Future of Audio Hearing Kicks Over Old Issues

Traditional radio continues struggle against digital pure-play services

A House hearing on the future of audio kicked the rock over on two old issues in the radio business exacerbated by the stunning growth of digital radio services like Pandora. Should over-the-air radio stations be forced to fork over performance fees that are paid by radio stations and services online and on mobile platforms? Should there be on-air radio chips in cellphones?

Traditional radio finds itself up against mounting competition from pure-play digital radio services that are grabbing all the headlines and attracting larger numbers of listeners. Though hundreds of radio stations stream their stations on the Internet and on mobile devices, the pure-plays dominate digital devices, expanding distribution into radio’s former automotive turf, even being placed in refrigerators.

Today's hearing, called by former radio broadcaster Rep. Greg Walden (R-Ore.), didn’t reveal anything new. It did give the opposing sides in both debates a chance to rehash old rivalries and open old wounds, making for great entertainment to observers in the hearing room. 

For Gary Shapiro, the feisty chairman and CEO of the Consumer Electronics Association, the radio industry’s position on both issues was old hat. “This is about an industry trying to preserve its market share. This is about an industry that doesn’t even play fairly,” he said.

Radio stations, represented by Steve Newberry, are still adamantly opposed to having any legislation to mandate performance fees on radio. The GOP tends to agree, pointing to Clear Channel’s bombshell deal with Big Machine as evidence that there doesn’t need to be any legislation.

Predictably, Dems, taking the side of the Recording Industry of America, disagreed, echoing testimony from Pandora’s Tim Westergren that it was time to level the playing field and give music artists the compensation they’ve been denied for more than 80 years.

Because of the digital performance fees, Pandora’s business model doesn’t add up. About 50 percent of the company’s $274 million revenue goes to performance fees for artists and labels.

“Congress has made decisions about radio and copyright law in a piecemeal and isolated manner; as each new form of radio transmission was invented, new legislation was passed but only to address the new form,” Westergren said. “The effect has been to penalize new media and advantage old media when setting the rules for music royalties.”

While the lines are clearly drawn in the debate over performance royalties, the issue of putting radio chips in cellphones is fuzzier. Broadcasters would love to see FM chips in cellphones, putting their on-air signals side by side in the same device with Pandora or Spotify. But, the industry stops short of calling for a legislative mandate.

The radio industry makes a good case for radio in cellphones in case of emergencies and because the radio chip uses 20 percent [less] of the battery life than streaming. “We just want this issue to be fully vetted,” said Jeff Smulyan, president and CEO of Emmis Communications, and the industry’s proselytizer on the cellphone campaign.

“Emergency warnings are limited to 90 characters of text. If you think that is sufficient, ask people in Joplin, Mo., or New Orleans,” said Smulyan. “But we agree with the CTIA that we should let the market decide."