Music Biz Rejects NAB’s Royalty Terms

The music business gave broadcasters the cold shoulder late Tuesday (Oct. 26), all but rejecting the new terms under which broadcasters would pay royalty fees for music played over the air. The National Association of Broadcasters voted on the new terms during the organization’s annual fall meeting.

Though the terms were similar to what the NAB and musicFIRST discussed in August, musicFIRST found the differences between the old and new terms a deal-breaker.

“We are deeply troubled by the NAB’s rewrite of the hard-fought agreement musicFIRST struck with broadcaster negotiators this summer,” said Tom Matzzie, a spokesman for musicFIRST. “The radio broadcasters unilaterally cut their digital royalty rates and lowered their terrestrial royalty payment. Those changes by themselves undermined the fundamental economic equation that was core to the July agreement.”

Under the new terms, broadcasters would pay a tiered rate of 1 percent of industry revenue, adding up to about $100 million a year. That rate would be flexible, depending on whether Congress mandates radio chips in cell phones, something both radio stations and music artists would like to expand their audiences. 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.

NAB president and CEO Gordon Smith said he was disappointed with musicFIRST’s position that there was a definitive July agreement. “This is demonstrably false. If this were true, why would our two sides have continued with negotiations in August, September and October?” Smith asked.

musicFIRST said it intends to push forward with Congress. “Fortunately, Congress writes the laws, not trade association like the NAB,” Matzzie said.