Two years after broadcasters derailed legislation requiring radio stations to pay performers for playing their music, Congress appears set to take up the issue again with an eye toward putting all music platforms on the same level.
The issue revolves around whether — and if so, how much — to compensate performers for playing their music, whether on traditional radio stations or via the Internet. Under the current piecemeal copyright-royalty system, cable and satellite providers pay performers less than online radio stations like Pandora, while traditional terrestrial radio stations pay performers nothing. This exemption stems from the traditional view that performers benefited from the exposure they got from airplay on AM and FM radio stations.
But as revenues from CDs and other forms of recorded music have dropped, the music industry has been pushing Congress in recent years to force traditional radio stations to start paying up, saying the promotional value artists receive from radio airplay isn’t worth as much as it once was when consumers had limited outlets for listening to music.
“Every platform that legally plays music pays to do so except for one,” Cary Sherman, president and CEO of the Recording Industry Association of America, told a House Energy and Commerce subcommittee in June. “AM and FM radio stations use music just like Internet radio, cable music channels, and satellite-radio services. The difference is all these other radio services compensate artists and labels for music they play, while promoting artists at the same time. AM-FM radio does not.”
The issue came to a head two years ago, when the House and Senate Judiciary committees approved legislation that would have required most terrestrial radio stations to start paying performers for playing their music on the air. The legislation stalled in the face of massive resistance from broadcasters. At the urging of lawmakers, music-industry groups and the National Association of Broadcasters came close to reaching a deal on their own — only to see talks collapse in the fall of 2010.
Rep. Jason Chaffetz, R-Utah, has helped jump-start the issue this summer by circulating draft legislation favored by the online-radio service Pandora that would allow Internet radio stations to negotiate performance fees under the same process used for cable music channels and satellite-radio providers, which pay lower fees than online radio stations.
“It seems ridiculous that when you move from listening to satellite radio to Internet radio that the fees are so much different,” Chaffetz told National Journal last month.
Chaffetz’s bill does not deal with the music industry’s call to require terrestrial radio stations to begin paying performance fees, which makes the bill a nonstarter for music-industry groups.
“We think that is part and parcel of any discussions of paying rates,” Hal Ponder, director of government relations for the American Federation of Musicians, said in an interview last week. “We’re about rate parity among music platforms. For starters, it should deal with the terrestrial [radio] issue.”
But Pandora, which has been very active in pushing for the Chaffetz legislation, argues that the debate over whether to require radio stations to pay performance fees has dragged down efforts to level the playing field among various music-delivery platforms.
“We’ve been held hostage to that for years,” said Tim Westergren, Pandora’s founder and chief strategy officer, in an interview on Monday. “The reason nothing has been fixed is we’ve been stuck behind [radio-station] royalties. We're victims of a fight that’s not ours.”
He added that while his company believes musicians should be compensated for their work, the current rates paid by streaming services are unfair, noting that half of Pandora’s revenues go to pay performance fees.
“We believe in compensating artists for streaming of their music,” Westergren said. But he added that “what we’re asking for is having a level playing field."
While Westergren has complained about the fact that traditional radio stations don’t have to pay performance fees, he said his company and radio broadcasters that also stream music online agree on the need to revise Internet streaming rates.
“NAB is reviewing specifics of Congressman Chaffetz’s draft bill, but we appreciate his interest in reforming the current Internet-radio rate structure, which makes Web streaming an unprofitable proposition for most of America’s local broadcasters,” said NAB spokesman Dennis Wharton.
But it remains to be seen whether Pandora and broadcasters can keep the issue of requiring traditional radio stations to pay performance fees out of the debate.
Rep. Bob Goodlatte of Virginia, who is vying to become the top Republican on the House Judiciary Committee in the next Congress and currently heads its Intellectual Property, Competition, and the Internet Subcommittee, told National Journal earlier this month that the panel expects to take a broad look at the music-royalty issue — including calls to require traditional radio stations to pay performance fees.
Chaffetz has said he plans to introduce his bill this year with an eye toward influencing the debate in the next Congress given that lawmakers have little time left to address such issues this year.