Photo Credit: Complete Music Update
A major international trade and copyright dispute has flared up between the American and European music sectors over the flow of broadcast and public performance royalties. At the center of the conflict is a fundamental difference in how copyright law operates on both sides of the Atlantic.
In most of the world, when a sound recording is played on AM/FM radio or in public spaces like bars and cafes, the businesses using that music pay performance royalties to local collecting societies. However, due to a long-standing loophole in US copyright law, American terrestrial broadcasters do not pay performance royalties to recording artists or record labels.
This dynamic has created a lopsided financial reality: when European recordings are played on US radio, those European creators receive nothing. Conversely, European territories have historically had to decide whether they should still pay American creators when US songs are broadcast on their airwaves.
National Treatment vs. Material Reciprocity
To navigate this imbalance, countries historically chose one of two pathways:
- National Treatment: Foreign creators are treated exactly like domestic creators. Under this system, US artists receive European royalties regardless of whether the US pays European artists back.
- Material Reciprocity: Royalties only flow to nations that offer equivalent reciprocal rights. Under this approach, European societies can withhold radio royalties from US artists.
This landscape was disrupted in 2020 by a landmark EU Court of Justice ruling (known as the RAAP case). The court ruled that EU directives did not explicitly allow member states to use a reciprocity approach, effectively forcing all EU countries to adopt national treatment. As a result, countries like the Netherlands, Ireland, Sweden, and Denmark had to begin sharing their domestic broadcast royalty pools with American creators.
Why European Indies Support a Legislative Fix
Many European independent labels and artist groups strongly support a new proposal by the European Commission to clarify and restore the option of material reciprocity in EU law. They argue that the post-RAAP system is financially draining local ecosystems.
For example, the Netherlands amended its rules in 2021 to comply with the ruling. Dutch indie trade group STOMP has warned that domestic royalty distributions for local Dutch artists and labels have dropped significantly as a result, directly reducing their ability to invest in local talent.
European indie label association IMPALA notes that they are not asking for a mandatory, EU-wide ban on paying American artists. Instead, they want a “proportionate approach” that restores flexibility, allowing individual EU countries to choose whether to apply reciprocity or national treatment based on their own legal traditions.
Why US Trade Groups Are Sounding the Alarm
On the other side of the Atlantic, a broad coalition of US music organizations—representing major labels, independent artists, and collecting societies like SoundExchange—has written a joint letter to the US Trade Representative. The coalition expressed “serious concerns,” warning that the European Commission’s move toward material reciprocity could cost the American music community nearly $300 million in annual overseas income.
US groups argue that adopting reciprocity would fragment the global copyright system, replace a rules-based framework with a volatile patchwork of national laws, and penalize American creators for a legislative loophole in Washington that they have spent decades actively lobbying to fix.
Ultimately, both sides agree on the ultimate solution: the US Congress needs to pass the American Music Fairness Act. Closing the US radio royalty loophole would immediately resolve the dispute, granting European artists performance royalties in the US while securing the $300 million pipeline for American artists abroad.
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