Rise of Music Industry and Performance Rights

I've talked before how Part 15 AM (perse) broadcasting was already becoming popular for several years with phono oscillators before Part 15 was even created. I'm only mentioning that but it's really not the topic at all.
By the mid 1930s about half the homes in the US owned at least one radio - but still half the country did not own any radio at all, so it really wasn't until the 1940s that radio for home entertainment began to become a mass media norm.

Point is that in during the roaring 1920's, radio still wasn't a very common thing at all l,so far as a form of entertainment goes, it was sheet music played at home and recorded cylinder and disc that were played for home entertainment. That was the whole music industry.

Anyway, in the process of doing Public Domain recreations of these old songs I discovered that what really launched the "sheet music industry" was the 1892 sheet music of "After the Ball" that broke all records by be the first song to ever sell over a million copies. From that point on sheet music sales became the primary backbone of the music industry for decades to come.

Well that got me to wondering when did the transition from sheet music to radio become the norm, so I ask Google AI and it provided a very interesting overview that also factored in the creation and competitions of ASCAP and BMI, and the story of when the radio networks boycotted ASCAPs expensive fees during the early 1940s and which was the catalyst for the creation of BMI material -All this I was already vaguely familiar about from past research, but this AI discussion really clarified what happened a bit and I think it's interesting enough to post an truncated version of what Google said, as follows

This is really more about copyright matters more than anything, but I think it's pretty interesting stuff..

-- Google AI Summary Excerpts:

"After the American Civil War, pianos became mass-produced and highly affordable. publishers started producing accessible, popular tunes rather than just classical or sacred music. Sheet music became a commercial industry in the 1880s and 1890s, peaking with the birth of Tin Pan Alley in New York City. Before mass sound recording, printed scores were the primary way to popularize music, driving massive sales for songs played on middle-class parlor pianos.

The Rise of Tin Pan Alley (1880s–1900s): The music business formalized in a specific cluster of publishing houses along 28th Street in Manhattan. This era introduced a standardized, factory-like approach to songwriting. It also generated staggering sales records; for example, Charles K. Harris's 1892 song "After the Ball" became the first to sell over a million copies of sheet music.

Radio became a mainstream medium for entertainment in the early 1930s, when a majority of U.S. households acquired a receiver. While commercial broadcasting began in 1920, the transition from a technical novelty to a dominant mass-entertainment staple occurred rapidly over the course of a decade.

U.S. Household Radio Ownership (1923–1940)
[1923] 1%
[1931] 50%
[1934] 60%
[1940] 83%

The rise of mainstream radio entertainment unfolded through several key milestones:
The Network Era Begins (1926–1928): The formation of national networks like the National Broadcasting Company (NBC) in 1926 and the Columbia Broadcasting System (CBS) in 1928 shifted the industry. Stations could finally share the high cost of programming, creating a national shared culture.

The Golden Age Catalyst (1930s): The Great Depression ironically cemented radio's mainstream status because it provided a free source of home entertainment after the initial purchase of the box. The 1930s introduced distinct, highly popular entertainment formats including situation comedies (like Amos 'n' Andy), soap operas sponsored by soap manufacturers, live music concerts, and variety shows featuring Hollywood stars.

The Sheet Music War: The Battle over "Public Performance"
In the 1920s, the music industry’s revenue relied heavily on sheet music sales. When radio stations began broadcasting live performances of popular songs, sheet music publishers—represented by the American Society of Composers, Authors and Publishers (ASCAP)—sued.

The Publisher Argument: Under the Copyright Act of 1909, creators held the exclusive right to "publicly perform" music for profit. Publishers argued that because radio stations used music to attract listeners and sell advertisements, broadcasting was a public performance for profit.

The Radio Defense: Broadcasters argued that radio was a private in-home experience, not a public venue. Furthermore, they claimed that hearing a song on the radio would make listeners run out and buy the sheet music.

The Legal Outcome: The courts sided with ASCAP, establishing that broadcasting constituted a public performance. Radio stations were forced to purchase blanket licenses to play copyrighted compositions.

By the late 1930s, ASCAP held a virtual monopoly on American popular music, including the massive Tin Pan Alley catalog. Between 1931 and 1939, ASCAP aggressively hiked its licensing fees for radio by over 400%. When ASCAP attempted to double those rates again for 1941, the radio industry revolted.

The Boycott: On January 1, 1941, the National Association of Broadcasters (NAB) launched a total boycott of all ASCAP music. Over 1 million songs vanished from the airwaves overnight.

The Public Domain Solution: To fill the silence, radio stations flooded the airwaves with older music that was free from copyright restrictions, popularizing standard public-domain tunes like "Jeanie with the Light Brown Hair."

