It’s the same, only different. That’s the way many observers on both sides of the debate over whether AM/FM radio should pay a performance royalty are assessing the prospects that broadcasters will be able to successfully beat back legislative efforts during the new congressional session. So what is the same, and what’s new? Here’s a look:
There may be some tweaks, but even before the ink dried on the proposed Fair Play Fair Pay Act (H.R. 1836) it was evident the goal was the same. Rep. Jerrold Nadler (D-NY) wants AM/FM radio to pay a performance fee on music used for over-the-air broadcasts.
National Association of Broadcasters president Gordon Smith thinks the sentiment in Congress largely remains unchanged, with lawmakers recognizing the role local radio plays in jump-starting the careers of musicians and sustaining legacy artists. “The internet and piracy has hurt the business model of record labels—we understand that,” Smith said. “But let’s not punish free and local radio with a new fee that would threaten the viability of music-playing radio stations.”
Like similar legislative proposals made in the past, the latest iteration of the bill would offer a carve-out for small stations with less than $1 million in annual revenue. Nadler said the bill would also protect news/talk and religious stations from having to pay any royalties at all.
But National Religious Broadcasters VP of government relations Aaron Mercer isn’t swayed. “The issue remains the same—and that is performance royalties place a burden on local stations,” he said. “We don’t think the benefits of music airplay are a one-way street.”
The music industry said while the bill may have a déjà vu feeling, the tides are shifting somewhat. “This issue has never been riper for action,” SoundExchange VP of global public policy Julia Massimino said. “The lack of a performance right has always been unfair. But the impact of that inequity has never been so stark.” She points out that 51% of the recording industry’s 2016 revenue came from streaming services.
That shift is engaging more artists in the debate according to The Recording Academy’s chief lobbyist, Daryl Friedman. Organizers have seen a record number of artists taking part in lobbying blitzes like the recent Grammys On The Hill event in Washington. “In some ways we feel like this is the year that we have all been working toward,” Friedman said. “We’re seeing a fever pitch among artists to say it’s time to fix this—that’s why it feels different this year.”
Over the years radio royalty proposals have used different strategies and legislative language all ostensibly ending in the same place: Congress creating a performance right on AM/FM airplay. But Rep. Darrell Issa (R-CA) threw a curveball into the game earlier this month when he introduced the Performance Royalty Owners of Music Opportunity to Earn Act or “PROMOTE Act” (H.R 1914) which would allow an artist to opt-out of having their music played by broadcasters if stations don’t pay a royalty that’s identical to that paid by non-subscription digital streaming services.
Issa’s critics—who note that he was among five lawmakers who cosponsored the Fair Play Fair Pay Act—see the bill as an attempt to ramp up pressure on broadcasters. But supporters say the bill is a natural outgrowth of Issa’s longtime support of a radio royalty and his legislative personality. “He’s someone who really likes to figure out how to make progress on policy issues and so he is constantly thinking of new approaches, which is refreshing in Congress,” Massimino said. Capitol Hill insiders say Issa may also be sending a signal that if he succeeds Rep. Bob Goodlatte as Judiciary Committee chairman, he’ll keep the performance issue on the agenda.
Issa said his bill “calls the bluff” of both the radio and music industries. That’s something The Recording Academy’s Friedman said presents the radio industry with an opportunity to either embrace or abandon its argument that AM/FM promotes artists and their music. “If that’s the case they should have nothing to fear from the PROMOTE Act which simply said the artists have control,” Friedman said.
One broadcast lobbyist pushes back, saying it would be a boost for radio to show how few acts would blacklist their own records. “What idiotic musician would say they don’t want us playing their records on radio,” he said. But the NAB said it has “significant concerns” with Issa’s legislation. Spokesman Dennis Wharton said it would “upend the music licensing framework” and result in less music being played on the radio—something that would hurt not only listeners but also musicians trying to sell records.
That’s something not lost on the songwriting community. While the performance rights organizations have yet to weigh in on Issa’s proposal, the fear that the change could result in smaller ASCAP, BMI and SESAC payouts to songwriters has led to what some say is a tepid response to Issa’s bill among the music community. “The legislation has some holes in its logic, so it almost seems more about grabbing attention rather than thoughtfully considering this issue,” Fletcher, Heald & Hildreth attorney Karyn Ablin said.
