Bill Would Fill the Gap in Copyright Protections for Music on AMFM Radio

On January 31, Sen. Marsha Blackburn filed the American Music Fairness Act. If it were to become law, the bill would secure full public performance rights in copyright owners' music sound recordings. The bill is backed by a bipartisan group of co-sponsors, including Senators Alex Padilla, Thom Tillis, and Corey Booker. An announcement for the bill states that Rep. Darrell Issa will be introducing companion legislation in the House. In the 119th Congress, both chambers should give the American Music Fairness Act the timely consideration it deserves. 

Copyright law contains a gap in its protection of the property rights of sound recording owners. Currently, terrestrial commercial AM/FM radio stations are allowed to broadcast copyrighted music sound recordings to attract listening audiences and earn money from airing ads around those recorded songs – all without obtaining a license or compensating the recordings' owners. 

 

The American Music Fairness Act would fix the issue. Under the Act, AM/FM stations would be required to pay royalties to owners of sound recordings – just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners. 

 

Importantly, the American Music Fairness Act would set low, set flat royalty rates for smaller stations. For instance, the bill would establish a rate of $10 per year for non-profit and commercial stations that generate less than $100,000 in revenue each year. An annual rate of $500 would apply to stations that generate revenues over $100,000 but less than $1.5 million each year. 

 

Another merit of the Act is that it would enable sound recording owners to receive public performance royalties from foreign radio stations. The U.S.’s lack of full public performance rights has enabled foreign stations to lawfully withhold royalties from American copyright owners. But if the Act becomes law, foreign trade agreement provisions would kick in and compel those stations to finally pay American sound recording owners for the use of their copyrighted property. 

 

Previously, the American Music Fairness Act has been falsely attacked as a tax bill. In reality, the Act is a pro-property rights bill. No intellectually honest person can claim one private party's obligation to pay another private party for the use of private property is a government tax. Copyright royalties are not taxes. (The obvious differences between payments for the right to make copies, publicly display, or publicly perform another's copyrighted property and payments of taxes or fees to the government are addressed in more detail in my blog post from September 2022.) 

 

The American Music Fairness Act was introduced in both the House and Senate in prior Congresses, and the House Judiciary Committee passed it in December 2022. Sen. Blackburn and her colleagues deserve thanks for reintroducing the American Music Fairness Act in the 119th Congress and giving sound recording owners another chance at being fully secured in their rights. Hopefully, the Senate will take up the bill for due deliberation.

 

Additional background on the American Music Fairness Act can be found in my 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," as well as in my April 2021 Perspectives, "Congress Should Secure Full Copyright Protections for Music Sound Recordings."

Congress Should Fully Protect Valuable Copyrighted Music Recordings

On August 29, the Recording Industry Association of America (RIAA) released its "Mid-Year 2024 RIAA Revenue Statistics" report. RIAA's report finds a 4% increase in U.S. recorded music market retail revenues for a total of $8.7 billion during the first half of 2024 compared to $8.4 billion during the first half of the prior year. Digital streaming service subscriptions totaled about 99 million during the first half of this year, and those subscriptions account for almost two-thirds of total revenues. Additionally, the reported $994 million in physical sales during the first half of 2024 was up from $822 million during the first half of 2023, due primarily to a 17% increase in revenues from vinyl record sales. See RIAA's report for more details.

As music recording artists, producers, and the rest of the recorded music industry pursue creative and economic opportunities in 2024, there remains work for the 118th Congress to do to help ensure that valuable copyrighted sound recordings receive full protection under the law. One important thing Congress should do is advance the American Music Fairness Act – S.253 and H.R. 791. 

Under current copyright law, terrestrial AM/FM radio stations have a special exemption from paying royalties to owners of copyrighted sound recordings when those stations play the music on the air. Consequently, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. In other words, the recorded music industry does not generate any direct revenues from radio broadcasts of copyrighted sound recordings. 

