Clearing Up Some Misconceptions About Radio Royalties

Many historians trace the first radio transmission back to 9 p.m. on Christmas Eve 1906, when Reginald Fessenden used a handmade device to broadcast from Brant Rock, Massachusetts. Those lucky enough to tune in — a few nearby ships at sea — heard Fessenden play “O Holy Night” on a violin and read a Bible passage. 

Which brings us to an important question: Who got paid? Actually, that’s a trick question, as the concept of performance royalties was still decades away. It certainly wouldn’t have been Fessenden, though. 

Let’s cut through a few of the myths and misconceptions surrounding radio royalties, shall we?

Who Gets Paid and Why?

When a song gets played on terrestrial radio — an AM/FM broadcast as opposed to a satellite or streaming radio station — its writers are paid through whichever Performing Rights Organization (PRO) or Collective Management Organization (CMO) they’re affiliated with. These royalties are typically issued under a “blanket license” that lets radio stations broadcast a publisher’s catalog at a lower rate than it would have to pay on a song-by-song basis. 

This annual fee varies based on a station’s market share, listenership, and revenue. PROs then pay out blanket license royalties based on the percentage of airplay your work received during a sampling of certain timeslots. PROs also issue bonuses to some members for their high listenership.

Satellite radio is a slightly different situation, dependent on a PRO’s individual policies. For instance, while ASCAP pays its members royalties based on broad audience samples, BMI relies on a detailed report of what was actually played when. As for what a blanket license costs, PROs charge satellite radio stations annual fees based on their advertising, revenue, and overall reach.

Performing artists and master recording owners do not receive royalties for broadcast radio in the United States, however. This is only true in a handful of other countries; everywhere else, songwriters, master owners, and recording artists are paid to use their music. 

Why does the U.S. handle things this way? When regular broadcasting began in the early 1920s, music represented a relatively small amount of airtime, and there was no provision to pay performance royalties to recording artists. By the time Top 40 stations began to proliferate — the first to adopt the format was New Orleans’ WLNO in early 1955 — the recording and radio industries had developed a largely symbiotic relationship, and record labels were leery of displeasing radio executives by demanding they pay additional royalties.

Is There Hope for Greater Equity?

Although terrestrial radio is being increasingly sidelined by other broadcast formats like satellite and digital stations, it’s still a primary way listeners hear music around the world. Hoping to change the legal paradigm, a group of industry leaders and legislators worked to incorporate the Fair Play Fair Pay act, which would require radio broadcasters to pay license fees to master recording owners, into 2018’s landmark Music Modernization Act

They were ultimately unsuccessful, but SoundExchange — a premier digital performance rights organization — is making some headway in this area. Don’t confuse “performance rights organization” with PROs, though. SoundExchange differs from ASCAP and BMI in how it represents recording artists and labels rather than songwriters and publishers. 

By focusing on the digital radio market, SoundExchange collects digital performance royalties for “non-interactive” music platforms like Pandora and satellite radio services like SiriusXM. (“Non-interactive” is similar to terrestrial radio since you aren’t choosing what you listen to.) 

In addition, SoundExchange collects fees on behalf of artists in many foreign markets. These reciprocal deals help account for performance royalties. As the U.S. does not yet have an overarching legal framework to provide such royalties to performers, it's important for creators to know about this distinction and register their songs with the appropriate organizations to make sure they collect what is owed. 

We sincerely hope you come away from this article with a deeper and more nuanced understanding of how radio royalties work (and how they don’t). And most of all, we hope your songwriting efforts end up on the radio, or anywhere else you can be paid for your work. If you want to talk further about that goal, you know how to reach us.

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