Economic impact of removing radio caps for sound recordings
REPORT

Economic impact of removing radio caps for sound recordings

clock

14.06.2024 - 07:02

Economics

Mandala's latest report with PPCA explores the economic impact of removing radio caps for sound recordings on Australian artist incomes, the potential investment in Australian artists and music from increased revenue, and the likely impact on radio profit margins from higher royalty rates. We have found that removing the caps could lead to an additional $4.8 million paid to Australian artists in royalties in 2024-25 and artists played on radio could see up to $19,100 in additional income per year, or a 78% increase in income. 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.

Radio caps have artificially constrained artist income since 1968

Radio caps were introduced as part of the Copyright Act 1968 (Cth) which limits the amount that radio broadcasters pay in royalties for sound recording copyright. This cap was set (in 1968) at 1% of broadcast revenue for commercial radio broadcasters, and $0.005 per head of the population for the ABC.

Since then, there have been six reviews recommending the removal of them.

portableText image

The actual royalty rate paid by commercial radio stations Australia is 0.4% of broadcast revenue. This is significantly lower than other comparable benchmarks. No cap exists on musical works copyright, which has an average royalty rate of around 3.6%. Other international rates for sound recordings are also much higher. Countries such as Canada, UK and Germany have rates between 3% and 7.5%.

To estimate the impact of removing radio caps, we have considered a scenario where radio broadcasters pay sound recording royalties at the same rate as musical works. This is an example only, noting rates would be determined by negotiation and the Copyright Tribunal per existing processes.

Removing the radio caps could increase music income of the most played artists by 78%

Artists are at breaking point and typically work several jobs to support themselves. 83% of artists hold multiple jobs, with 65% of artists relying on a non-music job as their main source of income. Festivals, which have been a key source of income for artists, are also being cancelled at a higher rate.

Data shows Australian artists played on the radio received $0.6m in sound recording copyright royalties in FY23.

Removing radio caps could lead to an additional $4.8m being paid to Australian artists in royalties in FY25. For Australia’s most played artists, this could be up to $19,100 in additional income per year, or a 78% increase in income from music.

portableText imageportableText image

Removing radio caps could double the number of new Australian artists played on the radio for the first time

Record labels play an important role in partnering with artists, investing and supporting creative development and driving their commercial success. In particular, record label investment in artists and repertoire (A&R) helps to identify and develop promising talent, and grow the music industry.

Removing radio caps would increase record label revenue and
their ability to invest in the Australian music industry. For Australian repertoire alone, record labels would receive an additional $4.2m if radio caps were removed.

portableText image

Data also shows a strong, positive relationship between record label revenue and the number of artists per country. The corresponding increase in record label revenue, and investment, from removing radio caps would almost double the number of additional new Australian artists being played on the radio (and receiving royalties) each year.

Radio companies are well resourced and capable of paying higher rates

The radio industry allege that removing radio caps would make radio broadcast, particularly for local stations, commercial unviable. However, analysis indicates that radio stations are more profitable than the Australian industry average and the industry is dominated by a small number of large players.

The Australian radio industry has some of the highest revenue per capita globally. The four largest commercial radio stations account for close to $1 billion in revenue and all maintain healthy profit margins ranging between 12% and 21%. Together with the ABC, these players account for 85% of all industry revenue for the radio broadcast industry.

portableText image

These companies are also capable of paying higher rates. If the four largest commercial radio companies paid sound recording royalties at the same rate as musical works, they would have an average profit margin of 15%, which is still higher than other Australian industries on average. For the broader radio industry, paying higher rates would marginally reduce profit margins from 13% to 11%.

portableText image

The ABC currently pay $130,000 per year for sound recording royalties, out of a total budget of almost $1.3bn. Paying sound recording royalties at the same rate as musical works would account for less than 0.3% of ABC’s total annual budget.

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.

Read the full report here.

Read our latest posts

Revitalising National Competition Policy
Competition

Revitalising National Competition Policy

Mandala's submission to the National Competition Policy Unit on Revitalising National Competition Policy, focuses on realigning Australia's legislative settings on competition to meet the current realities of our economy.

4 Oct, 2024

The Zurich-Mandala Climate Risk Index: The impact of climate change on the Australian tourism industry
ClimateTourism

The Zurich-Mandala Climate Risk Index: The impact of climate change on the Australian tourism industry

Mandala Partners (Mandala) in conjunction with Zurich Financial Services Australia (Zurich) has produced Australia’s first Climate Risk Index for the Australian tourism sector. This report analyses the impact of climate change on Australia’s top tourism sites – including major airports, national parks, beaches and museums – under different Intergovernmental Panel on Climate Change (IPCC) scenarios.

9 Sep, 2024

The benefits delivered by faster delivery
RetailCompetitionTechnology

The benefits delivered by faster delivery

Our latest report, commissioned by Amazon, presents new research measuring the improvements in delivery times over the last ten years and the benefits that have flowed to consumers, businesses, and the economy. Average delivery times have halved nationwide over the past 10 years. In metro areas and outer suburbs, average delivery times have fallen from 7-9 days to just 4 days. Online shoppers have saved 3.7 million hours per year. This improvement translates to $1.8 billion to businesses through more sales and lower costs. Read the full report to learn more.

21 Aug, 2024

Assessing the benefits of accelerated digital delivery of government services
Technology

Assessing the benefits of accelerated digital delivery of government services

Mandala's recent report commissioned by Adobe estimates the benefits of accelerating the adoption of digital transactions by shifting government transactions from traditional channels (in-person, mail and phone) to digital channels. Our report finds that accelerating digital adoption generates benefits for both government and citizens, such as $12 billion saved by governments over 10 years in service delivery costs, $3 billion saved by governments over 10 years due to improved cyber security and 800 million hours saved by citizens over 10 years in seeking and accessing government services (worth $19 billion to the Australian economy). Australia must overcome governance, finance and delivery challenges before it can achieve accelerated adoption. Read the full report to learn more.

20 Aug, 2024

Loading...