The Music Biz #1

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Radio Royalties: How Do Radio Stations Pay Artists? 

Some might think that radio stations just cut a check to the artists they put on the air, but this is the music industry we’re talking about, so it shouldn’t come as a surprise — it’s much more complicated. There are thousands of radio stations out there, each playing hundreds of songs every single day and at such a scale the direct payment system just doesn’t work. So, the PROs (Performing Rights Organizations) act as a middleman of sorts, doing the administrative work of collecting performance royalties and distributing them to proper artists or their representatives (and taking a cut in the process). 

Now, the way that the process is set up is very intricate and also market-specific. In some countries, both the recording artists (owners of the master copyright) and the songwriters (owners of the composition copyright) earn royalties when their songs (and composition) are played on the radio. Then, on each respective side of the music copyright, there’s local legislation dictating who gets paid what. Those entanglements are way too complex to cover in a single article, so, a disclaimer: in this overview, we will focus primarily on the US context. 

By the time the artist receives the royalty, it has often passed through many hands, and if artists (and their representatives) want to maximize their earnings, they need to know precisely how it works and how much they deserve. So, let’s outline the typical scenario of how the money flows from the radio and into the artist’s pocket. 

How do radio royalties work?

Radio royalties payouts system works by first having the radio station purchase a blanket license from the local performance rights organization(s). Then, the radio station reports the songs it has broadcasted back to the PRO, which uses that data to allocate and distribute the royalties due to proper artists and their representatives. This process can take a while — it’s not uncommon for artists to get their royalties more than a year after the actual broadcast took place. 

As we’ve mentioned earlier, in most markets, both songwriters and recording artists are typically paid royalties any time their music is played on the radio. In the US, however, that is not the case. So, for the American-based music industry, only songwriters and their publishers (owners of the composition copyright) are paid performance royalties for airplay. Accordingly, since this article focuses on the US context, from here on out, we will only cover the royalties due to songwriters and their publishers. As for the neighbouring rights on the master side, we will get to it in one of the future articles, so stay tuned!

1. Radio acquires a blanket license(s) from its local PRO(s) 

So, the radio public performance royalties flow from broadcasters to artists through dedicated administration bodies, known as PROs. On the first step of the radio royalty payout process, the radio stations have to acquire a blanket license from a PRO that will allow them to play all music represented by the PRO. Generally speaking, a PRO will both represent the entirety of the local repertoire and have partnerships in place with PROs around the globe to license the music they represent. 

That means that in most of the world (where there is only one PRO per country) a blanket license from a PRO will give the radio station a right to play all music in the world. But the US does it a little differently (as they often do): the States are one of the few counties in the world that have several competing PROs. So, American songwriters and publishers can register their works either with ASCAPBMISESACor Soundexchange which means that a radio station that wants a license to play any music they want must get a license from all four PROs. 

Now when it comes to the price of those blanket licenses, it will hugely depend on the type of radio, but at the end of the day, the blanket license will tie up to the radio’s audience. For example, for noncommercial educational broadcasters (i.e., college radio), the blanket license fees will depend on the number of students attending the school. 

The commercial radios, on the other hand, pay a set percentage of their revenue in license fees (around 1,7% for each license, although those rates are a subject of negotiation between PROs and radio broadcasters representative bodies like RMLC). The amount of details here is massive, but the one thing you need to remember is that the bigger the radio — the bigger the blanket license fees. And, since those fees are the first step of the radio royalty funnel, the bigger the radio — the bigger the royalty to pay to the artists. So, a spin on big commercial radio is likely to drive 100 times more than a college radio broadcast. 

2. A song is played on a radio, and the airplay is reported to a PRO 

Then comes the broadcast itself. The radio plays a song, puts together broadcast logs, and reports them back to the license-issuing PRO. Radio programmers are obligated to provide a record of every song they’ve put on the air. The PRO collects and compiles this data to allocate the blanket license fees between the songwriters featured on the air, according to their contribution to the broadcasts. The formula there is not as simple as the straight “share of voice”, but let’s not get ahead of ourselves. 

The process of radio reporting poses an issue in itself. Given the scale of the operation, the inevitable human errors sift in, which means that these radio logs are often riddled with missing details and errors (typically due to lack of attention to reporting). Throughout the years working in the music business, we’ve seen all sorts of missing or wrong radio reporting data: from misspelled artist names to straight-up missing track data — or something like “Track 1” put in instead of the song’s title. 

Corrupted broadcast logs mean that the PROs can’t identify the songwriters behind the spin, and so the royalties due are likely to be sucked into the royalty black box â€” collected, but never paid out. Adding up to the heap of music metadata issues, incomplete broadcast logs mean that songwriters around the globe miss out on millions in potential revenue. 

The imperfection of the reporting system has led the music industry players on the songwriter’s end (mainly, music publishers, which we’ve covered in detail in our Mechanics of Publishing) to search for third-party airplay tracking tools, that would allow them to assess the reports from PROs and claim the royalties due to their artists. 

This need inaccurate worldwide airplay data is a part of the reason we’ve developed Soundcharts Airplay Monitoring service. Soundcharts radio tracking relies on audio fingerprinting to make sure that our clients don’t have to rely on the problematic radio metadata — which makes it an essential tool for music professionals looking for accurate airplay data. Covering over 1,700 radio stations in 69 countries around the globe, Soundcharts has proved to be an indispensable tool for music professionals working closely with radio — whether to claim the radio royalties due or optimize local radio promotion campaign. 

