Performance Rights Act: Additional Costs for Broadcast Radio Stations; Additional Revenue for Record Companies, Musicians

Congress is considering legislation, the proposed Performance Rights Act (H.R. 848), that would expand copyright protection for the public performance of sound recordings. The proposed act would require AM/FM radio stations that broadcast music to pay a royalty, and this royalty would be distributed to the copyright holder, performers, and musicians.

This report addresses 1) the benefits received by the recording and broadcast radio industries from their current relationship, 2) the possible effects of the proposed act on the broadcast radio industry, and 3) the possible effects of the proposed act on the recording industry. If broadcast radio stations with revenues of $1.25 million or more pay a royalty based on a percentage of station revenues, every 1 percentage point would cost the broadcast radio industry $101 million per year. GAO also estimated that with a 2.35 percent rate, the 25 percent of stations with revenues of $1.25 million or more would pay over 90 percent of the total royalties. According to broadcast industry stakeholders, these costs could lead some stations to reduce staff, switch to a nonmusic format, or discontinue operations. However, assuming a 2.35 percent royalty rate, GAO estimated that 56 percent of performers would receive $100 or less per year, and fewer than 6 percent of performers would receive $10,000 or more per year in royalties from airplay in the top 10 markets. (GAO-10-826)