Word on the street is that Big Radio’s lobbyists are hitting Congressional offices today with the following unbelievable claim: they say stations will have to reduce the size of their staff if required to pay for music.
For purposes of argument, let’s set aside the fact that every other kind of radio pays a performance royalty. Internet radio like Pandora? They pay a performance royalty. SiriusXM? They pay too.
Let's also put to one side the expert research finding that those royalties are equivalent to the overhead costs borne by virtually all online businesses – as a proportion of revenues, companies like Netflix, Overstock, and 1-800-Flowers pay the same or more than Pandora for their inputs. The whole argument that radio can’t afford to pay for music when music is the primary input of its business turns basic economics on its head.
And we will also ignore how radio companies, such as Clear Channel/iHeartMedia, have been systematically laying off local staff as they centralize operations, replace local DJs with piped in voices from out of town, and are using technologies to maximize profits while still not paying artists for their work.
Now that we have removed all of those facts from the equation, let's just look at the narrow question – can FM radio stations afford to pay for music?
Start with the truly local stations (which, if you look at the NAB’s promotional materials, seem to be the only kind of radio they think exists). Under past performance rights proposals, small stations – stations with annual revenues under ONE MILLION DOLLARS would pay ONLY $500 A YEAR FOR ALL THE SONGS THEY PLAY. Public and noncommercial stations would pay ONLY $100 A YEAR. Talk radio and news stations would pay NOTHING AT ALL. In fact, between 75% and 80% of stations would pay LESS THAN THE COST OF THEIR LOBBY WEEK PLANE TICKET FOR THEIR MUSIC. However, since just 20% of the radio stations make up nearly 80% of the industry’s profits according to BIA data, the stations that can afford performance rights would have to pay their fair share.
Therefore, can Big Radio afford to pay? According to figures from the Radio Advertising Bureau, radio revenues have increased each year since 2009 – when revenues were $16,029,000,000 – to 2013 – when revenues totaled $17,649,000,000. That is an increase of nearly 10%. That’s right, in five years radio revenues are up almost 10%.
And, according to a Government Accountability Office study, the cost of a performance royalty for those really big radio stations, would most likely be just 2% of revenue. A blip on their multi-billion dollar bottom lines, but potentially the difference between a living wage and packing it in for a musician trying to get by.
I think the folks asking if Big Radio can afford to pay for the music that is the foundation of their business should think about a different question – can the musicians radio is stiffing today afford to keep making music for nothing?