Old media battle new as NAB and CEA square off

Ah, August, the season for political hyperbole and heated rhetoric, both for lawmakers and lobbyists. The latest example is a dogfight pitting the National Assn. of Broadcasters against the Consumer Electronics Assn.

The orgs are old foes, today battling over a compromise hatched by broadcasters and the music business over performance royalties. But this skirmish is part of a larger struggle, one often characterized as the conservative NAB, i.e. “old media,” against the more progressive CEA, i.e. technological insurgents.

The underlying issue this time didn’t even directly involve the CEA: Performers have long wanted payment when radio stations play their music, while broadcasters have flatly refused. A year ago, the dispute looked intractable, even as legislation establishing performance rights cleared the House and Senate judiciary committees.

But after congressional leaders compelled the two sides to sit down and talk, they reached a surprising breakthrough. The radio biz is mulling a deal whereby it would pay royalties for the first time, though only perhaps about $100 million per year — less than the music biz wanted but an acknowledgement of a performance right nonetheless. The catch is there’s at least one provision that must be written into the performance rights law for the broadcasters to support it: A government mandate that all cell phones and PDAs include an FM radio chip.

But … FM on mobile phones? To the CEA, that sounds like a return to the Walkman era — or worse. Radio is an afterthought at best on modern mobile devices. Trendsetter Apple has always rebuffed suggestions it include radio in the iPod/iPhone line, preferring its users buy music through iTunes to their listening to it free over the air.

The CEA was quick to pounce on the proposal, labelling it a broadcasters’ ploy to preserve their business. Gary Shapiro, president and CEO of CEA, called it a “blatant attempt to take an old media and hijack new media.” His org bashed the plan with an ad that highlights its philosophical differences with the NAB, albeit in stereotypical terms: a horse dragging a vintage auto near the Capitol steps, with the warning “Don’t Be a Buggy Whip Industry — Oppose FM Chips in Cell Phones.” (The “buggy whip industry” tag was gleefully repeated by tech bloggers.)

“They’re frustrated,” Shapiro said bluntly in an interview. “They want the government to step in to protect their business model.”

The CEA and NAB are often at swords’ point. Recently they sparred over aspects of the FCC’s National Broadband Plan. In May, Shapiro took to the Huffington Post to write that broadcasters were hoarding spectrum, “even though it is increasingly irrelevant to their business.”

NAB officials, however, say it’s too simplistic to characterize their battles as a declining industry vs. a growing one, noting broadcast radio added 7 million new listeners last year, and that 239 million listeners tune in each week, according to Arbitron.

CEA’s opposition to the chip plan, says NAB spokesman Dennis Wharton, “was not unanticipated by us.”

“We get it,” he says. “CEA is going to fight anything.”

Broadcasters believe they have a powerful public-safety argument to take to Capitol Hill. FM chips would be a cheap way for the federal government to carry out the Warning, Alert and Response Network Act’s mandate to upgrade communications capabilities during emergencies.

During a virtual town hall with their members on Aug. 23, NAB president and CEO Gordon Smith acknowledged the ubiquity of handheld devices. “Radio needs a presence on that, and it needs it not just for our purposes or for the performers’ purposes. It needs it for good public policy reasons related to public safety.”

Moreover, the NAB contends that the chip actually would help the tech sector, not force an unwanted feature down its throat, since an FM chip could free up network capacity some users now devote to streaming music media like Pandora.

Peter Smyth, an NAB board member and the chairman and CEO of Greater Media, which has 23 AM and FM stations, notes that while the CEA is bristling at the prospect of a government mandate, “We all have a public safety component to our businesses.”

But Shapiro calls the public safety argument “ridiculous,” as consumers might not be tuned to a station broadcasting an announcement. (He prefers a plan to deliver alerts on wireless air interfaces.) He suggests the chip plan is untenable, and is merely a way to kill the performance rights bill. “I’m amazed the RIAA fell for it,” he says.

The RIAA’s chairman and CEO, Mitch Bainwol, counters that Shapiro’s statements are just “harsh rhetoric and extravagant hyperbole” that belong more to lobbying tactics than a real industry-to-industry divide — or, as he calls it: “Gary doing his thing again.”

By the numbers, the NAB exerts much greater lobbying strength than the CEA. According to the Center for Responsive Politics, the NAB has spent $6.6 million on D.C. lobbying so far this year, compared with $1.1 million for the CEA. But the CEA often is joined by other orgs as it pushes its agenda, like CTIA — The Wireless Assn., which has spent about $4.2 million on its efforts.

If the FM chip plan heads to Capitol Hill, Bainwol predicts, Congress will bring in the parties to come to some kind of resolution. That won’t happen until mid-September at the earliest, when lawmakers return from summer recess.

In the meantime, there are still a few heated days left in August.

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