The National Association of Broadcasters (NAB), in a recent FCC filing, undermined its principal claimed justification for the special copyright exemption enjoyed by radio stations – that music artists benefit from the promotional value derived from radio broadcasts of their copyrighted works. NAB's filing argued that the Commission should remove media ownership rules due to shrinking radio broadcast revenues and audiences, a point that incidentally – and necessarily – shows that any value recording artists derive from broadcasts of their copyrighted works is also shrinking. NAB's implicit admission that the value of such publicity is in decline bolsters the case for Congress to pass the American Music Fairness Act, which would eliminate radio's special copyright exemption.
Since 1971, copyright law has exempted terrestrial AM/FM radio broadcasters that broadcast copyrighted music from paying royalties to the owners of copyrighted music. As Free State Foundation Director of Policy Studies Seth Cooper explained in an August 2021 Perspectives from FSF Scholars, this exemption has persisted despite its conflict with the Founders' embrace of property rights. Specifically, the natural right to enjoy the fruits of one's own labor that informed the Copyright Clause of the Constitution. One supposed justification offered by NAB and others for the persistence of the radio copyright exemption is that music artists benefit from the free publicity deriving from the broadcast of their copyrighted works.
But distribution services that compete with terrestrial AM/FM broadcast – namely satellite radio and online streaming services – are not exempted from owing copyright royalties. And as Seth Cooper explained in his August 2021 Perspectives, music industry revenues increasingly come from copyright royalties. Royalties paid by streaming services alone comprised 83% of the music industry's total revenue in 2020.
The increasing reliance on streaming revenues has been accompanied by a steep drop in revenues from CDs and music downloads, the type of sales benefitted by any publicity from radio broadcast of copyrighted works. Accordingly, whatever value recording artists derive from the promotional value from radio stations playing their copyrighted works, it must be relatively low compared to years past, and is in further decline.
Informed by these market changes, Congress is considering the American Music Fairness Act, which would eliminate the radio copyright exemption. As Seth Cooper explained in a February 2022 Perspectives from FSF Scholars, that bill would bring music distribution services into competitive parity and better align copyright law with constitutional principles. NAB opposes passage of that the American Music Freedom Act, insisting that the radio copyright exemption must continue in part because music artists are fairly compensated by free publicity.
But as the musicFIRST Coalition explained in an ex parte filed with the FCC, NAB undermined its claims when it recently argued in a FCC proceeding on media ownership restrictions that the Commission should lift those restrictions in light of declining revenues and shrinking audience size of radio stations. That admission – similar to admissions that NAB has made for years – undermines NAB's opposition to the payment of royalties for radio stations' broadcasts of copyrighted music. It's time for Congress to eliminate the radio copyright exemption by passing legislation like the American Music Freedom Act.
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