Promotional Effects and the Determination of Royalty Rates for Music

Phoenix Center Policy Bulletin No. 39

14 Pages Posted: 8 Feb 2017  

T. Randolph Beard

Auburn University

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Michael L. Stern

Auburn University; Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: November 2016

Abstract

When a terrestrial radio station plays a song during its over-the-air broadcast, the artists and their record labels receive no compensation for the sound recording right. Yet radio’s digital competitors — including streaming services and satellite radio — do pay performance royalties to performers and their labels for the sound recording. Terrestrial radio’s cost-advantage is not the result of marketplace deals or competitive forces, but from a statutory preference granted to radio broadcasters. Legislation aimed at leveling the playing field has been strongly resisted by broadcasters based on the claim that radio provides a promotional effect, or free advertising, for record labels and performers. In this BULLETIN, we demonstrate that any promotional effect is fully internalized in a marketplace bargain between the music and radio industries. As such, a promotional effect provides no basis for federal law to mandate the free use of music by the radio broadcast industry.

Keywords: Radio, Broadcasting, Copyright, Intellectual Property, Fair Pay Fair Play, Royalties, Performance Rights

JEL Classification: O3, G18

Suggested Citation

Beard, T. Randolph and Ford, George S. and Stern, Michael L., Promotional Effects and the Determination of Royalty Rates for Music (November 2016). Phoenix Center Policy Bulletin No. 39. Available at SSRN: https://ssrn.com/abstract=2913112

T. Randolph Beard

Auburn University

415 West Magnolia Avenue
Auburn, AL 36849
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Michael L. Stern

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Phoenix Center for Advanced Legal & Economic Public Policy Studies

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

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