But S.253 and H.R. 791 would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do. Passage of the Act would enable U.S. copyright owners to receive royalties from foreign stations. Notably, the Act provides a low flat royalty rate for small commercial and non-profit stations. 

 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings." And for a brief overview of the hearing on H.R. 7910 held by the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet during the summer, see my July 5 blog post "American Copyright Owners Deserve Royalties When Radio Stations Use Their Property."

American Copyright Owners Deserve Royalties When Radio Stations Use Their Property

 On June 26, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a Hearing titled "Radio, Music, and Copyrights: 100 Years of Inequity for Recording Artists." The hearing featured testimony from witnesses on two competing legislative measures introduced in the 118th Congress: the American Music Fairness Act of 2023 and the Supporting the Local Radio Freedom Act.

The American Music Fairness Act – H.R. 791 and S.253 – would finally recognize a public performance right in terrestrial AM/FM radio broadcasts of copyrighted music recordings. If passed into law, the Act would require for-profit AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do. Smaller commercial AM/FM stations as well as non-profit stations that have less financial resources would qualify for a significantly reduced annual royalty payment of $500, $100, or $10. 

Testimony by country music star Randy Travis and his wife Mary Travis challenge the position of many radio stations that American recording artists don't deserve a public performance right for their sound recordings for radio airplay because radio broadcasts of their music promote sales of physical CDs, merchandise, and tickets. Indeed, in the age of digital streaming services, revenues from CD sales are only a fraction of what they were many years ago, and many recording artists struggle to make a living and pay their crew and other co-workers. Commercial terrestrial AM/FM radio stations profit from playing copyrighted sound recordings. Internet streaming and satellite radio services pay public performance royalties for broadcasting copyrighted sound recordings, and it makes no sense to continue giving terrestrial AM/FM radio services. 

 

At the hearing, SoundExchange CEO Michael Huppe testified to the important point about how the American Music Fairness Act would benefit American recording artists and copyright owners by unlocking significant royalties from foreign radio stations. As explained in my March 27 blog post, "Music Revenue Report Should Spur Congress to Secure Copyrights Fully":

Under existing international agreements, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. Passing the American Music Fairness Act would open up those foreign royalty streams to U.S. copyright owners. Importantly, the legislation is sensitive to the limited financial resources of smaller commercial and non-profit stations by treating them to a low, flat royalty rate. 

The case for the American Music Fairness Act is presented in further detail in my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," and in my August 2021 Perspectives from FSF Scholars, "Congress Should Secure Full Protections for Music Sound Recordings." 

 

Testimony from National Association of Broadcasters President and CEO Curtis LeGeyt endorsed the Supporting the Local Radio Freedom Act – H.ConRes.13 and Sen.Con.Res.5  – a resolution stating that Congress should not impose "any new performance fee, tax, royalty, or other charge" on a local radio station broadcasting sound recordings over the air. But Mr. LeGeyt's testimony, like the Supporting the Local Radio Freedom Act, wrongly lumps payment of royalties by a radio station for commercially exploiting someone else's copyrighted property in with fees and taxes paid to the government. NAB's position isn't new, and it doesn't overcome the just claims of the owners of copyrighted property. I addressed the critical distinction between royalties and taxes in my September 2022 blog post, "In Debate Over Radio Royalties, Congress Should Favor Property Rights."

 

The American Music Fairness Act deserves to be advanced by Congress because it is a sound policy rooted in constitutionally recognized property rights principles. The other legislative measure is not. 

Music Revenue Report Should Spur Congress to Secure Copyrights Fully

On March 26, the Recording Industry Association of America (RIAA) released its "Year-End 2023 RIAA Revenue Statistics." On the positive side for music sound recording artists and copyright owners, RIAA's report reveals annual increases in U.S. recorded music market revenues. But the report's release also ought to remind Congress that it ought to secure broader legal recognition of music copyrights and promote creative and economic opportunities by passing the American Music Fairness Act – S.253 and H.R. 791.

