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Berman, Leahy introduce radio royalties bills

Howard_bermanU.S. Rep. Howard Berman (D-North Hollywood) and Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, introduced a much-anticipated proposal today (download the PDF here) to require radio stations to pay performance royalties. Backers include several influential Republicans and Democrats in each chamber, such as Sen. Dianne Feinstein (D-Calif.), the RIAA and a host of recording artists. Just as notable, if not more so, is the team on the other side: the National Association of Broadcasters, a force that lawmakers have hesitated to oppose in election years. And the NAB cares very, very deeply about this issue.

Broadcasters around the world pay performance royalties, but U.S. stations have been exempt for decades. The NAB argued, persuasively, that stations shouldn't have to pay labels for the privilege of airing music because that airplay promoted record sales. But there's no consistency in Congress' approach. For instance, over-the-air stations must pay royalties to songwriters and music publishers, which hold copyrights on the compositions (as opposed to the performance of those compositions, which is covered by a separate copyright). And broadcasters have to pay both performance and composition royalties for songs transmitted online. Webcasters pay performance royalties, too, as do music services delivered via satellite and cable TV.

With a few notable exceptions, the Berman and Leahy bills wouldn't set a royalty amount for over-the-air broadcasts. Instead, it would leave the stations to negotiate the rate with labels. If those talks failed, a panel of copyright royalty judges would set the rate, just as they have for webcasters. It's worth noting that the rate set for webcasters is so high, even some of the biggest online stations (e.g., Yahoo's Launch music service) have threatened to shut down unless the labels agree to lower fees. That experience might discourage lawmakers from imposing a similar system on over-the-air broadcasts.

The bill provides an option for non-commercial and smaller commercial stations to pay a flat fee -- $1,000 for the former, $5,000 for the latter. Berman estimated that more than three quarters of the commercial music stations in the U.S. would qualify for the discount. Not surprisingly, the NAB wasn't mollified. Said NAB spokesman Dennis Wharton:

After decades of Ebenezer Scrooge-like exploitation of countless artists, RIAA and the foreign-owned record labels are singing a new holiday jingle to offset their failing business model. NAB will aggressively oppose this brazen attempt to force America's hometown radio stations to subsidize companies that have profited enormously through the free promotion provided by radio airplay.

Note the not-so-veiled appeal to lawmakers' nationalist and populist instincts. Nice work, Dennis!

Wharton also noted how much credit artists and label executives have given to radio for promoting sales. Still, as he noted, the business model for music is changing drastically, and it's not clear how much longer the industry will be able to live off the sale of albums and singles. Instead, its future appears to be built around multiple smaller revenue streams, reflecting the many different ways music enters people's lives. In that context, it's worth asking why over-the-air broadcasters are uniquely eligible to play music for free. For now, though, the NAB seems to have a strong hand; nearly 120 House members have signed onto a resolution opposing performance royalties for local stations.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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