The musicFIRST coalition doubles down on its demands for terrestrial radio royalties as House hearings assess effectiveness of music modernization bill

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American Music Fairness Act

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Photo credit: musicFIRST

Based on a congressional hearing on the Music Modernization Act (MMA), the musicFIRST Coalition is again calling for legislation to be passed that would require nationwide terrestrial radio stations to pay for recorded music licenses.

The aforementioned hearing was held specifically by the House Subcommittee on Courts, Intellectual Property and the Internet (“Five Years Later – The Music Modernization Act”) took place this morning in Nashville. As the title suggests, the hearing was designed to analyze the effectiveness (and potential areas for improvement) of the half-decade-old MMA.

The hearing was attended by witnesses including Kris Ahrend, CEO of the Mechanical Licensing Collective (MLC), Garrett Levin, CEO of DiMA, and Michael Molinar, GM of Big Machine – the latter two also serving on the MLC’s board of directors. In advance, musicFIRST sent a letter to the committee chair, senior member and other members.

The news was shared today with Digital Music News, urging the aforementioned recipients to “also consider how artists’ struggle for compensation for the use of their works continues” – while underscoring the global implications of the current licensing framework.

“By paying artists nothing at all when their music is played domestically,” musicFIRST wrote, “American artists are also missing out on royalties abroad.” The vast majority of foreign nations—those who Do Already pay artists for radio plays – withhold royalties from American music artists whose songs are played in their countries simply because the United States does not pay their artists here. Annually, that amounts to about $200 million in lost income for American artists.”

Of course, the organization’s claim that “the United States doesn’t pay its artists here” refers to the fact that AM/FM radio stations only spit out for use of underlying compositions (not for recording) in the US. And on this front, musicFIRST has also taken the opportunity to call for the passage of the American Music Fairness Act.

This bipartisan measure, reintroduced in February, would force traditional radio stations to pay for recordings. It goes without saying that Big Radio has strong incentives to keep the existing framework. And as part of the comparatively easy goal, the National Association of Broadcasters has long pushed for its rival Local Radio Freedom Act, which only bans the imposition of “any new performance fee, tax, license fee or other levy” on local stations.

“We urge you to continue to build on the advances of MMA by supporting the balanced, non-partisan and bicameral American Music Fairness Act,” concluded musicFIRST, whose membership includes the RIAA, the Recording Academy, SoundExchange and SAG-AFTRA to count. “We look forward to working with you and your employees on this important next step in the ongoing effort to modernize the music industry.”

Notwithstanding the letter, terrestrial broadcasting royalties were only briefly mentioned during the hearing before Congress. Instead, despite previous criticisms of the MLC, Ahrend praised the company’s performance to date (“we’ve already doubled nearly 300 million in historic royalties that DSPs previously couldn’t pay”), while various witnesses raised concerns about artificial intelligence and the accuracy of the MLC data .

“We keep the unpaid royalties that we have accrued,” Ahrend said during one of the more interesting exchanges of the hearing. “And we hold them until we’re able to pay off the underlying royalties, and then we pay those royalties with interest.” The monies we hold are invested conservatively in financial assets through institutional finance companies that aim to achieve the legally required rate of return while minimizing risk.

“It’s not an easy task, but we took it on. We monitor this carefully and work with external paid consultants who also have no financial advantage in doing so to ensure we are doing this as effectively as possible.”

“Are the board members involved in this process, in this decision-making process, or is this a decision-making process that you alone are responsible for?” asked Virginia Rep. Ben Cline.

“No, the board is fully involved in this process,” replied Ahrend, whose organization reportedly has a significant tranche of unpaid royalties. “They have adopted a policy, an investment policy, that guides how we manage these funds and we keep them regularly updated on our progress – as do the advisors we have hired.”

“Are you also making this information public?” asked the legislature.

“We did not publish the investment policy,” Ahrend replied, “because the policy contains not only the parameters that I have just described, but also the specific indications that our advisors have given us on where to invest the money.” And they have advised us that it is not good for security reasons or market manipulation to publish information about where we are investing the money.”