Congress to debate lifting broadcast radio's royalty exemption

Since the dawn of the musical era in radio, broadcasters have been free from paying royalties to musical performers. Radio was once the bands' ticket to the big leagues. That may change if two congressmen have their way.

In a hearing last July, Rep. Howard Berman (D - Calif.) made it extremely clear that he believed the fact that terrestrial broadcast radio doesn't compensate performers for the songs they play, and never have, is a clear and present danger to the lives and well-being of a multitude of performers who may literally lie destitute in nursing homes today.

Yesterday, Rep. Berman and Sen. Patrick Leahy (D. - Vt.) offered to the floors of their respective houses legislation that would effectively codify the rectification of what Berman has literally characterized as evil: a very slight addition to US law that would enable the Copyright Royalties Board to determine royalties to be paid to a performers' rights organization, by stations earning more than $1.25 million in annual gross revenue per year.

Stations earning less than that amount would pay a $5,000 annual fee. Public radio stations would pay $1,000 per year, apparently even if they don't have a contemporary music format. Sen. Orrin Hatch (R - Utah) and Rep. Darrell Issa (R - Calif.) are co-sponsors.

"With introduction of this bill," Rep. Berman stated last night, "we have taken the first step to provide artists, musicians, and labels with compensation for their contribution to the music we hear over the radio. It's only fair that we work toward parity for the different technology platforms that deliver that music, but we still have a long road ahead of us. We have only started the lengthy process of addressing songwriter concerns, broadcaster issues and greater parity."

Leading the advocacy against the bill on behalf of terrestrial stations is the Free Radio Alliance, whose spokesperson, Cathy Rought, issued a statement last night.

"This bill, which was so long in the making, is drafted around exemptions and discounts, and the result is bad public policy," Rought wrote. "Any fee -- regardless of whether it's discounted, tiered or reduced -- will only serve as a foot in the door for the record labels to establish precedent for higher fees down the road. With copyright fees, history is pretty clear: Rates will only continue to go up. If passed, this could threaten the survival of local radio stations, would reduce the quality of their programming and would almost certainly reduce diversity in radio. This flies directly in the face of the goals that Congress and the FCC have set for our airwaves."

Rought cited the history of similar performance royalties measures in Canada. There, as for broadcasters in America, radio stations centralize their music repertoires by copying their songs onto local hard drives, and letting software easily arrange and shuffle their play lists. In the late 1990s, it was realized that such copying constituted a formal reproduction, thus paving the way for artists and performers to be compensated for what effectively amounted to a single reproduction process that directly benefitted thousands of listeners.

Since 2003, the Canadian Association of Broadcasters has been petitioning the Copyright Board of Canada to adopt a fairer system for determining royalties rates, for the single acts of reproduction necessary to wean broadcasters from having to still use turntables. In Canada, the CAB says, parliament ministers fall victim to lobbyists and special interests who use their leverage to boost those rates...and it's that nightmare that Rought doesn't want to see replicated here.

"The handwriting is on the wall," she wrote. "These bills follow a failed Canadian policy for guidance, and seek to adopt something similar here. No radio station, or ultimately any local business that plays recorded music, will be spared if things go the same route. Restaurants, bars, health clubs and other establishments will have to eventually contribute their hard earned dollars to the record labels."

On the floor of the House yesterday, Rep. Berman responded to that criticism by remarking the legislation would only apply to terrestrial radio. "The bill repeals the current broadcaster exemption," he said, "but it does not apply to bars, restaurants and other venues, or expand copyright protection in any other way."

Indeed, neither version of the bill mentions bars and restaurants where music plays from loudspeakers. In fact, the principal pertinent addition that the Berman/Issa House version of the bill (the Senate version is identical for now) would make to US Code is literally the deletion of a single word. 17 U.S.C. 106 currently authorizes the Copyright Royalties Board to determine fees that would be paid in a handful of circumstances, number six of which reads as follows: "in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission."

The amendment proposed by the new legislation would delete the word "digital." For grammar's sake, it would then replace "a" with "an."

"Never in the past have there been more engaging technological platforms which offer music to consumers at almost any time, in any format," reads Rep. Berman's speech to the House, which was read into the record yesterday. "Especially with the roll-out of HD ('hybrid digital') radio which will provide greater choice, it becomes harder to justify an exemption for any one platform.

"While calling the performance right a tax might make for good rhetoric," Berman continued, referring to opponents' common phrase for the new royalties tier, "it is also good rhetoric to call it 'corporate welfare' when the U.S. Code compels copyright owners, artists and musicians to give broadcasters their music for free. It is simply time to eliminate this anachronistic and unjustified subsidy."

But while Berman adds weight to his side of the issue by casting it in the light of welfare reform, Rought compensates by casting it in the light of civil rights.

"For the government to fundamentally meddle with the established business model of one industry," Rought wrote yesterday, "solely to benefit another industry whose business model has failed to keep pace with technology is not the way we should run our country. The unintended harm to everyone from small radio station owners to nonprofit groups to the Hispanic, African-American and other diverse communities will be felt far and wide if this passes."