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House majority supports radio’s exemption from performance royalties

nab logo rectangleThe National Association of Broadcasters (NAB) announced that a congressional majority has signed onto a resolution called the Local Radio Freedom Act. The bill opposes any change to radio’s existing and long-standing exemption from paying a performance royalty to labels and musicians, for broadcast use of recorded music.

The NAB describes the resolution as an “anti-performance tax resolution,” referring to the possibility of a government-enforced performance royalty applied to broadcast radio. (It’s not exactly a tax, despite the effectiveness of branding it that way.) Opponents of the bill are pushing for radio to pay musicians for the records it uses.

Terrestrial radio has always been exempt from a statutory requirement to pay for the recordings that are broadcast over the medium. Satellite radio and Internet radio are not exempt, and pay performance royalties regulated by the U.S. government. That unevenness in the business landscape of music listening drives some lawmakers and lobbyists to call for radio, satellite, and Internet radio to have the same royalty rules.

Opponents of the anti-royalty resolution also point out that The United States is one of the few western nations where radio is exempt from performance royalties. The persistent radio exemption puts the U.S. in the company of Iran, North Korea, and China. (U.S. radio does pay licensing fees to songwriters, composers, and publishers, which represent the other side of creator/performer collaboration which owns the rights to most music.)

The historical justification for radio’s free use of music recordings is based on promotional value — radio builds hits, and sales. Detractors insist that the rationale is outdated in the digital era, when other forms of listening also promote music, but must pay for its use. Pandora, for example, pays roughly half of its revenue to labels and performers, and accounts for about half of all collections by SoundExchange, which distributes royalties to rights-holders.

Without question, a new content expense would be burdensome to many radio stations which have never needed to budget for recordings. Along that line, the NAB emphasizes the importance of maintaining the status quo as a local-business issue:

“We applaud all the co-sponsors of the Local Radio Freedom Act for voicing their strong support for America’s hometown radio stations,” said NAB President and CEO Gordon Smith. “A job-killing performance tax would be devastating to free and local radio, which has an overall economic impact of over $513 billion in Gross Domestic Product and generates more than one million jobs annually.”

Opening a business avenue between zero royalties and imposed royalties, Clear Channel, the largest radio group in the U.S., has been on a deal-making tear with record labels including Warner Music Group, one of the largest. In that and other agreements, the two sides package revenue sharing and promotional sharing that includes paying terrestrial performance royalties.

Brian Lakamp, head of digital for CC, recently told RAIN, “Those deals are about building a sustainable and long-term model by which radio and the record labels partner to develop artists and an economic model that makes sense for everybody […] In our ideal world, we would negotiate and come to a market-based resolution of all issues.”

 

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Brad Hill

2 Comments

  1. Digital became prevalent after terrestrial over free air radio (TOFAR) was created, and c/r laws were amended then. TOFAR was already in practice and grandfathered in. I disagree with the proposal to add record label performance royalties onto a struggling TOFAR business. Why are the labels changing their position when not too long ago the labels were PAYING TOFAR to play their new releases and records, now they want money for the same thing. Why? Is it to prop up their self inflicted wounds now in retribution for their financial missteps in the market ?

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