Congress Considers Performance Royalties for Terrestrial Radio

Since the inception of the medium, American radio broadcasters have been exempt from paying royalties to song performers (though not songwriters), on the theory that radio already provided a service to performers in the form of promotion. But with Internet radio, satellite radio, and MP3 distribution having radically reformed the music landscape, Congress is asking whether that exemption remains valid.

At issue is much of the business model of the American broadcasting industry, which has already seen tremendous change over the last decade with the consolidation of station ownership among a handful of companies, such as Clear Channel.

With members on both sides of the House Subcommittee on the Courts, the Internet, and Intellectual Property appearing united behind the ideal of charging broadcasters performers' royalties in the interest of "restoring parity," the balance would seem to be overwhelmingly tipped toward lifting the long-standing radio station exemption from owing performance royalties.

Part of the reason for considering lifting the exemption may be to help soften the blow for the performance royalty firm SoundExchange, if Congress should decide -- which appears likely -- to support legislation that reduces Internet radio's performance royalty commitment to a level on a par with satellite radio. If SoundExchange were to receive revenue from a new and already very well-developed source, it may be less willing to put up a fight.

Still, major radio broadcasters face the prospect of being financially responsible for the shifting landscape of music distribution. As the sole representative of the broadcast industry -- Charles Warfield, president and COO of ICBC Broadcast Holdings -- made clear, payments to royalties organizations would have to be compensated for somehow.

Stations may have to increase advertisements, and potentially reduce commitments to public service such as news and traffic - which relaxations in FCC regulations in recent years, ironically, would enable them to do.

For more: Lopsided Case for Performers' Royalties Made by House Subcommittee