Since it was first used eight years ago, the introduction of concurrent resolutions in both the House and Senate have successfully deterred Congress from taking action on any bill that would create a radio royalty. It’s no different in the 115th Congress. What’s been labeled the Local Radio Freedom Act has been signed by 168 House members—more than half the 216 currently needed to block legislation—and 21 Senators have gone on record opposing a performance royalty for AM/FM radio.
The NRB’s Mercer thinks it’s a boost for radio that hundreds of lawmakers aren’t remaining silent and are signing onto the resolutions. “They still understand the importance of radio to their local communities and the importance of these local stations in the music airplay that they give artists,” Mercer said.
Yet could the sameness of the resolution mean its impact is wearing off? The Academy’s Friedman thinks so. He said many members of Congress have told the music community that their signature means nothing in terms of how they may vote on an actual piece of legislation and points out some lawmakers who’ve signed in the past are so far withholding their support.
One reason, according to SoundExchange’s Massimino, is that more members of Congress are waking up to the fact that the lack of a performance right in the U.S. means American artists are losing out on hundreds of millions of dollars that they’ve earned in other countries—money that would otherwise be taxable income. “That is impactful,” she said.
Friedman thinks the resolutions could also be interfering with the odds that common ground will be found. “The resolution is a drug that the NAB is feeding its membership that gives them a quick high and makes them feel good but it’s terrible for the long-term solution because it keeps kicking the can down the road,” he said.
In the meantime, the NAB and state associations rally members to press local congressmen to side with broadcasters to continue adding more names to the resolutions. And it’s an open secret on Capitol Hill that both sides have a number of supporters in waiting who opt not to throw their support publicly one way or the other before it’s needed to avoid incurring the wrath of either industry.
The biggest question mark over the entire radio royalty conversation is how far the House Judiciary Committee’s four-year effort to modernize U.S. copyright law will go. Committee chair Bob Goodlatte (R-VA) has already taken several steps to reform the Copyright Office but so far music licensing has yet to percolate to the top. When he released the first series of policy proposals in December, Goodlatte said he and ranking member John Conyers (D-MI) said nothing should be read into that, adding they planned to loop in music issues “in time.” But so far nothing has been announced. Committee aides say no decisions have been made and that lawmakers are still meeting with representatives from both sides of the issue.
The NAB, meanwhile, has been cautious in its public statements. Gordon Smith recently told Inside Radio that Goodlatte has said that any copyright reform would likely start with issues where there is a consensus. “It’s unclear right now exactly what he has in mind, but NAB’s door is always open for chairman Goodlatte,” Smith said.
Details of those conversations aren’t being disclosed but SoundExchange’s Massimino said Goodlatte is asking people to actively discuss what could be on the table. “There’s a very clear message from Goodlatte that if there is a way forward on music licensing, he wants to do it,” she said.
The Academy’s Friedman also views copyright reform as a “fairly cooked issue” with legislative proposals already on the table that would encompass music-related matters. “All of that makes me confident that music licensing will be part of the overall copyright reform,” he said. Because Goodlatte’s term as Judiciary chairman ends at the end of the current congressional session, Friedman expects he’ll need to introduce something by the end of this year to get it through the legislative process in time. Only adding to the uncertainty, Friedman notes Goodlatte himself hasn’t said anything publicly about his timetable.
Conyers said in a YouTube video he and Goodlatte released in December that their proposals aren’t meant to be the “final word on reform” but rather a “starting point” for further discussion. Yet even as several members of the Judiciary Committee back a radio royalty, broadcasters have won wide support in Congress overall and some lobbyists think lawmakers may not be willing to risk killing a copyright reform bill over the AM/FM component. That may include Goodlatte who’s likely to have one eye on his legacy as the Committee’s chairman.
Radio groups including iHeartMedia, Cumulus Media, Entercom and Beasley Broadcast Group have signed direct deals with a handful of record labels in what may one day be a blueprint for a royalty compromise. The arrangements share on-air revenue in exchange for reduced streaming royalty rates. iHeartMedia CEO Bob Pittman told Inside Radio in a recent Q&A that he sees “great balance” in the deals. “We provide enormous promotion for the music industry and at the same time they provide music for us,” he said.
