Valuing Music for Needletime Purposes

Of course, if one thinks “intellectual property”, a sound recording cannot really compare with the underlying musical work, or even the performance – there lies the real “creation of the intellect”, and all the sound-recording effects is their mechanical capture. This may be the reason why the majority of international jurisdictions, traditionally, have recognized a higher royalty rate for musical works.
Nevertheless, a value must be attributed; but, importantly, it is against this background that the assessment must be made. In balancing the interests – and, now there are different parties competing for a slice of what broadcasters are prepared to (or can afford to) give away, per play – there are some facts to be taken into account which undermine the claim of record companies. Recording artistes, I am sorry to mention this, but you should know, because your slice is likely to come to you from the record company, if that is the way your deal is structured with the studio.
First, economic experts agree that a pure value would be one which matches the cost of production; indeed, input costs are the “cornerstone” of the record company’s claim to a needletime royalty. However, this has limited significance, because the copyrighted life of a sound recording is, generally speaking, fifty years. Whereas the cost of broadcasting is ongoing, and increasing, the cost of producing a given sound recording has long since been amortized. After all, if a song has not been a ‘hit’ in the domestic territory, its overseas release – and, therefore, broadcast – is highly improbable.

Tribunals might even factor this into the determination – a sliding scale, for example, so that the older a recording is (current, through to 50 years), the less is the royalty. Moreover, a substantial proportion of the cost of producing a saleable CD has no bearing on its broadcast. Expensive sleeve covers, artwork, printing, photography, and the like all concern marketing for retail purposes, not broadcast – And, such production costs are recovered by the record companies (from CD and digital sales) before any artist gets paid.

Secondly, there is a benefit to record companies, and artists, in boosted retail sales following broadcasts of a recorded piece of music. Although ‘payola’ is a dirty word now and represents a practice denied by record companies, it is no secret that record companies push to have their recordings broadcast on appropriate radio stations; and, fairly, a formula should take this symbiosis into account. Indeed, broadcasters might argue that less royalty should be paid because [record companies] are getting their benefits in increased sales.
Another aspect to take into account is the appropriate national or regional regulatory structure. Often, a broadcasting industry works within considerable constraints imposed by regulation and license, in particular the cost imposed by any public mandate.
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What we musicians must bear in mind is that a formula based on the premise that the more advertising revenue a radio station garners, the more it should pay to artists (or record companies) is inviting dispute. And, recording artists deserve money, not disputes!
The point to be accepted here – and it is fundamental – is that, with many commercial radio stations, there is no correlation between its advertising revenue and its playing of music. This is demonstrated in many different ways:-
* talk stations often generate far greater advertising revenue than music stations;
* the prime advertising slots, morning and afternoon drive time shows, have very little music content at all;
* high music usage is from midnight onwards, when there is low listenership and hardly any advertising; and
* adspend is cyclical, increasing and decreasing according to economic conditions, whereas music usage remains constant.

So! … Valuing “music” in the broadcasting scenario is a difficult exercise. Of the the three proprietary rights, the composition itself is arguably the most “valuable”; and the performance thereof more so than the sound recording.
I mean – what is more likely to be a ‘hit’? – Josh Groban singing ‘Danny Boy’ set to the tune of Londonderry Air, or singing the alphabet in monotone? And, then, is that recording of Josh Groban’s ‘Danny Boy’ more likely to be a hit than a recording of that same song by an amateur croaker – or worse, me?
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Needletime Royalties
Composer Rights
What are the Copyrights?
Owning Copyright