Scholar calculates b'dcast radio would owe $2.5 billion annually if they paid Pandora's rates for aired recordings

If U.S. radio broadcasters were subject to the same royalty terms as webcasters for over-the-air use of copyright music, they'd owe the record industry $2.5 billion annually. That's according to calculations done by David Touve, Assistant Professor of Business Administration at Washington and Lee University, and published in his blog.

And that $2.5 billion is at the rate at which Pandora and SoundExchange settled (details here). If terrestrial broadcasters owed at the statutory rate determined by the U.S. Copyright Royalty Board (using the "willing buyer willing seller" standard), its bill would be about $4.7 billion.

U.S. radio broadcasting total revenue last year was about $17.4 billion, according to the RAB.

The key assumptions in Touve's calculations are (1) music radio plays about 12 songs per hour, and (2) radio's estimated listening audience (from Arbitron) of 8.8% of the country's 12+ population. (To account for error, Touve also makes his calculations by expanding and reducing both the number of songs per hour (by 3 each way), and the estimated audience -- by 33% each way.)

So, at the webcaster settlement rate of $0.0011 "per performance" (a "performance," in this instance, means one listener hearing one song) for 2012, 12 songs per hour played to 8.8% of the 12+ population would have radio owe $2,469,294,195 in royalties for sound recordings (that's what you can see in the chart above). Using the actual statutory rate (keeping other numbers the same) yields a bill of $4,714,107,000 in royalties (that's the rate used in the chart below).

Billboard columnist Glenn Peoples commented (here), "Touve did not take into account the 17% of radio listening that goes toward non-music formats such as talk, sports and news (source: Arbitron "Radio Today 2011" report). Had Touve reduced his numbers to adjust for non-music listening, the estimate for Big Radio's royalty bill would be $2.05 billion rather than $2.47 billion, according to my calculations."

Read Touve's blog here.