Bars and Clubs To Pay More Taxes on Music?

Written by Ean Golden on March 15th, 2009 24 Comments

Recently, we received a well intentioned letter that is making the dj rounds in America. The letter urges djs to not support the new Performance Rights Act in congress because it will mean bars, clubs and restaurants may pay more money for music played and their business will suffer. This statement requires some deeper investigation, and djs deserve to know all the facts before taking a stand on an important issue that effects our fellow musicians and performers, who like us, work to scratch out a living in the arts.

THE BASICS

First, lets look at the act itself and understand what it does do before we talk about what it may do.

The current situation in a very small nutshell:

Performers and Musicians that were involved in recording a song now receive royalties on their performances but only if that music is transmitted digitally. The songwriters receive royalties on music played over the air but music labels and musicians do not. This means web casters, digital radio, and satellite radio pay extra fees to cover the royalties to these musicians but AM/FM radio is currently exempt. The argument in the past was that radio supports the artists and sells more albums by promoting the music.

Now with album sales tanking due to digital downloads, the artists backed by the RIAA are claiming the need to find other ways to get paid and that broadcast radio should pony up. Many members of congress agreed and have drafted the Performance rights act which:

Removes the word “digital” from the current law so that “terrestrial broadcasters” (Radio) will be obligated to pay a defined schedule of fees that will go to the musicians and labels.

a more detailed break down of the pros and cons

WHO IS AGAINST IT?

The Free radio alliance, a mixed group of small broadcasters is against the law because it would mean they pay 1-5k per years in fees. On their site they ambiguously suggest:

Simply put, a performance tax is a fee that record labels want the government to impose on radio stations, and eventually charge restaurants, retail stores or any other public venue that airs recorded music…….

Anyone who listens to the radio will be impacted. Reportedly, the new tax could cost between $2 and $7 billion annually. Ultimately, anyone who eats at a restaurant or plays a song on a jukebox could also be impacted.

This appears to be a weak attempt to get the general public concerned about a bill that is going to cost their members money when there is no evidence supporting this claim. The bill addresses “Terrestrial broadcasts” and “Digital Transmissions” which have nothing to do with playing music in a venue. The bill does however mention public performance (including clubs):

SEC. 5. NO HARMFUL EFFECTS ON SONGWRITERS.

(b) Public Performance Rights and Royalties- Nothing in this Act shall adversely affect in any respect the public performance rights of or royalties payable to songwriters or copyright owners of musical works.

Read what one broadcaster had to say at the hearing for this bill:

Steven Newberry
Commonwealth Broadcasting Corporation
On behalf of the National Association of Broadcasters

” The recording industry claims to be trying to close a “loophole” in the law but neglects to point out that H.R. 4789 is specifically targeted at the over-the-air broadcasts of local radio, leaving untouched numerous other entities and venues that play recorded music and are covered in foreign jurisdictions, such as hotels, restaurants, bars, nightclubs, sporting arenas, shopping malls, retail stores, health clubs, etc. “

So unless we are missing something obvious, there is no clear way this will effect djs. Instead, it might provide some much needed revenue for musicians by employing a tax technique that is already in use throughout much of the world including Europe. Billy Corgan from the Smashing pumpkins agrees in his testimony supporting the act. The pros and cons of this law should certainly be debated and I look forward to hearing your opinion however we can be fairly certain this is not a issue for djs, but an important one for musicians.

Filed under: Editorials and Opinions, News, and tagged clubs and bars, News, performance rights act, royalties.

http://www.dj-jesc.com JesC

My question is how is the going to get regulated? Are we going to get charged a % of our pay? Its going to be interesting how this is going to pay out in D.C.
http://www.djnvidia.info/ Dj Nvidia

I have mixed feelings about this…I am all for supporting artist, but artists receive the majority of their money doing live performances and other live appearances. So money from this tax won't even go to them (probably).

I do see how this will hurt radios, forcing them to pay more money in taxes, and I agree this will probably not get down to the level (meaning affecting clubs/bars) that they (radio stations affected by the bill) would have us to believe.

What I will say is that most artist should be grateful that radio stations are playing their music. To tax the people that promote your music for free (meaning you don't cut them a check) seems a little backwards.

In summary, I disagree with these bill. Artist make need to be inventive and learn how to use use music and their personality to work for their for money…not just sit at home and wait for royalty checks. Sorry artist, there's enough money out there for you, just gotta get off your butt and work for it.
http://indydesigns.net Hipnotikk

this is just going to make everything more expensive. something a lot of us could do without right now. if they have to pay, we have to pay.
Chris Kraft

Generally I am against stuff like this but I do see one positive, that is if I understand the bill correctly, and that is that it equalizes the fees between terrestrial radio and net radio.

Net radio stations have to pay more for their music than over the air radio stations and that never seemed fair to me. Terrestrial radio helped get the version of this passed that was aimed at Net radio stations, its only fair that it now comes back to haunt them.

