by : Music Law, October 2009

Recording Industry v. Broadcasting Industry

In February of this year the House of Representatives Judiciary Committee approved a bill that would implement a new royalty fee on terrestrial radio broadcasters (AM/FM) for the public performance of sound recordings. This is a separate royalty from the one paid to performance rights organizations like ASCAP, BMI, and SESAC, who compensate composers and publishers of the underlying compositions. The new performance royalty will require broadcasters to pay for use of the actual sound recordings during their broadcasts, compensating the performing artists, producers, and record companies in addition to the royalties they already pay. This marks the first time the recording industry has demanded such fees from broadcasters, which has since has spiraled into a series of heated debates that are still being disputed.
Sponsors of the new bill, known as the Performance Rights Act, state many reasons for implementing the new royalties. House Judiciary Committee Chairman John Conyers relays that legislation has “Introduced the Performance Rights Act to ensure fairness so that any service that plays music pays those who create and own the recordings – just as satellite, cable and internet radio stations currently do. Working with the Senate, I hope that Congress may act quickly to pass this important legislation to level the playing field between different technologies and ensure rightful compensation to performers.” To counter this statement, David Rehr, CEO of the NAB (National Association of Broadcasters), argued that the new “performance tax” would be detrimental to local radio stations and new artists trying to break into the business. Rehr also states that the majority or “at least half” of the collected fees will be paid directly to major record labels, and not benefit the artists as much as the bill proposes.
Furthering controversy over the new performance royalty, organizations have begun to speak out for their cause via radio and Capitol Hill rallies. The Free Radio Alliance opposes the “performance tax,” while the MusicFirst Coalition is trying to persuade congress to adopt the performance royalty.
More recently, the MusicFirst Coalition has asked the FCC (Federal Communications Commission) to investigate broadcast stations that have allegedly boycotted, or cut back on playing, artists that support the performance royalty and run spots on their opposition to the Performance Rights Act. A petition, the First Amendment rights of broadcasters, has since been circulated, arguing that the rights of artists and record companies to collect royalties from broadcasters is so essential that the broadcasters First Amendment rights should be abridged, not allowing them to speak against the new policies.
The National Association of Broadcasters have successfully gained the support of about 240 Congressional Representatives to sign a resolution opposing the adoption of the performance royalty for the use of sound recordings. However, the efforts to enact the regarded legislation have only intensified as a result.
The senate has yet to reach a final decision regarding this movement and is encouraging both parties to negotiate for an appropriate royalty prior to the imposition of one by the government. Newly appointed NAB president, Gordon Smith, will have an interesting term with the inherited controversies broadcasters are facing from the FCC and Congress.

By Sawyer Stoltz


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