Streaming Radio Royalties Set To Affect Terrestrial Radio
The second, introduced by California Demoractic representative Howard Berman, calls for the exact opposite. In December, Representative Berman introduced H.R. 4789, now under discussion in a House subcommittee, supporting a "performance fee" that radio stations would pay for any recorded performance they play over the air.
Radio stations, backed by the National Association of Broadcasters (NAB), oppose the performance fee, as do a number of members of Congress, but SoundExchange applauded the move as it would be the disbursing agency to send funds to the labels and artists, minus an administrative fee.
"The performance fee would disrupt the mutually beneficial relationship between local radio stations and recording industries," said Representative Conway, who opposes the newer resolution.
Think there's not a direct line between the battle last year for internet radio and this year's move to force performance fees on traditional radio? SoundExchange notes that satellite radio and internet radio pay performance fees to artists, which makes traditional radio the "odd man out."
"Now we have a situation where one format—AM/FM radio—has a competitive advantage over digital radio," said Nancy Sinatra, Frank Sinatra's daughter, in prepared remarks before the House Subcommittee on Courts, the internet and Intellectual Property. "This isn't any more fair to digital radio than it is to artists."
SoundExchange feels fairly certain it will win this battle, as well, as it's gifted several digital songs and a can of herring to the NAB, in response to NAB's presentation of the fact that performance fees could cost the traditional broadcaster more than $7 billion in revenues. SoundExchange, in turn, notes that traditional broadcasters sell advertisements and these revenues are not shared with artists, which it calls piracy.
"It's a form of piracy, if you will, but not in the classic sense as we think of it," Martin Machowsky, a musicFirst spokesman, said in recent remarks reported at Wired.com. "Today we gifted them a can of herring, about their argument that they provide promotional value. We think that's a red herring."
The "promotional value" argument has been one that traditional radio has held since its inception, arguing that it provides airplay for artists that the labels are seeking to promote. Traditional radio often does this at the expense of unsigned artists, increasingly so in the area of large radio conglomerates such as ClearChannel, but SoundExchange argues that radio no longer provides the uptick in sales of mainstream artists that it once did, so radio stations need to provide artists with additional revenues.
"Nobody listens to the radio for the commercials," said Machowsky.
The NAB disagrees vehemently.
"If it wasn't for radio play, most of the performers wouldn't be known," counters NAB vice president Dennis Wharton, tagging its contributions to the recording industry at over $2.4 billion annually.
In the end, unsigned artists might just begin to get airplay if H.R. 4789 passes, but more than likely the outcome will be increased pressure to institute the royalty fees on internet radio that the CPB passed last year. To that end, Pandora's founder, Tim Westergren, has been noting that the current royalty rates mean his company is paying $18 million per year in royalties on about $25 million in total revenue, losing more than $1 million a month.
His morality tale is something the NAB wants to avoid.
"Internet radio is being crushed because of this dynamic between rights holders and radio," Westergren said. "If this doesn’t get fixed, we go out of business. If we found out on Monday that there’s not going to be a solution, we pull the plug that evening because we’re burning cash."
SoundExchange is unswayed by Westergren's argument, that internet radio pays a higher percentage than cable or satellite radio.
"This is about Pandora and its venture capitalists coming to Congress and trying to get a corporate earmark," Richard Ades, SoundExchange spokesman, quipped.
"These different royalty rates reflect different lobbying power," said Westergren, who is attempting to suggest internet radio royalties be stabilized at 7.5% just like cable and satellite radio.
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