Chris Kraft
Bob

Generally speaking, if you want to equalize the tax between digital and non-digital broadcasting, I'd argue that we we should do away with the tax on digitally transmitted content. To put it succinctly, taxation is NOTHING more than theft, and here's why:

1. Theft is defined as taking property w/o the consent of the owner.

2. Tax collectors don't ask for consent.

––––––

3. Taxation is theft.

Now you can dispute the consequences of this here logical equation, but unless you show it to be logically incorrect, then you must admit that taxation is theft. Whether you like it or not. Whatever.

And to those who say that distributing content w/o the consent of the producers is theft, well, look at it this way: after the distribution, does the producer have anything less than before? Potential gains? Please, if "steeling" potential gains is a crime, then Clinton and Obama could have sued the fuck out of each other for "steeling" each other's donations. Society as we know it would cease to function and we would probably die out.

To conclude: We should see this new tax for what it is: a random act of aggression carried out by a desperate and dying body that really has no way of functioning without resorting to the use of systematic violence against the people who support it the most. Bla.
Braydon Zirkler

I'm think I'm against this. I'm not 100% I've got this right.

A songwriter is only connected with the individual product (hit song) nobody will search out the songwriter to find more their work. ON the other hand a performer develop an identity (brand) from the song and this in turn create interest and further work (other songs, tunes etc.).

I see this then as more of an ad. Should an artist get paid to advertise themselves?

I can see thier point that digital radio creates almost on demand type radio and therefore it's like picking your own tunes. So the music a person chooses is in no need of advertisting (cause most people know what they are looking for)

But with clauses like this I think a better against is needed.

"This establishes a $5,000 minimum for AM/FM broadcasters grossing less than $1.25 million.

The effect of this minimum is that AM/FM broadcasters with over $1.25 million in annual gross revenue would be subject to the statutory royalty rate set by the Copyright Royalty Board and paid by broadcasters to labels/artists (or a performance rights organization like ASCAP or BMI, but for sound recordings – not compositions).

The PRA also states that AM/FM public radio would pay a $1,000 minimum."

As well as this with the advent of digital music streaming, new advertisting etc. Why bother with a media which I think is on it's way out? Isn't this a case of closing the gate after the horse has bolted?
Braydon Zirkler

[quote comment="17030"] To put it succinctly, taxation is NOTHING more than theft, and here's why:

1. Theft is defined as taking property w/o the consent of the owner.

2. Tax collectors don't ask for consent.

––––––

3. Taxation is theft.

Now you can dispute the consequences of this here logical equation, but unless you show it to be logically incorrect[/quote]

I'm sorry. I would say anything. But you sir are an idiot(removed by editor-)

It's not a tax, it's payment on a service in this case songwriting (get paid for something you do is not a tax)
Bob

Bars and Clubs to pay more Taxes on Music?

And as far as I know, most taxes are designed to pay for services that we receive. How the do you think public school teachers get paid? Or are they not doing something? Think long and carefully about what you just posted, just please don't hurt yourself afterwards, it's really not your fault. Lol.
http://www.eangolden.com Ean Golden

I appreciate the enthusiasm guys but lets keep this conversation in dj land, and not let it become an issue about to tax or not to tax in general. That could get ugly really fast. The debate of this bill is a tough one and would require much more information than we can go into here- so my main point is to share what this bill attempts to do, and clarify what it wont do (tax bars and clubs). Then each of can take a stand on the issue based on our own feelings and additional research.

That being said, I would love to hear what each of you (any lawyers out there) have to say about the question of equal royalties.
f0tif0

so what about now before it is being passed .

I can play whatever.

Coz i hsve my first big gig this friday
takeAbath

legally speaking, this makes a lot of sense. especially following the ruling that allowed Sirius and XM to merge. that ruling meant that their merging was not a monopoly, and thus not a market unto itself, and therefore was part of a collective competition with radio and personal media devices. so in that sense, since digital download and satellite radio have to pay such taxes, it is only fair that terrestrial radio must do so.
takeAbath

and to keep it in DJ land, one could argue that DJ's alter and change the context of the musics presentation so that they are able to circumvent these rulings, in much the same way that artists like Andy Warhol did with his Marilyn Monroe and Campbell's Soup portraits. by changing the context you have created your own unique piece of art.
http://www.livewire.name Danny Livewire

From what I can understand from it….. changing the law does NOT mean TAXATION…. It's licensing rights.

The fees would most likely go through ASCAP, so it's a way for the lawyers to make more money….. But if you are a real professional artist, you know that the real money is in publishing.

The argument of the $$$ being in performing these days is largely because of the downfall of record sales (for DJing and for CD listening)…

The publishing money is the ONLY avenue artist really have these days…

I see soooooooo many good starving artist that are not making it, because the initial record sales are not there anymore….

