GAO Says Performance Royalties Bill Could Hurt Broadcasters
Largely dismissing an April plea from the U.S. Copyright Office to cast the Performance Rights Act (HR-848) in a more favorable light, GAO maintained that the bill would raise costs for broadcasters and boost revenue for the recording industry. A GAO report dated August 2010 and released Friday reached the same conclusion as a February preliminary report made public in June. That earlier version had prompted an April rebuke from the Copyright Office (CD June 8 p11).
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
In the August report, GAO said the cost to broadcasters would vary based on a station’s annual revenue, commercial status, and any contracts signed before the proposed law’s enactment. “If broadcast radio stations with revenues of $1.25 million or more pay a royalty based on a percentage of station revenues, every 1 percentage point would cost the broadcast radio industry $101 million per year,” GAO said. Broadcasters say the costs “could lead some stations to reduce staff, switch to a nonmusic format, or discontinue operations,” GAO said.
Revenue for the recording industry would vary based on the total royalty payments, the stakeholder’s role and amount of airplay, GAO said. “Assuming a 2.35 percent royalty rate, GAO estimated that 56 percent of performers would receive $100 or less per year, and fewer than 6 percent of performers would receive $10,000 or more per year in royalties from airplay in the top 10 markets,” GAO said. “Some experts and the Copyright Office believe that the additional revenue would promote investment in music and greater employment, although this opinion is not universally held."
But GAO said the benefits of radio promotion for the recording industry are unclear. “The presence of other promotional outlets, such as the Internet and special events, and growth of music piracy create a more nuanced environment wherein the relationship between airplay and music sales is less clear than in the past.” For example, GAO “found no consistent pattern” between the number of times a station spun a single and the total number of digital single sales. And it’s unclear if radio airplay had any effect on album sales, GAO said.
The death of struggling radio stations “would likely be a natural function of the free market and could only be marginally attributed to passage of the [Performance Rights Act],” said the Copyright Office in a July 21 letter responding to a draft of the GAO report. As it complained in April, the Office wrote that the report “neglects to acknowledge the recent upswing in the advertising market for radio.” The report “does not take into account revenue data indicating that in the first quarter of 2010 radio experienced record revenue growth,” the Office said. “This growth … supports numerous industry forecasts that predict several years of compounding growth in radio advertising revenue.” GAO responded that it didn’t incorporate analyst reports cited by the Copyright Office because they are less reliable than industry revenue reports.