SoundExchange CEO Calls U.S. Radio Royalty Gap ‘An Extremely Unusual Exception in the World’

SoundExchange’s CEO, Michael Huppe, has been working towards getting artists paid on terrestrial AM/FM radio stations for the last decade, but he says the effort to get this royalty in the U.S. dates back “much longer,” he explains. “There’s a letter that was issued by Frank Sinatra — I don’t remember exactly when, but I think it was about 30 years ago — to Bruce Springsteen [saying the same thing].”

SoundExchange has collected royalties for artists on digital and satellite radio sources like SiriusXM and Pandora since its formation in the 1990s. However, for terrestrial radio, artists are not required to receive the same compensation — or any at all. Only songwriters do. While many of today’s biggest stars are both artists and songwriters, Huppe still believes this is an unfair practice that demeans the contribution of artists and the record labels footing the bill to take songs to radio in the first place: “We’re the only industrialized country where this is true.”

Huppe points to the song “Respect” by Aretha Franklin as an example of the inequality. “When you hear that song over a local classic rock station or R&B station, Aretha and her record label make nothing — that is an extremely unusual exception in the world… In every other industrialized democratic country both [the songwriter] Otis [Redding] and [the recording artist] Aretha get paid. It makes sense right?”

In an in-depth conversation for Billboard‘s new music business podcast, On the Record, Huppe discusses his organization’s latest efforts to get artists paid on terrestrial radio, the American Music Fairness Act, and his partnership with Gene Simmons at this week’s congressional hearing. He also speaks to the evolution of radio from its earliest days — from the start of recorded music, to the payola scandals of the mid-century, to the diverse online radio options today. While it’s been a fraught relationship from the start, Huppe describes the “symbiotic” relationship radio broadcasters and the music industry share.

Below is an excerpt of that conversation.  

Watch or listen to the full episode of On the Record on YouTube, Spotify or Apple Podcasts here, or watch it below.

How did this system where songwriters, but not artists, are paid for radio plays start in the first place?

I describe it as a victim of history and politics. A lot of it revolves around when the big revisions to the Copyright Act occurred. There was one big revision in 1909 and the next one didn’t come along until the 70s. So, in 1909, think about it, there were songwriters — because songwriters have been around forever. So the songs had a seat at the table, and when they did that revision, they tweaked some things to the benefit of the songwriters. Again, I’m not saying that songs are paid fairly because I think they should be making more too. But the recorded music industry hadn’t really come around yet. By the ’30s, the phonograph had been invented, but it didn’t sound very good. Fast forward to the ’70s, when the next provision happened? Well, by then, you had all these spikes in radio stations everywhere. The National Association of Broadcasters was formed in 1920, so the next time they had a shot at it, there were very powerful broadcasters, and there’s not a single congressman or woman or a single senator who doesn’t need their airwaves every two years, right? Basically, by the time the next revision rolled around, the broadcasters were just too powerful, and they’ve been able to stop the move to get a royalty for artists.

Is there some way that this could hurt radio stations and, thus ,hurt artists in the future. Like, if you push too hard on getting rates for artists, is there a potential that it puts radio stations in jeopardy financially, and thus eliminates it as an income stream for songwriters?

I would say no. I think a lot of the arguments they used to justify not paying melt away with just even the slightest bit of heat you apply. The promotion argument, or you know, what if it hurts local radio? Well, they pay their on-air talent, and they get paid well from advertisers.

Why do you think, in the 1990s, the music industry was able to get this artist royalty on digital and satellite radio, but not on terrestrial radio?

I mentioned this multi-decade fight that the recording industry has had with the FM industry to try to get radio to pay. And in 1995, we finally got a digital right. The reality is just that, politically, that’s what we were able to get through as an industry, but why did Congress just give us the digital right and not apply it to FM? The answer you would get is because they saw the digital future NAFTA was starting to kick around. I mean — maybe really came on the scene a couple years after that — but Congress was thinking a lot about digital around this time too and thinking “wow, this could be a piracy problem.” You know, FM radio back then, not so much, but they saw the ability of what digital could mean for the acceleration of piracy. One thing about analog piracy is that you go from tape to tape to tape to tape, and it’s a much more labor intensive and capital intensive project. Plus, it degrades over time. With digital, with the push of a button, you could create a million perfect copies. So digital obviously had a lot of potential for the industry, but it also had the potential for piracy and theft and that was the ostensible justification of why Congress gave us this limited digital right.