What to know more about how top music professionals work with Soundcharts? Find out how D Music Marketing used Soundcharts real-time airplay insights to build and execute custom radio promotion campaigns for international artists entering Latin American markets or check-out the Artist & Song airplay charts.

3. The PRO distributes royalties and songwriter gets paid

So, the PRO collects royalties from the radio station’s blanket license on a set schedule and then uses the radio reporting data to divvy this money between the songwriters. The royalty money is then pooled together, and the PRO determines the royalties owed to a specific songwriter based on airplay data and the type of radio that the song played on. However, not all spins generate the same amounts of royalty to songwriters. ASCAP, BMI, SESAC, and Soundexchange use different systems of credits and weights to define the worth of each spin — and all of those details are way too plentiful to get into. 

However, here’s a short (and non-exhaustive) list of the main factors that can influence the worth of the spin. 

  • Radio Type and Audience: generally speaking, radio type (commercial vs. noncommercial vs. college) and its audience will determine the blanket license fees — the first step of the radio royalty funnel we’ve mentioned above. The bigger the radio — the more the pay
  • Performance Duration: radios will often play an excerpt of the song on the air. Such broadcasts also generate royalties, yet they earn just a portion of full royalty. 
  • Song’s Popularity: most PROs have a bonus rate that applies to songs that cross a certain threshold in the number of spins in the country. BMI, for example, applies a Hit Song Bonus to any song performed more than 95,000 times in a single quarter.
  • Song’s Longevity: songs that stay popular on the air for a prolonged period are considered “radio standard” and thus earn bonus royalties, as PROs acknowledge their importance to radio programmers. 

For more information on how a particular PRO attaches value to a radio spin, refer to their respective documentation and policies.

The songwriter is paid the royalties due

The songwriter, aka the author of the composition, is paid the royalty according to the PRO’s airplay data. However, it is not as simple as PROs just forwarding the entirety of the radio royalties to his bank account. 

Radio royalties are just one type of overarching public performance royaltiesdistributed by PROs, on par with royalties earned for public performance in all commercial contexts — including TV broadcasts, restaurants, live venues, and more. The public performance royalties, in their turn, are a single type of the royalties earned by the songwriters and managed by their publishers. 

Now, when it comes to composition copyright, most countries split it into two distinct parts: the writer’s share and the publisher’s share. In the US, those are split 50/50, which means that a songwriter that doesn’t have a publisher will only earn 50% of potential royalties. When the songwriter signs with a publisher, they are able to unlock the other 50%, but they generally have to transfer a part of their publisher’s share to their publisher.

The concept of publisher vs. writer share can be hard to wrap your head around, but the important thing is that depending on the publishing deal in place, the songwriter can earn from 50 to 90% of the overall royalties — 50% distributed directly by the PRO, while the rest going through their music publishing company. For more information on publishing deals and the writer vs. publisher splits, once again, check out our Mechanics of Publishing.

Why songwriters are paid instead of artists

Remember, this question is only relevant in the US, where songwriters are paid royalties for radio airplay, but recording artists are not. The reason? Well, the real-life answer is that the US is one of the few counties that hasn’t signed the Rome Convention of 1961, recognizing neighbouring rights of recording artists (and royalties, compensating them for the public performance of their recordings). Rome Convention recognizes the neighbouring rights for airplay on radio stations in the signatory countries — but only to recording artists that are residents of one of those countries. “If the US radio stations don’t pay neighboring rights to non-US citizens, we will refuse to pay those royalties to all US citizens”.

As for the reasons for the US continuous refusal to get behind the Rome Convention, there are plenty of powers at play. The primary justification is that radio airplay is a public broadcast, covered by public performance royalties, and performance royalties are only paid out to the copyright owner of the composition, NOT the master recording. Furthermore, that radio stations argue that the airplay rotation is such a huge promotion for the recording artists, that any further compensation is not required. Would you ask for royalties just because we advertise your songs?

That said, throughout the years there were plenty of initiatives trying to get the radio broadcasters in the US to compensate the performing artists — The Fair Play Fair Pay Act being the latest one — but none of them had any real impact on how the radio royalties are set up (so far). 

Are deceased songwriters still paid radio royalties?

Yes! In fact, in the US, songwriters, and artists can be paid up until 75 years after death (though, of course, artists won’t receive those royalties). These royalties are typically paid to the estate of the deceased songwriter — that is, the writer’s share. The publisher’s share (which is likely to be 50% of the copyright for the most renowned artists of the past), however, is attached to their publishing company, and as such, can often be resold. Think about it — the Beatles are likely never coming off the air. That makes the deceased pop-artists catalogs some of the hottest “real-estate” on the publishing market.

Conclusion 

In 2020, the radio industry in the US generated over $22 billion, surpassing the total revenues of the US music business we’ve estimated last year. And even if the royalties to songwriters make up a minuscule share of that $22 bn. pie, radio royalties are a huge potential revenue source for musicians out there. However, songwriters often aren’t diligent about getting the royalties they deserve. Our goal, as music professionals, is to help them get a fair pay — and to make sure that your artists get what they deserve, it’s essential to understand how the royalties are generated and distributed in your market. 

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