The following MBW blog comes from Michael Huppe (pictured), President & CEO of US performance rights organization, SoundExchange, which announced in April that it has distributed more than $7 billion in total royalties to music creators since it was founded in 2003. SoundExchange estimates that US creators are missing out on $150m in annual royalties from the UK, Netherlands, Australia, France and Japan alone. Here, Huppe discusses the treatment of American recordings and artists overseas, what needs to change, and the progress that’s being made…
Music is a major American export – you hear American music everywhere you go, in cabs and bars and restaurants around the world. And yet, because of technicalities and loopholes, many other countries refuse to grant American recordings and artists the same protection they provide their own citizens. As a result, American artists and labels often get paid less than their foreign counterparts – and in some cases, get paid nothing at all – for the exact same activity. For too long, this has been just accepted as the “way things are.” But that is wrong, and it’s time for all other countries to give “national treatment” to American recordings.
What is “national treatment”? Simply put, it’s treating American recordings and artists the same as your own residents. In the US, if you are an artist or label entitled to a royalty, you are paid for the use of your sound recording no matter where you recorded it, where you were born, or where you reside. US law treats all creators equally. If any use garners a royalty payment, creators of all nationalities are entitled to collect. And if another use unfairly withholds a royalty payment, creators of all nationalities are harmed equally. We provide foreign music creators with “national treatment” – giving them access to the entire US market on par with our own creators.
Unfortunately, the same isn’t true for Americans in countries all over the world. In fact, the norm is for American artists to face discrimination overseas – subject to very different rules than their brothers and sisters who were born in or happened to record in a particular country. At SoundExchange, we collect and distribute digital performance royalties on behalf of more than 220,000 recording artists and master rights owners. We send huge amounts of royalties overseas: In 2019 alone we paid artists and labels in the top five countries $106 million in royalties in 2018 but received only $2.6 million for U.S. artists in return. If American music is among the most popular in the world, averaging 30% of spins worldwide, how do those numbers make sense? Something isn’t right here.
The countries that discriminate against American musicians claim they can do so because, in the United States, traditional “terrestrial” radio doesn’t pay for the recordings they play. But that’s nonsense: First, because digital radio does pay recording artists in the United States, and because digital radio is a massive part of the biggest music marketplace in the world, the United States is the largest source of radio royalties in the world. No one else comes close. And creators of all nationalities participate equally in that revenue stream. Second, we aren’t asking for American artists to be treated better than their counterparts overseas; we’re asking for them to be treated the same – which should be unobjectionable. We estimate that U.S. creators are losing out on $150 million in annual royalties from unfair laws in the UK, Netherlands, Australia, France and Japan alone. Bring in the rest of the world and you have more than $330 million in “lost” royalties that would otherwise flow to U.S. creators if they were treated the same as their domestic counterparts.
Some governments have recognized the unfairness of this position and have agreed to give American artists and recordings national treatment, including Germany and Brazil, and most recently in Canada (through adoption of the USMCA).
But we have a long way to go, and it is essential that U.S. policymakers seek national treatment in every new trade agreement that they can. The next big opportunity is with the United Kingdom, during the upcoming US-UK Free Trade Agreement (being negotiated in the wake of Brexit). To give a sense of the problem, in 2019 SoundExchange paid out $37 million to performers and rights owners in the U.K., yet collected less than one-twentieth of that amount in return. This is not the fault of our sister organizations in the UK, but of a legal regime that treats Americans as second-class citizens. This new trade deal will hopefully remedy that ill. The good news is that USTR fought hard to keep national treatment in the USMCA and saw it through in implementation. Now the national treatment language from USMCA is the baseline for future trade negotiations and Members of Congress in both the House and the Senate have urged USTR to include this protection for American creators in all trade agreements going forward.
Without broad adoption of national treatment principles in global trade agreements, U.S. music creators will be denied the same royalties that are afforded to nationals when it comes to radio broadcasts, public performances and private copying in other countries. The cure is simple: governments must uphold the principle of “national treatment” in all free trade agreements.
In these times of the pandemic, it would be easy to point to the decimation we see in live music as a reason to enact this reform. But the truth is – this treatment has always been wrong, for decades before the Coronavirus. The suffering we see in our industry today simply makes that unfairness appear even more stark. All music creators should receive fair compensation for their work – regardless of where they are from. That means that if any labels and performers are paid in a territory, all labels and performers should be similarly paid. American music is played all over the world; it’s time for our trading partners to treat the people who make that music – from whatever country — with the royalties they have earned and the fairness they deserve.
Music Business Worldwide
