There are thousands of radio stations out there, each playing hundreds of songs every single day and at such a scale the direct payment system just doesn’t work. So, the PROs (Performing Rights Organizations) act as a middleman of sorts, doing the administrative work of collecting performance royalties and distributing them to proper artists or their representatives (and taking a cut in the process).
Now, the way that the process is set up is very intricate and also market-specific. In some countries, both the recording artists (owners of the master copyright) and the songwriters (owners of the composition copyright) earn royalties when their songs (and composition) are played on the radio. Then, on each respective side of the music copyright, there’s local legislation dictating who gets paid what. Those entanglements are way too complex to cover in a single article, so, a disclaimer: in this overview, we will focus primarily on the US context.
How do radio royalties work?
Radio royalties payouts system works by first having the radio station purchase a blanket license from the local performance rights organization(s). Then, the radio station reports the songs it has broadcasted back to the PRO, which uses that data to allocate and distribute the royalties due to proper artists and their representatives. This process can take a while — it’s not uncommon for artists to get their royalties more than a year after the actual broadcast took place.
1. Radio acquires a blanket license(s) from its local PRO(s)
So, the radio public performance royalties flow from broadcasters to artists through dedicated administration bodies, known as PROs. On the first step of the radio royalty payout process, the radio stations have to acquire a blanket license from a PRO that will allow them to play all music represented by the PRO. Generally speaking, a PRO will both represent the entirety of the local repertoire and have partnerships in place with PROs around the globe to license the music they represent.
That means that in most of the world (where there is only one PRO per country) a blanket license from a PRO will give the radio station a right to play all music in the world. But the US does it a little differently (as they often do): the States are one of the few counties in the world that have several competing PROs. So, American songwriters and publishers can register their works either with ASCAP, BMI, or SESAC, which means that a radio station that wants a license to play any music they want must get a license from all three PROs.
Now when it comes to the price of those blanket licenses, it will hugely depend on the type of radio, but at the end of the day, the blanket license will tie up to the radio’s audience. For example, for noncommercial educational broadcasters (i.e., college radio), the blanket license fees will depend on the number of students attending the school. The bigger the radio — the bigger the royalty to pay to the artists. So, a spin on big commercial radio is likely to drive 100 times more than a college radio broadcast.
2. A song is played on a radio, and the airplay is reported to a PRO
Then comes the broadcast itself. The radio plays a song, puts together broadcast logs, and reports them back to the license-issuing PRO. Radio programmers are obligated to provide a record of every song they’ve put on the air. The PRO collects and compiles this data to allocate the blanket license fees between the songwriters featured on the air, according to their contribution to the broadcasts. The formula there is not as simple as the straight “share of voice”, but let’s not get ahead of ourselves.
The process of radio reporting poses an issue in itself. Given the scale of the operation, the inevitable human errors sift in, which means that these radio logs are often riddled with missing details and errors (typically due to lack of attention to reporting). Throughout the years working in the music business, we’ve seen all sorts of missing or wrong radio reporting data: from misspelled artist names to straight-up missing track data — or something like “Track 1” put in instead of the song’s title.
Corrupted broadcast logs mean that the PROs can’t identify the songwriters behind the spin, and so the royalties due are likely to be sucked into the royalty black box — collected, but never paid out. Adding up to the heap of music metadata issues, incomplete broadcast logs mean that songwriters around the globe missout on millions in potential revenue.
3. The PRO distributes royalties and songwriter gets paid
So, the PRO collects royalties from the radio station’s blanket license on a set schedule and then uses the radio reporting data to divvy this money between the songwriters. The royalty money is then pooled together, and the PRO determines the royalties owed to a specific songwriter based on airplay data and the type of radio that the song played on. However, not all spins generate the same amounts of royalty to songwriters. ASCAP, BMI and SESAC use different systems of credits and weights to define the worth of each spin — and all of those details are way too plentiful to get into.
However, here’s a short (and non-exhaustive) list of the main factors that can influence the worth of the spin.
- Radio Type and Audience: generally speaking, radio type (commercial vs. noncommercial vs. college) and its audience will determine the blanket license fees — the first step of the radio royalty funnel we’ve mentioned above. The bigger the radio — the more the pay
- Performance Duration: radios will often play an excerpt of the song on the air. Such broadcasts also generate royalties, yet they earn just a portion of full royalty.
- Song’s Popularity: most PROs have a bonus rate that applies to songs that cross a certain threshold in the number of spins in the country. BMI, for example, applies a Hit Song Bonus to any song performed more than 95,000 times in a single quarter.
- Song’s Longevity: songs that stay popular on the air for a prolonged period are considered “radio standard” and thus earn bonus royalties, as PROs acknowledge their importance to radio programmers.
For more information on how a particular PRO attaches value to a radio spin, refer to their respective documentation and policies.