According to RIAA's report, total revenues retail for the U.S. sound recording grew 8% to $17.1 at retail estimated value, up from $15.9 billion in 2023. Revenues from paid subscriptions to streaming music services grew 9% last year $11.2 billion, amounting to 78% of streaming revenues and almost two-thirds of total revenues. Paid subscriptions to on-demand music services totaled 96.8 million, constituting an annual growth rate of 5.7%

 

Although annual revenues from digital downloads dropped again in 2023 – slipping to $434.1 million compared to nearly $495 million in 2023 – revenues from sales of physical copies of sound recordings rose again last year. In 2013, vinyl record sales revenues rose to $1.4 billion, up 11% compared to the year before, marking the seventeenth consecutive year of vinyl sales increases and the second consecutive year in which vinyl unit sales have exceeded CD unit sales. Last year, CD sales revenues also rose 11% to $537 million.

 

These positive annual revenue totals and trends reflect the high value and growth potential of copyrighted music. Copyrighted property deserves legal protections and a market environment favorable to creative and economic flourishing. As Free State Foundation President Randolph May and I observed in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020), the American Founders believed that one of the key roles of government is to protect and promote the creation, acquisition, use, and value of private property. The U.S. Constitution's Article I, Section 8 Copyright Clause gives the federal government a direct charge to secure rights in creative works, declaring that Congress shall have power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Congress should take action to promote creative and economic opportunity in the U.S. recorded music market. It should advance the American Music Fairness Act – S.253 and H.R. 791. 

The American Music Fairness Act would ensure equal legal treatment of different music distribution platforms and alleviate unfairness to copyrighted owners of recorded music who receive no compensation when their recorded songs are commercially by terrestrial AM/FM stations. Under current copyright law, terrestrial AM/FM radio stations have a special exemption from paying royalties to owners of copyrighted sound recordings when those stations play the music on the air. But S.253 and H.R. 791, would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do.  

 

Under existing international agreements, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. Passage of the American Music Fairness Act would open up those foreign royalty streams to U.S. copyright owners. Importantly, the legislation is sensitive to the limited financial resources of smaller commercial and non-profit stations by treating them to a low, flat royalty rate. 

 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings."

Stronger Copyrights Would Give Added Boost to Rising Music Market

On March 9, the Recording Industry Association of America (RIAA) released its "Year-End 2022 RIAA Revenue Statistics." RIAA's report highlights continuing annual increases in U.S. recorded music market revenues. Hopefully, recording artists also do well here in 2023. But Congress can promote the continued success and expansion of economic opportunities in the copyright-intensive music recording industry by passing the American Music Fairness Act – S.253 and H.R. 791.

RIAA's report found that retail revenues for the U.S. sound recording industry grew to $15.9 billion in 2022, up from $15 billion in 2022. Revenues from paid subscription music services increased 8% to 10.2 billion in 2022, accounting for 77% of streaming revenues and almost two-thirds of total revenues. Interestingly, in 2022, vinyl records outsold music CDs for the first time since 1987. For the sixteenth year in a row, revenues for vinyl record sales have increased. And in 2022, revenues from sales of vinyl grew 17%, constituting $1.2 billion of the $1.7 total for sales of physical copies that year. Also, $495 million in revenues were generated from sales of digital downloads, an annual figure that amounted to only 3% of annual U.S. recorded music revenues last year. Digital download revenues have declined several years in a row since 2012, when they constituted 43% of annual recorded music revenues. 

Bearing those overall positive findings in mind, there are steps that Congress can and should make to promote flourishing and opportunity in recorded music marketplace. One significant thing that Congress can do is pass the American Music Fairness Act, which was reintroduced in the 118th Congress as S.253 and H.R. 791. 

 

Existing copyright law exempts terrestrial AM/FM radio stations from paying royalties to owners of copyrighted sound recordings when their music is given radio airplay. Online subscription services and online ad-supported services that play copyrighted sound recordings pay royalties to the owners of those sound recordings. But no such payments are required by AM/FM stations that profit from broadcasting copyrighted sound recordings by drawing audiences and resulting ad revues. 

