Music biz harmony comes down to politics

After years of vehement opposition to paying performers for songs played over the air, broadcasters’ potential turnabout comes down to a matter of political realities.

If they accept a proposed compromise with the record labels and music biz put forward earlier this month, the radio business will forestall the prospect of a more onerous bill already passed by the Senate and House judiciary committees slipping through Congress in the lame duck session later this year.

Even if they succeed in killing the bill this year, broadcasters would likely face another battle down the road. There’s a chance that would be true even if Congress flips to Republicans come November.

Gordon Smith, the former Oregon Republican senator who became president of the National Assn. of Broadcasters last year, told a “virtual” town hall of its members on Aug. 23 that the issue “will be back again and again and again.”

“But a lot of political capital for radio will be spent on this,” he said. “Now, that may be the place to spend it. That said, if you have listened to the terms they have laid out to us, that is far better than where we started or where the current bill would put radio.”

The proposed deal would set up tiered rates in which stations would pay 1% or less of their net revenue, or about $100 million per year, to the performers who are heard over the airwaves.

The National Assn. of Broadcasters is still gauging members’ reaction to the proposal, which provides a much smaller payment to artists than the music biz had sought. Should they go forward with it, however, radio stations would be paying artists for the first time to play their music.

Support for the proposal would seem surprising considering the tone of radio station spots in the past year, warning of another “bailout” — a “new tax on every song on the radio” that would “bankrupt local radio stations.”

Some stations saw this less as an issue of money and more a matter of principle: They are the ones providing the promotional platform to artists, an invaluable service even as audiences increasingly splinter from an array of competing listening choices.

Instead, the deal would be an acknowledgement that artists really are entitled to some sort of compensation.

The music biz has pulled out all the stops many times before to argue for the performance right — Frank Sinatra once lobbied for it — but this time it undoubtedly benefit from the support of the Democratic Congressional leadership.

Before sending the bill to the floor, House leaders asked that both sides at least sit down and talk, starting with an initial November meeting in the basement of the Capitol that produced little progress. But according to Mitch Bainwol, the chairman and CEO of the Recording Industry Assn. of America, House Democratic Majority Leader Steny Hoyer appeared briefly at the meeting with his own message: Work it out, or we will work it out for you.

They kept on meeting, almost a dozen more times since then.

Some of the concessions started emerging in February, and rumors of a compromise began to surface in the spring. The deal also calls for removing the Copyright Royalty Board from the equation in setting rates, with adjustments requiring a change in the law or a mutual agreement between the parties. There’s also a mandate to require that all mobile phones include FM chips, something the wireless business already is fighting. The broadcasters also get a reduction in the rates they already pay to performers for digital streaming.

The fear, Smith said, is that without a deal, broadcasters will be in a “very dangerous situation” that more troubling legislation could pass, perhaps in the lame duck session, especially with Democrats under the gun to deliver for their supporters in Hollywood and Nashville.

Despite some of the rhetoric, support for paying performers for songs broadcast over the air has straddled party lines somewhat. Orrin Hatch (R-Utah) was a cosponsor of the existing legislation. The Obama administration supports it, but so did the Bush administration. Even anti-tax advocate Grover Norquist favored the idea of it.

“Among my former Republican colleagues,” Smith said, “the notion of property rights is very appealing to them… If our music friends, the performers, can say that we have a right that is uncompensated, that has some currency among Republicans.”

The deal still would need to be taken to Capitol Hill and made into law, a process that offers no guarantees. The wireless biz is raising red flags about the FM chip, a dealbreaker for broadcasters. One lobbyist for the Consumer Electronics Assn. even suggested that the RIAA has been hoodwinked by the NAB into agreeing to something as a kind of Machiavellian way of killing the legislation.

But Bainwol said that lawmakers will recognize the “good faith” efforts to negotiate a solution to a battle many lawmakers would just as soon both sides work out among themselves. He said that there was a “dawning recognition” that it was difficult to defend the idea that performers shouldn’t be compensated for their recordings’ airplay, as artists are paid on digital platforms and in many countries overseas. “We feel like we have struck an agreement on a formula that is workable now,” he said.

Peter Smyth, an NAB board member and the chairman and CEO of Greater Media, which owns 23 AM and FM stations, was a fierce opponent of paying performers but is now supportive of the deal. There’s a good reason for it: Peace of mind.

“I don’t think [the original bill] would have a chance to pass this year, but you never know,” he said. “This deal provides some certainty for all of us.”

He added that he easily could have been a “pain in the ass and say no,” but “there comes a time when a good deal is a good deal.”

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