House bill would strike radio's exemption from performance royalties

In the first round of a new chapter in the music royalties debate, the chairman of the House Judiciary Committee has proposed a fresh bill that would excise language in US law exempting terrestrial radio stations from paying royalties.

In one of his first major moves since abolishing the House Subcommittee in charge of Internet and intellectual property-related issues, Rep. John Conyers (D - Mich.) today introduced fresh legislation that would close the books on a key exemption in place ever since the formation of the radio industry in the 1920s: the exemption enjoyed by radio stations from paying royalties for performances of a musical work.

Terrestrial stations in the US have always paid copyright holders' royalties, and historically it's been for a negotiated upon annual amount, set with the cooperation of bargaining agents that collect royalties on behalf of rights holders. But performers have never seen a dime from airplay; in fact, during the scandalous 1960s, record labels were accused of, and often found to have been, paying radio stations for airplay -- the famous "payola" affair.

But with Internet radio fast becoming a fixture of American life, and with streamers accountable for both rights holders' and performers' royalties, some in Congress are working to assemble some sort of parity. Opinions on this matter are not at all split along party lines; in fact, the person who would have chaired the committee Rep. Conyers eliminated, Rep. Rick Boucher (D - Va.), may very well have opposed this legislation.

A very early draft of HR 848 received Wednesday afternoon by Betanews reveals the main clause of Conyers' bill would simply remove the exemption paragraphs. That clause is entitled, "Inclusion of Terrestrial Broadcasts in Existing Performance Right." The bill does not stipulate how much stations would pay, with a few exceptions: Commercial stations whose gross revenues are less than $1.25 million per year may pay a minimum annual fee of $5,000, and public broadcasters may pay only $1,000.

And a very curious clause in this early draft addresses a matter raised two weeks ago, when the Copyright Royalty Board accepted a revenue-based rights holders' royalties scheme for Internet broadcasters. At that time, the CRB judges opted to allow streamers to reduce the amount of royalties paid to rights holders by the amount they pay to performers. The move by judges may have been a key concession to streamers who had argued that, although the collection agencies for performers' and rights holders' royalties are different, the collections end up going to the same resource in the end: the record labels.

Conyers' bill would expressly prohibit any kind of converse reasoning to be applied in the case of rights' holders assessments, stating specifically that rates established by the CRB may not "be cited, taken into account, or otherwise used in any administrative, judicial, or other governmental forum or proceeding, or otherwise, to reduce or adversely affect the license fees payable to copyright holders of musical works or their representatives for the public performance of their works by terrestrial broadcast stations."

As if on cue, National Association of Broadcasters President and CEO David Rehr sent a public letter to House Speaker Nancy Pelosi in opposition to Conyers' bill. Its language should be very familiar by now:

"Local radio broadcasters consider this fee a 'performance tax' that will not only harm your local radio stations, but will threaten new artists trying to break into the business as well as your constituents who rely on local radio," Rehr wrote Speaker Pelosi. "Although the proponents of H.R. 848 claim this bill is about compensating artists, in actuality at least half of this fee will go directly into the pockets of the big record labels, funneling billions of dollars to companies based overseas."

Later, Free Radio Alliance spokesperson Cathy Rought reminded the public of the history of similar legislation in previous Congresses. "Congressman Conyers' re-introduction of a performance tax bill on local radio is disappointing, especially since the bill doesn't reflect the views of the majority of his colleagues," stated Rought. "Last year, the more than 226 members of Congress stood with local radio in opposing any measure that would tax local radio to benefit the big, foreign-owned labels. Especially in the dire economic times we all face, any measure which will threaten the family-supporting jobs of more than 125,000 people employed by radio, the more than $6 billion in local community support of non-profit and service organizations, and the ability to introduce more diversity in station ownership is a short-sighted approach and bad public policy."

The performance rights organization SoundExchange, which collects royalties on behalf of performers, had not yet issued a comment Wednesday afternoon.