RIAA vs. Public Radio – Performance Rights Act Moves Ahead

If one were to frame this as a case of biting the hand that feeds it, there would be plenty of people who wouldn’t be surprised at the comparison. A bill in the US is moving ahead that would tack on a brand new tax onto public radio broadcasters where if radio plays music, they have even more royalty fees they have to pay.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

It’s not hard to see why the RIAA (Recording Industry Association of America) wants this bill passed. Just read this part of a PC Mag article:

Stations with annual revenues of less than $100,000 would pay a flat fee of $500 each year. Stations with revenues between $100,000 and $500,000 would pay $2,500, and those earning between $500,000 and $1.25 million would pay $5,000 annually.

Stations making any more than that each year would have to negotiate royalty payments with the Copyright Royalty Board (CRB), a government body that sets royalty rates.

Stations that gross less than $5 million per year would not be subject to these fees for three years, and stations making more than $5 million would not have to pay for one year.

Essentially, it would mean a brand new stream of revenue. The bill cleared committee with a 21 to 9 vote and is now moving to the House for a full vote.

Of course, the National Association of Broadcasters isn’t amused. There’s some history between radio broadcasters and the record industry. In a previous incident where the record industry demanded additional royalty payments from radio broadcasters, the provision was that every time radios played their music, the radio stations would have to pay royalties to the labels. Once that became the case, then the radio broadcasters boycotted the major record labels and played independent music. Once the major record labels saw their music sales tank, they had to renegotiate with the broadcasters again and were forced to back down on the royalty demands.

So what’s the difference between then and now? According to a summary from Open Congress, the Performance Rights Act, or H.R. 4789, the bill would “establish a flat annual fee in lieu of payment of royalties for individual terrestrial broadcast stations with gross revenues of less than $1.25 million and for non-commercial, public broadcast stations”. Clearly, the record labels have learned from history and the broadcasters are not amused. Judging by the summary, you could play nothing but public domain Beethoven music all day long and still have to pay royalties to the record labels. Not hard to see why the National Association of Broadcasters are furious over this – it almost appears to be an existence tax.

As Techdirt notes, the history goes beyond just a royalty dispute. Techdirt’s article says, “of course, the most damning argument against the recording industry’s demand for money here is the fact that, for decades, the industry has (illegally) had the money go in the other direction. The system of payola has shown, quite clearly, how much the recording industry values airtime, in that it’s willing to pay radio stations to play its music.

So, can anyone explain why it’s illegal for record labels to pay radio stations to play music, but it’s okay for Congress to force radio stations to pay the record labels for playing their music? It defies common sense.”

Techdirt goes as far as calling this an RIAA bailout, but other bloggers go so far as to calling this a Britney bailout.

As we’ve alluded to throughout the article, the National Association of Broadcasters aren’t entirely amused by the whole idea. They even started a website at noperformancetax.org which has this to say:

In recent years, the record labels have seen sales of albums decline as more listeners opt for digital downloads. However, radio remains the number one promotional vehicle for music — it’s not responsible for the label’s resistance to the digital age, and it shouldn’t be on the hook to fix it. Radio already provides between $1.5 to $2.4 billion dollars annually in music sales for artists and record labels. By pushing a tax on local radio, record labels are biting the hand that feeds them.

Where does the money go?
In short, the money would flow out of your community and into the pockets of the record labels — the great majority of which are foreign-owned. The record labels would like for you to think this is all about compensating the artists, but in truth the record labels would get at least 50% of the proceeds from a tax on local radio.

How does this affect me?
If you’re one of the 235 million people who listen to radio each week, a tax could reduce the variety of music radio stations play, and all but eliminate the possibility of new artists breaking onto the scene. The tax could particularly affect smaller, minority-owned stations, some of which may have to switch to a talk-only format or shut down entirely.

It also affects your community. Radio stations are major contributors to public service — generating $6 billion in public service annually and providing vital news and community information and free airtime to help local charities. If a tax were imposed, stations’ critical public and community service efforts could be reduced.

And worst of all, if you’re one of the 106,000 Americans employed by local radio your job could be in jeopardy. In these troubling economic times, the last thing local radio needs is to be hit with a tax that some analysts estimate could be $2-7 billion annually.

It’s hard to say where this is going to go, but one thing is for sure, any movement on this legislation is bound to create some fireworks given that there are two huge US associations butting heads over this.

Drew Wilson on Twitter: @icecube85 and Google+.

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