SoundExchange Launches Campaign for Royalties on Pre-1972 Recordings

Listen to the Stooges' "Search and Destroy" from the 1973 album "Raw Power" on Pandora and the band will receive a small royalty. But listen to "Down on the Street," from the "Funhouse" album released three years earlier, and the band won't be paid. That's because some digital radio services don't pay royalties for songs recorded before February 15, 1972 -- and it's an ongoing point of dispute in the music business. 

Now SoundExchange is making a push to change how older recordings are treated. On Thursday, the Washington D.C.-based collection society for digital performance royalties launched a multi-pronged campaign aimed at changing the federal law that excludes pre-1972 sound recordings from coverage under statutory licenses used by many digital music services.

Project72 puts front and center a quirk in U.S. copyright law that treats differently songs recorded before and after February 15, 1972. The campaign features a microsite and an advertisement running in Thursday's issue of Politico. A call to digital radio services to “pay for all the music they play,” the advertisement is an open letter from over 70 artists including B.B. King, the Supremes, members of Steely Dan, the Beach Boys, Roseanne Cash, Martha Reeves, Cyndi Lauper and Al Green.

Services that use the statutory license -- Internet radio, satellite radio and cable radio -- are required to pay royalties to SoundExchange. However, the digital performances of pre-1972 recordings are currently subject only to state laws. As such, services such as Pandora and SiriusXM do not pay royalties on pre-1972 recordings.

New legislation will coincide with the launch Project72. The RESPECT Act, to be announced at noon ET on Thursday, will seek to place pre-1972 sound recordings under federal copyright law. 

Mike Huppe, President and CEO of SoundExchange, predicts broad support in Congress for fair treatment for older recordings. He said, “We believe it is an unobjectionable position."

The disjointed nature of laws covering sound recordings have led both creators and rights holders to sue the biggest digital radio services to recoup unpaid royalties. Already this year, record labels sued SiriusXM in California court and Pandora in New York court. Last year, SiriusXM was sued by SoundExchange in the District of Columbia and musicians Flo & Eddie of the Turtles in a $100 million class action suit filed in L.A. Superior Court. 

Terrestrial radio is a separate but related issue regarding the performance of sound recordings. Trade groups representing creators and rights holders are also pushing for a performance right for U.S. traditional radio stations. Unless a record label has directly negotiated a deal with a terrestrial broadcaster, no sound recording -- regardless of the year released -- generates a performance royalty.

At issue is a huge transfer of wealth from digital services to creators and rights owners, and hundreds of millions of dollars will be at stake in the coming years. Pre-1972 recordings account for about 5 percent of its plays at Pandora and 15 percent at SiriusXM. The dollars involved are significiant, however. SoundExchange estimates the value of last year's pre-1972 sound recordings would have been $60 million. With SoundExchange distributions experiencing double-digital annual growth -- they were up 28 percent in 2013 -- the amount of disputed royalties could soon grow to $100 million annually.