 

The American Music Fairness Act would rectify this unequal legal treatment and the unfairness to copyrighted owners who receive no compensation when third party terrestrial AM/FM stations commercially exploit their creative works. S.253 and H.R. 791 would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do.  

 

An oft-overlooked downside to the current terrestrial AM/FM station exemption for paying public performance royalties to copyrighted sound recording owners is that the exemption effectively precludes the sound recording owners from receiving royalties from foreign stations that play their music over the air. So long as domestic terrestrial AM/FM radio stations have no obligation to pay royalties for broadcasting copyrighted sound recordings owned by American, foreign radio stations are similarly relieved from having to pay those royalties when they play copyrighted music owned by Americans. Passing of the American Music Fairness Act into law would therefore enable American copyright owners to tap royalty streams in foreign nations. Notably, the legislation takes a light-touch approach to smaller commercial and non-profit stations by treating them to a a low, flat royalty rate. 

 

My February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," spotlighted the hearing that the legislation received a in the House Judiciary Committee during the 117th Congress. The 118th Congress is now primed to advance the American Music Fairness Act into law. 

American Music Fairness Act Advances Out of House Committee

On December 7, the House Judiciary Committee voted to recommend the American Music Fairness Act – H.R. 4130 – in the form of a substitute bill. The legislation now goes to the full House of Representatives for consideration. The House – and then the Senate – should pass the bill into law and secure full public performance rights in copyright owners' music sound recordings. 

Under existing copyright law, terrestrial commercial AM/FM radio stations can profit off of copyrighted music sound recordings by broadcasting them to attract audiences and then draw revenue from running ads – all without paying royalties to the recordings' owners. The American Music Fairness Act would finally change this. The bill would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners.

An important aspect of the American Music Fairness Act is that the bill includes a low, flat royalty rate for smaller commercial stations and for non-profit stations. In addition to ensuring that sound recording owners finally receive compensation for third-parties' commercial use of their copyrighted works in America, the bill would enable sound recording owners to begin receiving from foreign radio stations public performance royalties that have long been withheld because of the shortcomings of U.S. copyright law.

Also, nobody in Congress should take seriously the claim that royalty payments to copyright owners for public use – including commercial use – of their works is a tax. Royalties are not taxes. There are obvious differences between paying taxes or fees to the government and paying for the right to make copies, publicly display, or publicly perform another's copyrighted property. (I address this matter more in my blog post of September 6, 2022.) The American Music Fairness Act is a pro-property rights bill. 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," as well as my April 2021 Perspectives, "Congress Should Secure Full Copyright Protections for Music Sound Recordings."

Recording Music Revenues Up: Stronger Copyrights Would Increase the Pot

Late September of this year, the Recording Industry Association of America (RIAA) released its "Mid-Year 2022 RIAA Revenue Statistics." RIAA's report reveals many interesting and positive trends and data points for the U.S. recorded music market. The report also ought to serve as a reminder that the sound recording industry is copyright intensive and that Congress can bolster copyrights for owners of music recordings by passing the American Music Fairness Act.

According RIAA's report, during the first half of 2022, retail revenues for the U.S. sound recording industry grew to $7.7 billion, up from $7 billion during the first half of 2021. And wholesale revenues rose to $4.9 billion during the first half of the year, up $300 million compared to the first half of the prior year. 

Streaming is overwhelmingly the dominant source of revenue for the sound recording industry, as about 84% of its revenues during the first half of 2022 came from streaming services. Of the $6.5 billion generated by streaming during the first half of the year, about 78% or $5 billion came from paid streaming subscription services. Meanwhile, revenues from digital downloads of single tracks and albums declined 20% to $256 million, amounting to only 3% of total revenues for the recorded music industry. As RIAA's report shows, paid subscriptions have continuously increased in recent years and have now reached the 90 million subscriber mark.

