Streaming May Have Killed the Radio Star, but it Might Bolster Public Performance Rights

It seems like a commonsense principle – under Section 106 of the Copyright Act, copyright owners have the exclusive right to publicly perform their work through digital audio transmissions. Because of this exclusive right, copyright owners are generally required to authorize public use of their sound recordings by third parties, and in return, they receive royalties. However, there is a standard exemption from this exclusive right that has recently been challenged. Historically, AM/FM radio broadcasts of sound recordings have been exempt from a copyright owner’s public performance right. Broadcast stations do not pay copyright owners royalties for using their sound recordings, either locally or abroad.

However, that may soon change. Recently, John Squires, the Director of the United States Patent and Trademark Office (“USPTO”), wrote a letter to Congress advocating for an amendment to the Copyright Act that would require AM/FM broadcast radio stations to pay fair compensation to copyright owners and performers when their sound recordings are broadcast. The move interestingly inserts the USPTO into the adjacent, but separate, Copyright Act space where typically only the Copyright Office intervenes.

The original justification for the AM/FM broadcast radio exception was that  AM/FM broadcasts gave artists a unique avenue to debut their work and gain public exposure.  However, in the current music landscape where streaming services account for most of recorded music revenue, this justification is weak.  Consumers no longer purchase physical or digital CDs, albums, or songs after hearing an artist’s debut work on the radio. Rather, consumers access millions of songs on various streaming platforms without ever owning a copy of the work, and payment is only required if the consumer does not want to have their listening experience interrupted by ads. However, unlike radio stations, these streaming platforms must pay royalties to copyright owners for the public performance of their works, even though those same copyright owners are not receiving similar compensation from radio stations based on the long-standing exemption.  In an attempt to balance out this disparity and ensure that copyright owners are fairly compensated for their works performed through all mediums, the USPTO urged Congress to expand protections under Section 106 by removing – or at least revising – the AM/FM broadcast exception.

It is not yet clear what action, if any, Congress may take as a result of the USPTO’s request. Only time will tell if an amendment to the AM/FM broadcast exception will help or hurt the music industry and what effect, if any, additional costs to AM/FM stations will have on general music licensing fees. Stay tuned.

If you have questions about how this may impact your business or work, please reach out to your Dinsmore intellectual property attorney.