The economic impact of removing radio caps revealed
A potential 78% increase in income for artists played on the radio has been revealed today in an economic study into the impact of removing caps on sound recording royalties paid by radio. The study, released this morning, was commissioned by the Phonographic Performance Company of Australia (PPCA) and compiled by the economics advisory firm Mandala.
Key findings from the study include:
- Removing the caps could lead to an additional $4.8 million paid to Australian artists in royalties in 2024-25
- Artists played on radio could see up to $19,100 in additional income per year, or a 78% increase in income
- Top commercial radio stations would maintain profit margins of 15% if they paid the same rate for sound recordings as they do for musical works; the broader radio industry margin would be slightly reduced from 13% to 11%
- Paying sound recording royalties at the same rate as musical works would account for less than 0.3% of the ABC’s total annual budget
- If caps are removed, increased reinvestment from record labels could see double the number of new local artists played on radio for the first time
The full report may be viewed here, or click here to see a video of what it’s all about.
The report follows Senate Committee hearings held on 7 March this year regarding the Copyright Legislation Amendment (Fair Pay for Radio Play) Bill 2023, introduced by Senator David Pocock.
The Bill amends the Copyright Act 1968 to remove restrictions limiting the Copyright Tribunal’s ability to determine the amount payable to rights holders in sound recordings when music is played on commercial and ABC radio. These restrictions are often referred to as caps, or radio caps.
The Mandala report concludes that “radio companies are well-resourced and capable of paying higher rates” and that “removing the radio caps is an effective, low-cost way to deliver on the Government’s objective to support the arts industry and promote Australian talent”.
Commercial radio earns around $1 billion a year in advertising revenue and pays only $4.4 million in copyright fees for the use of sound recordings. Radio has built a successful business model around the use of recordings, yet it pays very little for their use.
PPCA CEO, Annabelle Herd, said: “Australian artists are doing it tough at the moment. Plenty of recent media coverage has outlined the serious and urgent challenges facing our local industry.
“Today we are pleased to release an independent economic report that both confirms the exponential benefits of fair compensation for Australian recording artists, while illustrating in no uncertain terms how radio caps have artificially constrained artist income since 1968.
“The report shows how a fair rate would deliver additional income for Australian artists, as well as drive increased investment from labels into local artist development and promotion, helping an industry that is a proven economic and social contributor reach its full potential,” she said.
“Removing these caps is the single most effective way to increase fair compensation for artists when they need it most. It can be done quickly and, as shown by the Mandala study, it will not impact the operating model or severely hit the profitability of radio stations in Australia.
“Radio has benefitted from decades of financial windfall from these provisions in the Copyright Act at the expense of local artists and labels. The heavy burden of subsidising Australian radio – a profitable and successful industry – cannot continue to fall on struggling local artists,” Ms Herd said.
Mandala Director, Tom McMahon, said: “A clear finding from our research is that the system in Australia is well out of line with comparable jurisdictions. The Australian radio industry has some of the highest revenue per capita globally. But the actual royalty rate for sound recordings paid by commercial radio stations in Australia is just 0.4% of broadcast revenue, compared to countries such as Canada, the UK and Germany, which have rates of between 3% and 7.5%.”
The radio caps were legislated over 55 years ago and prevent the recording industry from negotiating a fair market rate for sound recording royalties paid by radio.
Currently, recording royalties are capped at 1% of commercial radio revenue and 0.005c per head of population for ABC Radio.
Australia is the only country in the world with this sort of copyright law, and does such a cap does not exist for any other type of copyright in Australia. No other copyright user benefits from a legislated cap including television broadcasters, schools, universities, libraries or small businesses such as nightclubs, gyms, shops, bars or restaurants.
Click here to download the full report.