I understand that commercials pay the studio for air time, but how do the studios get paid for the songs they play?
Generally and historically, the stations do/did not get paid, they paid.
Since the music is the draw that brings in listeners (the product) for which advertisers (the customers) pay money, the stations actually paid the producers of the music for the privelege of using that lure to bring in listeners. The payment was arranged with the various trade associations of record companies and monitored by the keeping of logs.
There has been a bit of a dust-up in the last few years in which radio stations began seeking “compensation” from various artists to play their music (basically saying “I want to reduce my costs. If you want the air time (that you need to get your song “advertised”) you must pay me for the privelege.” I do not know the mechanics of that process, although it probably is also based on a fee-per-play with a log determining the payment schedule.
Short answer - “independent promoters” pay station programmers illegal payola cash, then turn around and milk the major labels for cash. This ensures that only major label-backed music makes it to the air.
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Tomndebb pretty well sums it up. Broadcasters pay royalties for the music that they broadcast. The royalties are divided up between the various players in the music industry - writers, performers, publishers, etc.
Most of the artists, publishers and so forth have arranged for their royalties to be collected by one of a smallish number of performing rights societies, which monitor the airwaves, collect the royalties from the broadcasters and divide them up among those entitled. Broadcast Music Inc is the largest such organisation in the US; the Performing Rights Society in the UK.
The division of royalties was first fixed in the 1920s, when recorded music was mainly a publicity vehicle to promote the sale of sheet music. For that reason the lion’s share of royalties still goes to the composer and publisher of the song, with relatively little going to the performer. Which is why Paul McCartney and the estate of John Lennon are fabulously wealthy beyond the wildest dreams of avarice, while Ringo Starr and the estate of George Harrison are just very wealthy indeed.
As the articles linked to by Freejooky point out, the promoters don’t care about breaking certain laws. That means they also don’t care about breaking other laws, e.g., those against breaking the legs of people who don’t “play the game.”
These are very powerful companies who have a lot of friends in Washington DC. Ergo, no legal worries.
A few years ago, Internet Radio started getting big. The companies involved stepped in, forced the royalty fees so high that the little guys can’t compete. Problem solved. Everybody still got their campaign contributions. Nice.
The basics have been covered, but I just wanted to make explicit the point for the OP that radio stations are not supposed to get paid for the songs they play. In fact, it’s illegal.
It’s the other way around. They are supposed to pay the composers for the right to play the songs.
If you look back to the “payola” scandal of 1959, one of the country’s most famous broadcast personalities, disc jockey Alan Freed (and others, such as Dick Clark), were disgraced during a congressional investigation of allegations that radio stations were taking money for playing songs.
As has been mentioned, there has grown a system of “independent promoters” that is extorting money from record companies (and, really, keeping much of the money from themselves) and sharing the money with radio stations. This system violates the spirit of the law and probably the letter of the law as well, but the Justice Department has not really moved against it yet, most probabaly for political reasons.
This is not what happened. The royalty rates were not set by a political process and I don’t think you can point to any elected official who benefited by getting credit for the royalty rates. The arbitration system by which the rates were set is actually still under dispute.
Incidentally, this arbitration system (which has roundly been declared a failure by all parties, whether political or commercial) gives royalty setting authority to bodies called Copyright Arbitration Royalty Panels, usually abbreviated as “CARPs.” The astute might notice that the phrase “Copyright Arbitration Royalty Panel” is actually nonsensical. It leads one to ask questions such as “What the hell is an ‘arbitration royalty’ and how does a panel set it?” or “What the hell is a ‘royalty panel’?”
Of course, what it really is is an arbitration panel that sets copyright royalties. So it should be called a “copyright royalty arbitration panel.” So why isn’t it? Well, because when you abbreviate “copyright royalty arbitration panel,” you get “CRAP.”