Broadcasters are expected to formally approve Tuesday (Oct. 26) a set of terms that could bring to a close the years-long fight between broadcasters and the music industry over royalty fees for music played on the air. The terms were voted on Monday by the radio board of directors during the National Association of Broadcasters annual fall meeting.
The terms were similar to what the NAB offered the music industry in August, with some modifications. Broadcasters would pay a tiered rate of 1 percent of industry revenue, adding up to about $100 million. That rate would be flexible, depending on whether or not the two businesses are able to convince Congress to legislatively mandate radio chips in cell phones. If the legislative mandate doesn't fly, broadcasters would pay an initial performance fee of 0.25 percent of net industry revenue until radio chips reach 75 percent of all mobile devices.
Other terms include a 12 percent to 14 percent reduction in streaming fees; simplified airplay reporting requirements; and breaks for small radio station operators, noncommercial stations, religious broadcasters, as well as incidental uses of music by News, Talk and Sport stations.
Broadcasters also want the music industry to acknowledge the role radio has played in to promote music.
Though the tug-of-war between broadcasters and the music business goes back years, the current action by the NAB was more than a year in the making. Though the NAB managed to sign up a majority of Congress to oppose legislating royalties, Performance Rights legislation passed out of two Congressional committees last year. Broadcasters felt compelled to compromise, fearing possible action by a lame-duck Congress.
A small group of radio broadcasters may not like any compromise at all, but overall, broadcasters feel the terms are their best way to end the conflict once and for all.
"From a position of strength, we have fashioned a Term Sheet for resolving the performance fee issue that in the long run is acceptable for radio," said Steve Newberry, NAB joint board chairman and president and CEO of Commonwealth Broadcasting. "No broadcaster that I know relishes paying a new fee, but the terms of this agreement provide badly needed certainty for our business to move forward, and the positives of this accord far out-weigh the negatives."
musicFIRST, the organization that has headed up the music industry's lobbying efforts to get a performance fee through Congress, didn't jump at the terms, because they differed from the terms in August. On the other hand, the organization didn't dismiss them either.
"While we are pleased that the radio broadcasters have for the first time acknowledged their obligation to pay the artists who are the foundation of their business, we are disappointed that they failed to vote on the deal both parties agreed upon in July," Tom Matzzie, spokesperson for musicFIRST said in a prepared statement. "After a quick review, this new term sheet differs significantly from that agreement. We will be reviewing their term sheet further."
Though putting radio chips in mobile devices is something both businesses would like to see happen, the idea has stirred up its own controversy with technology and consumer electronics industries opposing any legislative mandate. When the idea was first proposed this summer, the Consumer Electronics Association immediately trashed the idea and a coalition of six technology industry association came out swinging.
The CEA once again came out on the offensive. In a letter to the NAB, Gary Shapiro, president and CEO of the CEA, advocated the music and radio industries seek a "marketplace solution."
"We have yet to identify one member of Congress willing to support your attempt to impose old FM technology on new portable products," Shapiro wrote, vowing to crank up his organization's lobbying against any mandate to put FM chips in mobile devices.