This could be a step in the direction of fixing that problem…
http://www.louddjs.com lucid

honesty my interpretation is that this bill adds taxation to AM/FM radio only, which would make things fair and will at least take some money out of the pockets of massive corporations such as Clear Channel Communications, whom owns most of radio. Bars and clubs don’t hire djs as broadcasters, they are performers and subvert the issue.
tobamai

I certainly agree that radio play is free advertising. Congressman Berman is right to say that much of the music aired abroad is American and that we could cash in by taxing radio play world wide. He fails to recognize that if we taxed radio play globally, our music would be just as expensive as local music and would consequently receive less airplay. American music is so popular is because it's good (by pop standards), it's well marketed, and it's free to play. Obviously the music would retain most of its popularity, but over time it would lose its stance as the global giant that it is today.

To say that we should tax terrestrial stations the same way we tax digital stations is a good idea, but increasing the tax on the free advertising provided is not the way to do it. Instead, we should lower the taxes on digital stations since they are also free advertising. They are already regulated on how much the end user is allowed to pick their own music. Pandora has a limit on how many tracks you can skip in an hour's time as a direct result of this regulation. There are many other services that allow users to play specifically what they want, but (to my knowledge) these all charge a flat rate. Digital radio stations are just as much free advertising as terrestrial stations and should not be taxed more.

A slippery slope argument is a logical fallacy regardless of the situation. We could sit around all day and play "what if" to try to scare each other into avoiding legislation, but the truth is that no one can predict what will happen in the future. NAB's slippery slope comments are nothing more than scare tactics to gain public support.

I feel that this tax is a bad idea based on the principal of free advertising. I agree entirely that the record industry has failed to adapt to a changing market and is seeking revenue where it's inappropriate. They should instead make a stronger effort to profit from digital music sales as well as cut their back end expenses.
Jack Creamation

Final nail in the coffin of terrestrial radio? I sense a snow balling conspiracy agwan! Orchestrated by a dieing industry, which slept on keeping up with the times…. Sound familiar? (Big 3)

On a serious note,

I cant help but imagine how this bill will affect college radio if passed. This is how it will impact the DJ community…
http://www.rubicat.com/dj_dvlsadvct Dvlsadvct

Technically we are not, as DJs, allowed to reproduce any music that is licensed from ASCAP or any other agency without paying fees as members. Whether you are a wedding DJ, a mobile DJ, or a club DJ. Now, clubs should, arguable, pay those fees as the DJ is an employee of the club, but I'm sure many people don't. But this legislation has nothing to do with clubs or bars. They are already covered under paying ASCAP.

This legislation is entirely in regards, it seems, to terrestrial radio, and has nothing to do with clubs, unless those clubs are live broadcasting to AM/FM radio (which would be kinda cool).

Terrestrial radio has been dying anyway. It's odd, though, cause with TV now going completely digital it's really only a matter of time before terrestrial radio goes completely digital. And then what?

The thing is, though, that radio stations are using this music to make money on advertising. Really, if it wasn't for the music most radio stations wouldn't make money from advertising because people wouldn't tune in to just hear the advertising. So, the copywritten product the artist has produced is being used so someone else can make money. The theory is that they are now entitled to a cut of the profit, or to be paid to have their goods used in a for-profit basis. The promotion is good, but the model needs to change as the system is changing, so this is a step in that direction.
http://www.eangolden.com Ean Golden

@ DVLSadvct:

Fantastic summary, very on point and succinct. I agree completely
Burns

Taxes will not increase the earns of musicians or composers, it´s just USA going to the red hole of communism.
DvlsAdvct

[quote comment=""]Taxes will not increase the earns of musicians or composers, it´s just USA going to the red hole of communism.[/quote]

Um… Burns, this isn't a tax, and has nothing to do with a form of economy. Well, arguably it is because of capitalism that this is happening at all.

Please, don't spread this kind of misinformation.
animalelipse

I am a college radio DJ in addition to club/mobile DJ, and I'm really afraid of what this will do to college radio stations. Does anyone know whether these royalties are going to be a flat royalty (e.g. 5 cents per song play) based on advertising revenue (i.e. lower royalties for stations with little revenue and greater royalties for stations with a lot of revenue). If it's based on ad revenue, I'd imagine that college radio stations wouldn't be adversely impacted, since there is generally no advertising on college radio stations.

But even if it's linked to ad revenue and not a flat fee, I think there's something patently unfair about trying to take a cut from radio stations. I already paid for the music, no double dipping!
larry howe

we all are tax to much now. where does it stop. stand up and say

NO MORE TAX
quay quoffenheimer

I truly hope that it is based on ad-revenue. Here in portland we have KABOO 90.7 fm, which is the only station bringing scheduled mixes of world/electronica/downbeat/dubstep/dnb/hiphop they bring underground djs on, and have NO ADVERTISING. Community radio!! woo!
quay quoffenheimer

I truly hope that it is based on ad-revenue. Here in portland we have KABOO 90.7 fm, which is the only station bringing scheduled mixes of world/electronica/downbeat/dubstep/dnb/hiphop they bring underground djs on, and have NO ADVERTISING. Community radio!! woo!