Congress: Don't Fall for Corporate Music's Attempt to Extort Radio Stations

In my 20 years as a government watchdog, I've always found it amusing when crony special-interest groups justify their special giveaway and handout requests by claiming they want to preserve the free market and protect fairness.

This long list of shady actors now includes the corporate music industry.

At the behest of the largest record labels, Congress recently held a hearing on the American Music Fairness Act (AMFA), a bill that would slap a new fee on local broadcasters. Its advocates say they are pushing it to ensure fairness and protect artists' private property rights in the music industry. The truth is anything but that.

In reality, these big labels pay their artists pennies on the dollar of what they deserve. On average, the labels continue to give most artists a paltry 20% of streaming royalty payments even though they are all billion-dollar conglomerates with no valid reason to shortchange their musicians.

As a result, labels are catching heat for their shady business practices and they're looking for new income sources to split with artists. And the labels have decided to try to extract that money from small radio stations.

If large corporate labels were truly champions of free markets and fairness, they would admit they receive billions of dollars' worth of free advertising each year in exchange for allowing radio stations to play songs at no cost to the broadcasters.

Current payola laws prohibit local radio stations from charging the labels for the immensely valuable free advertising their music receives when it is broadcast to millions of listeners, who are also potential music customers. That free advertising translates into billions of dollars in revenue from music sales and downloads, on-demand streaming subscriptions, concert tours, merchandising and other revenue streams.

Laws preventing payola, or paying DJs or radio stations in exchange for playing certain songs, are good public policy. They prevent artists from having to bribe radio stations in exchange for playing their music. It means broadcasters play better music, rather than music made by artists whose labels can give the fanciest gifts or write the biggest checks.

No one is advocating that Congress repeal payola laws. But it makes just as little sense to argue that radio stations should have to pay off artists and record labels in exchange for playing music, either.

Unfortunately, this extortion racket is exactly what greedy corporate labels want to see.

While the big labels claim they want to protect artists' property rights by making radio stations pay them for the value of their music, they also want Congress to maintain the prohibition on radio stations charging the labels for the value of airplay. A true free market does not work like that; it allows both sides to bring their value to the table without either side being scammed.

Corporate record labels' preposterous AMFA proposal destroys this fair, free market system developed between labels, artists and broadcasters over the decades. Under the AMFA, the federal government would fix prices for music paid by local radio stations, while continuing legal prohibitions against local radio stations negotiating the value of their property.

The plan is unfair and tramples the successful and long-standing history of how record labels and radio stations work together to bring music to the masses.

Drew Johnson is a government watchdog who serves as a budget, tech and energy policy expert at several free market think tanks. Read Drew Johnson's Reports — More Here.