Radio Royalty Bill Headed for Fall Markup in Senate

Feinstein said S-379 incorporates work in companion legislation, HR-848, that the House Judiciary Committee approved May 13 (CD May 14). The full House hasn’t voted on HR-848. “There will be legislation,” Chairman Patrick Leahy of Vermont said at Tuesday’s hearing. “I urge you to sit down and talk,” he told broadcasters, who have fought hard against the legislation. An HR-848 provision aimed at helping smaller broadcasters, which would set a flat royalty rate of $500 a year for small stations, “is less than most radio stations pay their lobbying organizations,” he said: “We will need to consider similar amendments to address the legitimate concerns of smaller broadcasters” when the committee takes up the bill in the fall.

Broadcasters strongly oppose the bill and have fought similar efforts for years. They refused to take part in negotiations when HR-848 was being marked up. When the committee approved the bill after the contentious House markup, broadcasters took solace in the one exemption carved out for small minority and religious broadcasters allowing them a break on royalty payments.

The recording industry is pushing for the legislation so it can offset its losses from the economic downturn, said Commonwealth Broadcasting President Steven Newberry, speaking for the NAB. “It makes little sense to siphon revenues from local broadcasters to prop up the recording industry’s past failings and ill-advised business decisions,” he said. Nielsen data show that radio air play increases sales for artists and record labels, he said. S-379, aimed at broadcasters, would created a new “entitlement” for the recording industry, he said. “This would be the worst time to impose additional fees on local radio stations” hurt by the recession.

Ralph Oman, a Georgetown University professor of copyright law, praised S-379 for not taking a “cut the baby in two” approach by pitting performance royalties against those paid to songwriters and record labels. “The bill explicitly states that the new public performance right for sound recordings will not in any way adversely affect the royalties payable to the songwriters,” he said. Broadcasters’ vehement opposition to the bill shows that the companies know they wouldn’t be able to divide up royalties, an idea some broadcasters have endorsed, Oman said.

Oman opposes broadcasters’ position that free publicity is a fair tradeoff for compensating performers. “The broadcasters’ exemption runs counter to all other rules of business, and it runs counter to our legal system,” he said. “Promotion value cannot justify free use. Instead, it should be a factor in determining the appropriate royalty, just as it is in market negotiations for other content that radio stations use, and as it is in the statutory license for other platforms, such as Internet radio,” he said. The absence in the U.S. of a performance right, common in other countries, “costs us millions of dollars a year in lost revenues in foreign markets,” Oman said.

“Radio is the only part of the music business where our work is used without permission,” said performer Sheila E., speaking for the musicFIRST coalition, which is lobbying hard for the bill.

Online radio services want a fair royalty-payment system across all platforms, regardless of size, Robert Kimball, Real Networks executive vice president, told the committee. The government shouldn’t be picking winners and losers when broadcast, cable, satellite and Internet radio compete, he said. “Adopt a single, uniform royalty-setting standard … that consistently yields reasonable results for sound recording producers, artists, songwriters, music publishers, and radio services,” Kimball said. Internet radio pays much higher recording royalties than broadcast or satellite, he added, and that exposes the “fundamental unfairness created by the Copyright Act’s discrimination against Internet radio.”

Rounder Records founder Marian Leighton-Levy said the bill would “provide significant revenue” to many musical artists. He said broadcast radio is only one of many platforms that publicize music and make it popular, so the exemption from royalty payments no longer is merited. “Harming broadcasters it the last thing we want to do. … All we are asking for is fair compensation for use of our work.”

Minority broadcasters pleaded with the committee to consider financial problems making it “impossible” for the industry to absorb new royalty payments. Hedge fund investments gone bad have devastated the bottom line for many minority stations, said James Winston, executive director of the National Association of Black Owned Broadcasters. A second blow is resulting from Arbitron’s use of Portable People Meters to measure the number of listeners, he said. The devices, which Winston deems “inaccurate,” are hurting ad revenue. “Arbitron’s abuse of its monopoly position in the radio ratings industry” is an antitrust problem that the committee should study, he said.

Feinstein asked Newberry to explain why broadcasters continue to refer to the royalty proposal as a “tax.” “You can call it a tax. You can call it a fee,” he said. “There’s no question it’s a movement of money from one industry to another” at the government’s direction.

A proposal by Sen. John Cornyn, R-Texas, to let artists opt out of radio airplay, instead of making broadcasters pay them royalties, drew a cool reaction from all sides. A “do- not-play list” would have to be nationwide, to ensure that artists don’t strike deals with big broadcasters and leave out small ones, Winston said. Oman said the proposal would run counter to copyright law’s protection for the “small and the powerless.” Newberry said the proposal “certainly does draw a line in the sand,” but station-by-station negotiations for airplay would harm independent stations especially in the rural U.S. Sheila E. said that “would move everybody away from radio.” Sen. Dick Durbin, D-Ill., said giving an opt- out to performers would nullify the wishes of composers. Leahy proposed a royalty rate based on market size to protect small stations. Newberry protested that “our radio stations are much more than the songs we play.” They're also the “local personalities” that enliven broadcasts, he said.

“We're really not talking parity” with satellite, online and cable platforms, Newberry said, because broadcasters have regulatory duties that the others don’t. Feinstein said the royalty obligations of small webcasters are proportionally far greater than those proposed for similar-sized radio stations. Kimball said both seek “niche” audiences and the regulatory burden on broadcasters is far lower than the proposed royalty difference. Oman said broadcasters received a “tremendous public subsidy” from free spectrum.

Leahy urged broadcasters to negotiate with artists, “because legislation will move” and he wants it to “reflect your interests.” Durbin said he was shocked to get a call from ASCAP years ago demanding he pay royalties to publishers for 22 songs he played as a club owner. “'You sold a lot of beer because of that music, right?'” Durbin recalled being told. It’s not “fundamentally just” to deny royalties to performers, he said. Newberry said broadcasters were being singled out when restaurants and ballparks also play music. Durbin replied that it’s broadcasters’ whole business.

Asked by Feinstein about webcasters’ concerns over “songwriter protection” provisions in the royalty bills, Oman said the players are in talks about the provisions, and “misunderstandings” would soon be “allayed.” He pointed to “good faith on both sides.”