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Promotional effects and the determination of royalty rates for music

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  • T. Randolph Beard
  • George S. Ford
  • Michael Stern

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 article, 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.

Suggested Citation

  • T. Randolph Beard & George S. Ford & Michael Stern, 2018. "Promotional effects and the determination of royalty rates for music," Journal of Media Economics, Taylor & Francis Journals, vol. 31(1-2), pages 27-35, April.
    • Handle: RePEc:taf:jmedec:v:31:y:2018:i:1-2:p:27-35
    DOI: 10.1080/08997764.2020.1754227
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