But what those deals don’t do is create a performance right—and that’s the ultimate goal for the music industry which wants to re-patriot as much as $200 million for offshore music use. “Only Congress can establish the performance right so any kind of private negotiation would need to be codified by the Congress to actually establish the right in the law,” Friedman said. “Without the performance right in law you can’t unlock the foreign money.”
SoundExchange’s Massimino said without the right even what many people see as a marketplace solution largely remains a one-sided discussion in radio’s favor. “Those so-called ‘marketplace negotiations’ now are such that one party can decide that they’re tired of talking and walk away from the table and have exactly what they have now, which is all the music they want for free. That’s not a ‘free-market’ negotiation,” she said.
But broadcasters would likely want something from Congress too. The NAB’s Wharton said if a deal were to ever be reached, it would have to recognize the “unparalleled promotional value” of radio airplay. “Every time a broadcaster plays a song on the radio, that is free advertising for a label and an artist,” Wharton said. Others say broadcasters would likely demand a reduction in streaming rates in order to get behind a settlement.
Fletcher, Heald & Hildreth attorney Karyn Ablin suggests broadcasters could also consider asking for payola laws to be abolished. The result, she said, could be an interesting free market experiment to see whether promotional dollars flow into radio in exchange for airplay.
One radio industry executive, speaking on background, echoed that sentiment. “There’s a reason record label executives offered payola to radio deejays for decades—they know that airplay on the radio generates record sales. And that hasn’t changed.”
The dust has settled and time has passed since the broadcasters and the music industry’s earlier effort to reach a compromise spectacularly blew up when the record industry accused the NAB of changing the agreed-upon terms at the eleventh hour. While no formal negotiations have begun, representatives from both industries say informal talks never really ended. And several have indicated that a fresh attempt to reach a settlement no longer seems out of the realm of possibilities.
“There have been ongoing conversations between various parties over time—there are people who are interested in resolving this,” The Recording Academy’s Daryl Friedman said, adding there’s “nothing official” at the moment. Friedman was among those at the negotiating table eight years ago and he said the music industry warned terms would only get tougher for radio if it waited. “I think that was prescient because the marketplace has changed and in some ways the digital marketplace is becoming more important to the music industry,” he said. “This will be resolved at some point but the resolution will not be as favorable in later years as it would be today. That’s why we believe it’s in the radio industry’s interest to resolve this.”
The NAB’s proposal included paying the record industry 1% of radio industry revenue, or about $25 million immediately with the ability to raise that cap to as much as $100 million over time with carve-outs for news and talk stations. In exchange, the NAB proposed stations receive a one-quarter-percent reduction in their streaming royalty rates. Among nearly a dozen other conditions was a component related to securing FM entry into mobile phones, something the industry has achieved without the music industry or congressional action. Broadcasters also proposed permanently cutting the Copyright Royalty Board out of the radio royalty rate-setting business, with the venue seen as hostile to radio in the past.
Broadcasters’ goals are likely to be different today. Smith has said that radio’s growing reliance on digital revenue “makes it possible to get a deal done” but he also pointed out that some radio groups have opted to unilaterally sign deals with record labels. “I hope someday there is a deal that lets radio survive and accounts for their concerns—maybe it’s reducing streaming rates in some sort of exchange,” Smith recently told C-Span, adding, “We’ve put out a number of proposals that we hope are still being considered.”
In a recent interview musicFirst executive director Chris Israel echoed that sentiment. “The time is really there for the main actors to sit down with one another and try to figure out if we can resolve this,” he said.
But attorney Karyn Ablin isn’t certain rank-and-file broadcasters are ready to move in the direction of compromise and advises that once the industry sets down that path it would be nearly impossible to go back. “Even if a royalty were agreed to at a very low rate, let’s say 1% which was thrown about eight years ago, there is copyright creep,” she said. “Things never go backward and nothing is exempted once it’s copyrighted—which is why I would counsel to the broadcast industry to continue to resist this.”