a performance tax on the airplay of every song on local radio stations. The relationship between local radio broadcasters and record labels could change forever, threatening the survival of local radio stations and musician’s greatest promotional outlet.

The Performance Right Act, officially known as H.R.848, would levy a tax on local radio stations, designed to ensure that artists and record labels are being rewarded for the airing of their music. Though it seems like the pure promotion that record label’s artists get on the airwaves would be enough, it is not. Due to federal copyright law, radio stations currently are paying yearly royalties to the writers and publishers of the songs that they play. This Performance Right Act would tack on paying the record labels and the performing artists themselves while still paying the writers and publishers. According to a website opposing the performance tax, suitably called “No Performance Tax”, the record labels would like listeners and more importantly voters, to think that their effort is all about compensating the artists for all of their talent and hard work. In actuality, the record labels would get at least 50% of the cut from the fees being put on local radio. As mentioned above, radio stations are only required by federal copyright law to pay royalties to the writers and publishers of songs being played on their stations. Most performers are also the writers of their songs so it is erroneous to say that artists are not getting paid at all from radio stations. The free on-air promotion and royalties that they are already receiving are enough to repay them for their music.

The importance of free airplay of songs on terrestrial radio stations is essential to not only the livelihood of different local broadcasters all across the country but also to up and coming musicians. With the onset of a potential performance tax, radio stations would have to tap into all of their extra funds to pay the record labels and artists meaning that they would have to compensate for that money elsewhere. For example, they may have to cut other services they provide listeners such as the news or the weather. This would be a huge loss and a complete devastation to both radio broadcasters and listeners alike. Many people hear their national/local news, weather, and traffic reports from the radio and need that media outlet to hear this information, especially if they are driving in the car (Lopez, 2010). Musicians that are just making their footprint in the music business would struggle significantly trying to get airplay on local radio stations. Where broadcasters used to not have to worry too much about playing new artists since it was free, now they will have to invest in them before they consider airing them. For a company that is already in financial troubles, this would not be an easy decision for local radio stations. General Manager of Entercom Stations in Wichita, Kansas Jackie Wise states, “Why would we pay the recording industry to play new artists when we don’t know if our listeners are going to like it or not?” (KAKE) New artists that have the potential to become superstars may never have the chance because of the promotion they will not receive from local radio.

The Performance Right Act Bill was rejected from Congress in 2010 but may be making its way back into the House later this year. Gordon Smith of Oregon, CEO of the National Association of Broadcasters and also former Republican Senator, said the issue is unlikely to go away until an “equitable solution” is reached (Boliek, 2011). Hence, this is an issue in the music industry that will be dealt with in the oncoming years as radio broadcasters and recording industry execs battle out their opinions. Record sales are unquestionably at a large decline and this is hitting the record labels quite hard. However, relying on the already struggling radio industry to help get them out of this debt is unreasonable and will only further hurt the music industry as a whole.

Works Cited

Boliek, Brooks. (2011, February 10) Performance Right Act On Repeat. Politico. Retrieved Febraury 23, 2011 from, http://www.politico.com/news/stories/0211/49194.html

Diffin, Stephanie. (2010, February 17) Tax On Radio Songs Could Limit Listening Options. KAKE News 10. Retrieved February 23, 2011 from, http://www.kake.com/home/headlines/84637477.html

Anonymous. (2009, May 15) Performance Tax Threatens Radio Stations. Dayton Daily News. Retrieved February 17, 2011 from, http://www.daytondailynews.com/blogs/content/shared-gen/blogs/ dayton/artsandentertainment/entries/2009/05/15/performance_tax_threatens _radi.html

Goldman, David. (2010, February 2). Music’s Lost Decade: Sales Cut in Half in 2000s – Feb. 2, 2010. Business, Financial, Personal Finance News – CNNMoney.com. Retrieved February, 17 2011 from, http://money.cnn.com/2010/02/02/news/companies/napster_music_industry/

“Radio at Risk.” No Performance Tax Home. 2010. Retrieved February 17, 2011 from, http://www.noperformancetax.org/Radio at Risk

Lopez, Lucas. (2010, December 30). The Performance Rights Act: Strange Fruit In Tough Economic Times. Web log post. Beyonce Blogmatic. Retrieved February 17, 2010 from, http://beyonce.blogomatic.object-ive.com/?p=1863

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