The Birth of BMI: Anticipating the fight, the radio networks had pooled their money to launch a rival licensing agency: Broadcast Music, Inc. (BMI). BMI signed independent country, blues, folk, and jazz artists whom ASCAP had historically ignored.

The Resolution: Left completely broke by the ten-month boycott, ASCAP surrendered in October 1941, accepting a drastically lower fee structure than before. This broke ASCAP’s monopoly and permanently elevated genres like country and R&B into mainstream American culture.

The Recording Industry Loophole: The Fight over the "Sound Recording"
While songwriters and publishers won royalties for the underlying musical composition (the lyrics and notes), a completely separate battle emerged over the physical sound recording (the specific audio captured on a vinyl record).

The Record Labels’ Panic: In the 1930s and 40s, record companies like RCA Victor stamped warning labels on their physical records reading "Not Licensed for Radio Broadcast." They feared that if people could hear the record on the radio for free, they would never buy the vinyl.

The Legal Loophole: In a landmark 1940 court decision, judges ruled that once a consumer bought a record, the record company could not dictate how it was used. Furthermore, U.S. copyright law at the time did not recognize a performance right for sound recordings.

The Permanent Inequity: This created a unique, permanent legal loophole in American law. To this day, when an AM/FM radio station plays a song, the songwriter and publisher get paid a royalty via ASCAP or BMI. However, the recording artist and the record label receive zero dollars from traditional radio broadcast.

The Digital Performance Right in Sound Recordings Act of 1995 (DPRA) created a historic legal split in American media. For the first time in U.S. history, it granted record labels and performing artists the right to be paid when their specific sound recordings were played publicly—but only if that playback occurred via a digital transmission.

Because of how Congress defined "digital transmissions," newer platforms like satellite and internet radio were forced to pay artists, while traditional over-the-air AM/FM broadcasters retained their century-old exemption.

The Threat of "Perfect" Digital Copies
In the early 1990s, the music industry panicked over the birth of digital audio technologies like subscription satellite audio and early webcasting.The Industry's Fear: Labels feared that digital transmissions would deliver CD-quality audio directly into people's homes. They worried consumers would use digital recorders to tape songs off digital channels, completely destroying physical album sales.

The Congressional Response: To protect the music industry from this perceived digital piracy threat, Congress passed the DPRA. The law created a brand-new performance right explicitly for digital audio transmissions.

The Legal Definitions that Split the Industry
The DPRA categorized audio transmissions into distinct legal buckets, which fundamentally dictated who had to pay artists and who did not:

Subscription and Non-Interactive Digital Services: This covered services that charged fees or broadcasted digitally over satellite and cable (and was expanded in 1998 via the DMCA to include internet radio webcasters like Pandora). Under the DPRA, these platforms were required to pay statutory license fees to artists and labels.

Why Traditional AM/FM Radio Remained Exempt
Congress explicitly carved out an exemption for traditional, over-the-air analog AM/FM radio stations. The National Association of Broadcasters (NAB)—the powerful lobbying arm for traditional radio stations—successfully convinced Congress to keep the old rule intact using three primary arguments:

The Promotional Argument: The NAB argued that AM/FM radio served as a free, nationwide promotional tool that drove consumers to record stores to buy music. They maintained that playing a song was a symbiotic marketing service, not a product that required a fee.

No Piracy Risk: Analog AM/FM signals were susceptible to static and interference. Congress agreed that analog broadcasts did not pose the same risk of high-quality digital music piracy as satellite or internet feeds.

Economic Impact: Broadcasters claimed that forcing local, free radio stations to pay an entirely new royalty would bankrupt hundreds of smaller, community stations

The Long-Term Consequences: SoundExchange and the Royalty Gap
The implementation of the DPRA permanently disrupted the financial landscape of the music business:

The Creation of SoundExchange: To handle this massive new stream of digital royalties, a non-profit collective called SoundExchange was created. Today, SoundExchange collects fees from digital webcasters and distributes them directly:
50% goes to the copyright owner (usually the record label),
45% goes to the featured performing artist, and 5% goes to a fund for non-featured musicians (like session players).

The Unfair Advantage Controversy: This created a glaring double standard. If a consumer hears a song on a traditional AM/FM car radio, the singer gets $0. If that same consumer hears the exact same song moments later via SiriusXM satellite radio or a Pandora stream, the singer gets paid.

The Ongoing Political Fight: The AM/FM exemption remains a fierce battleground. For decades, the music industry has heavily lobbied Congress to pass legislation—such as the recurring American Music Fairness Act—to finally close the loophole and force traditional radio to pay performing artists.