Gene Simmons is Right: Pass the AMFA Now!

Gene Simmons, the co-founder and bass player for KISS, the iconic rock band, has a short but important op-ed in today's Wall Street Journal. The title, "EU and Big Radio Gun for Musical Artists," may be eye-popping in keeping with Gene Simmons' persona, but the message is on point.

 

The op-ed explains that the U.S. is one of the few developed countries in the world that allows AM and FM radio stations to play music without paying royalties to the songwriters and performers. In 2020, the European Court of Justice held that radio stations in EU countries had to begin paying American artists when they played their songs. According to Mr. Simmons, music artists are receiving nearly $300 million per year in royalties as compensation for playing their works. But now, the EU is threatening to cut off those payments under what it calls "material reciprocity." In the U.S., the radio broadcasters continue to refuse to pay royalties on the artists' copyrighted songs, so the Europeans say they may cease payments.

 

Mr. Simmons urges that Congress pass the American Music Fairness Act. The legislation would require the payment of performance royalties by large national radio station groups in the U.S., while requiring minimal royal payments from small local broadcasters. Free State Foundation scholars have been urging passage of the AMFA for years. It's not fair for American songwriters and performers not to be compensated for their copyrighted work – the product of their labor, which is their livelihood. That's the "fairness" aspect of the AMFA.

 

But in a very important sense it's also not very American either. The U.S. Constitution's Copyright Clause gives Congress the power, "in order to promote the Progress of Science and useful Arts," to grant artists the "exclusive Right" to their works. This exclusive right is intended to ensure that artists are compensated for their creative labors by securing copyrights. Indeed, Intellectual Property rights are the only "Rights" actually recognized in the Constitution of 1787.

 

So, in this year in which we are celebrating America's 250^th birthday, with the Declaration of Independence and the Constitution as foundational backdrops which undergird the success of the American experience, there should be even more urgency for Congress to pass, and for President Trump to sign, the American Music Fairness Act.

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."

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. 

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. 

Register Now! FSF Webinar on Copyright Law & Policy - July 28!

FSF Webinar on Copyright Law & Policy 

 

REGISTER NOW!

 

WHAT:  "Hot Topics in Copyright Law & Policy," a Webinar 

 

WHERE:  Via Zoom

 

WHEN:  Thursday, July 28 – 1:30 PM - 2:00 PM 

 

The Free State Foundation will host a webinar on current legal and public policy issues in copyright on Thursday, July 28, 1:00 – 2:30 p.m. EST via Zoom. 

 

A panel of prominent copyright experts will address copyright topics such as music royalties, DMCA reform, state legislation licensing ebooks, and ALI's Copyright Restatement project.

 

Confirmed Speakers Include:

 

Adam Mossoff – Professor of Law, Antonin Scalia Law School, GMU

 

Jessica Richard – Vice President, Federal Public Policy, RIAA

 

Devlin Hartline – Legal Fellow, Hudson Institute's Forum for IP

 

Additional speaker to be announced.



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Music Industry Grew Significantly in 2017

The Recording Industry Association of America (RIAA) recently released its 2017 Revenue Statistics, which show significant growth in the music industry over the last few years. In 2017, music streaming revenues were $5.7 billion, more than triple what they were in 2014 at $1.8 billion. Streaming applications now generate 65% of music industry revenues. Moreover, the number of paid music subscriptions grew by more than 55% from 2016 to 2017. Overall, the retail value of revenues throughout the entire music industry grew by $1.2 billion from 2016 to 2017.

While there are still problems with online piracy that need to be addressed, the growth of the music industry would not be possible with strong copyright protections, which enable artists and creators to earn a return on their labors.