Music biz and station owners inch towards agreement

For more than a year, Capitol Hill has witnessed a parade of musicians and radio disc jockeys lobbying over proposed legislation that would require radio stations to pay performers when their songs are played on the air — what has been regarded as a gaping loophole in copyright law.

Now, the music biz and radio station owners — who have been pitted against one another in the ongoing debate — report substantial progress and the outline of a preliminary agreement.

But it comes with a new wrinkle: Included is a provision requiring new cell phones to come with built-in FM radio chips. Presumably, such a requirement would boost radio play and revenue for all sides. But it’s a prospect that is not sitting well with a whole other group of lobbyists: consumer electronics manufacturers.

Yet, the fact that there is a deal in the works is viewed as significant progress given that both sides have been engaged in discussions off and on since November, when congressional leaders asked them to try to come up with a compromise. Legislation, called the Performance Rights Act, had already passed out of the House and Senate Judiciary committees, but it has yet to reach the floor of either chamber.

Marty Machowsky, a spokesman for MusicFirst, called the preliminary agreement a “tremendous breakthrough.” Musicians and the record industry have fought for years to obtain what they call a “performance right,” with legends like Frank Sinatra weighing in at certain points. But legislation has always stalled.

According to an analyst report being circulated, the terms of the preliminary agreement call for radio broadcasters to pay record labels and artists rates of up to 1% of net revenues, with smaller stations paying less based on a tiered system. That would cost broadcasters about $100 million per year, but the total could be hundreds of millions of dollars less than they would pay under the current legislation.

Their royalty payments also would be offset by a 10% cut in the royalty payments they already make for Internet streaming services.

The recording industry and musicians would get a performance royalty for the first time and would also be able to pursue payments overseas. Many countries require broadcasters to pay performers when their songs are played but do not compensate American musicians because of the lack of reciprocity.

On the provision requiring FM radios in cell phones, Gary Shapiro, prexy of the Consumer Electronics Assn., has told Ars Technica that it was a “back-room scheme” mandating “backward-looking features.” He also said that the NAB and RIAA were acting like “buggy whip industries.” According to Ars Technica, the consumer-electronics biz vows to seek higher royalty payments — in an effort to get their share of the pie — if the FM mandate stays in. It is a sign that despite their opposition, they could be open to a deal.

The talks could still collapse, and the National Assn. of Broadcasters and the MusicFirst coalition (which includes the Recording Industry Assn. of America) are in the process of briefing their members and monitoring reaction. And a revised bill would still have to pass the House and the Senate.

The NAB is planning an online “town hall” on Monday with radio station members to discuss the negotiations.

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