 

Conversely, RIAA reported declines in revenues from digital and customized radio services such as SiriusXM and Internet radio stations. Total revenues from that category of services dropped 3%, down to $556 million. Notably, U.S. copyright law does not secure a public performance right for sound recording owners when AM/FM terrestrial radio stations broadcasts their music. As a result, direct revenues to the music recording industry from airplay on terrestrial radio is effectively zero. 

In terms of revenues from retail sales of physical products, revenues from CD sales declined 2% to $200 million. CD sales constitute 26% of physical revenues. Yet revenues from vinyl records continue to grow. According to RIAA's report, "[r]evenues from vinyl albums grew 22% to $570 million, and vinyl's share of the physical market increased from 68% to 73%."

Having noted these overall positive trends in music recording revenues, there are things that Congress can do to help promote the music marketplace and grow the pie bigger for recording artists and music fans. Perhaps the most immediate thing Congress can do is pass the American Music Fairness Act – H.R. 4130 and S. 4932. 

As previously mentioned, current copyright law exempts terrestrial AM/FM radio stations from having to pay royalties to owners of copyrighted sound recordings when their music is played on the air. This means that commercial AM/FM stations can profit off of copyrighted sound recordings by broadcasting them to attract audiences and then draw revenue from running ads. 

The American Music Fairness Act would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners.

 

So long as the U.S. exempts American AM/FM stations from paying royalties to American sound recording owners, foreign stations have no obligation to pay royalties for broadcasting copyrighted sound recordings owned by Americans. But by passing the American Music Fairness Act into law, Congress would open up royalty revenue streams from foreign radio stations and American copyright owners would receive revenues that they rightfully deserve. Importantly, the legislation includes a low, flat royalty rate for smaller commercial stations as well as for non-profit stations. 

As discussed in my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," H.R. 4130 has received a hearing in the House Judiciary Committee. And S. 4932 was introduced in September of this year. There is still time in the 117th Congress for the American Music Fairness Act to become law. Congress ought to make it so. 

Senate Bill Would Ensure Royalties for Radio Play of Copyrighted Sound Recordings

On September 22, Senators Alex Padilla and Marsha Blackburn announced the introduction in the Senate of the American Music Fairness Act – S.4932. If it becomes law, the bill would secure full public performance rights for owners of copyrighted music sound recordings. In particular, the bill would secure the right of sound recording owners to receive royalties when their music is broadcast by terrestrial AM/FM radio stations. Current copyright law specially exempts AM/FM radio stations from having to pay such royalties, thereby giving those stations free rider use of copyrighted sound recordings for commercial purposes. That exemption should be removed from copyright law.  

S.4932 is identical to H.R. 4130. The latter bill received a hearing in the House Judiciary Committee on February 2 of this year. The House Judiciary hearing on the bill was the subject of my February 24, 2022, Perspectives from FSF Scholars,"American Music Fairness Act Would Secure Copyrights in Sound Recordings." Additional reasons for supporting the legislation were offered in Free State Foundation Legal Fellow Andrew Magloughlin's March 2022 blog post, "Broadcasters' FCC Filing Undermines Radio Copyright Exemption." And the American Music Fairness Act was one of the many interesting issues discussed during FSF's July 2022 webinar, "Hot Topics in Copyright Policy."

 

Notably, the American Music Fairness Act provides for significantly reduced royalty payment rates for non-profit and small commercial AM/FM radio stations. And don't for a minute confuse royalties with taxes. Royalties are payments owed to private parties for usage of their property rights. For more on royalties versus taxes, see my blog post from September 6 of this year, "In Debate Over Radio Royalties, Congress Should Favor Property Rights."

 

Hopefully, the 117th Congress will dedicate time in its remaining schedule to pass the American Music Fairness Act into law. By doing so, Congress will accord owners of copyrighted music sound recordings what is rightfully due to them when their music is played by commercial AM/FM radio stations. 

Broadcasters' FCC Filing Undermines Radio Copyright Exemption

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.