Radio Still Divided on Possible Royalty Deal
The radio industry hasn’t reached agreement yet on whether the NAB should put its weight behind a possible deal with music labels that would cut streaming fees in exchange for the U.S.’s first terrestrial broadcast performance royalty, many industry executives and lawyers said. They said agreement among broadcasters on outlines of an accord with MusicFirst, first publicized by the NAB Aug. 6, doesn’t appear imminent. Some music and radio executives had hoped to reach a deal that included mandating FM chips on all cellphones by the time Congress returned from summer recess. With this Congress in its waning days, there may not be time to pass any legislation this year even if a deal is reached, some broadcasters said.
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NAB radio board members are expected to discuss the issue amongst themselves this week in Washington at the NAB’s radio show, which starts Wednesday. Some companies do support the deal’s terms, so agreement remains possible, executives and lawyers with radio clients said. They said a concern among some broadcasters is continuing wireless and consumer electronics industry opposition to part of the deal. The NAB doesn’t have a target date to wrap up consideration of a deal and remains “in the gathering-of-feedback mode from our membership,” a spokesman said. “We're soliciting an honest dialog and response from our membership.”
The biggest concern among radio opponents to the possible deal is that it entails paying a performance royalty, something the NAB has long opposed, executives and lawyers said. They said some radio companies realize that an average royalty of 1 percent, which executives have estimated would cost $100 million annually, is better than taking the chance that Congress will pass legislation empowering the Copyright Royalty Board to set rates, which could be higher. Other radio companies don’t seem to have budged much in their distaste for any deal, which has been supported by companies that are not heavily indebted and more engaged with policy makers and opposed by those with high debt and little involvement with Washington (CD Aug 30 p1).
"Do I want to pay 1 percent? Absolutely not,” said President Bud Walters of Cromwell Group, with 22 stations in smaller markets in the Midwest. “But these other elements make it more palatable to consider it,” he said of other provisions. “For those who are against it, do they really and truly think that they'll be able to avoid it forever?” he said of a performance royalty. The part of the possible pact in which the American Federation of Television and Radio Artists could agree to let ads be streamed on radio webcasts “is a much bigger piece than many realize because it is a big reason why many people don’t stream today,” said Walters: “The question becomes if RIAA has agreed on it, can they deliver on it” with that union.
"There’s no deal yet but we remain hopeful,” said President Rich Bengloff of the American Association of Independent Musicians, part of the MusicFirst coalition. “We believe we put something together which should be a deal that can be agreed to by all parties in terms of economics” and future strategy, he added. MusicFirst, whose members also include RIAA, has “been reaching out to members of the music community” and “there is some enthusiasm for the prospect of resolving an issue that’s been out there for 70 years” -- the absence of a performance royalty, said a spokesman. “There is no agreement, but we are hopeful that as these conversations continue we can find our way there."
CEA, foe of any FM-on-cellphone legislation, countered an NAB survey (CD Sept 15 p8) saying most Americans are willing to consider paying the 30-cent cost for such a wireless-device chip. Seventy percent of the 1,257 U.S. adults CEA itself polled Aug. 26-29 aren’t interested in getting FM broadcasts on their cellphone, the group said Tuesday. And 80 percent don’t support a government mandate requiring wireless device makers include an FM tuner, CEA said. Also Tuesday, NAB began www.radiorocksmyphone.com. “There is a movement taking place, and radio fans are asking why cell phone gatekeepers are resistant to offering a free entertainment option that can also provide lifesaving emergency information,” the site said.
A reason some broadcasters aren’t on board is continued wireless industry opposition to any deal that includes a congressional mandate for analog FM chips in all wireless devices, a radio executive said. The momentum toward an agreement in August has faded somewhat, which may reflect that legislators won’t be in Washington much longer before recessing to run for re-election, the executive said. That means any legislation would need to pass in a lame-duck session. Earlier hopes by both the music and radio industries of reaching accord by the end of the summer may have been overly optimistic, the executive and others said.
"It’s a challenge” to get the potential legislation passed this session, said CEO Jeff Smulyan of Emmis Communications, owner of 25 stations and represented by other company executives on NAB boards. “Hopefully we're all going to be in business a long time, so I think the key is just to get it done.” A deal is likely to be reached, Smulyan predicted. “I think the tenor is moving positively in a lot of sectors” though “you're never going to have [total] consensus in an industry with 11,000 radio stations,” he said: “To me of course the cellphone issue is very important. I think that’s the biggest game changer our industry has had in years” and the more legislators and broadcasters hear about that, the more enthusiastic they are about a deal.
At least one state broadcaster group is concerned about any deal, because AM stations wouldn’t be able to be received terrestrially on cellphones with an FM chip, said radio lawyer Francisco Montero of Fletcher Heald. Some are saying “'getting a concession for say FM chips in phones is great, but what’s that going to do for our AM guys,'” he said. “I've heard a lot of AM people speaking up, `asking what’s in it for us.'” But “the NAB has presented a good platform or menu of thought-out reasoning for why this is the way to go,” Montero said.
None of broadcast lawyer Michael Berg’s clients want to pay a performance royalty, but there are benefits to a deal, he said. “There are mega-issues to be worked out, but one that is important to a lot of radio companies, particularly but certainly not only smaller ones, is what kind of record keeping and reporting requirements will there be at the station level” that accompany any royalty deal, Berg said: “That has a cost to it as well” and has “real consequences for day-to-day operations.”