Radio Fight: Loophole or Performance Tax?

For 70 years, musicians and record companies have done everything they can to get AM and FM radio stations to play their songs. Now, they want radio stations to pay them for it.

In the opening salvo of what could be a contentious fight in Congress, the music industry this week introduced a bill to close what it calls a loophole in U.S. copyright law that exempts over-the- air broadcasters from paying performers. Like webcasters, satellite radio providers and cable companies, the musicians argue, radio stations should pay performers a fee for the music they broadcast.

"Today marks the beginning of the end for corporate radio's loophole,” Jennifer Bendall, executive director of musicFirst, a lobbying group for performers, said in unveiling the legislation this week. "It's unfair, unjustified and un-American that artists and musicians are paid absolutely nothing when their recordings are played on AM and FM radio. Music is their work, their livelihood. They deserve fair pay for air play."

But the National Assn. of Broadcasters calls the idea a “performance tax,” arguing that the music industry is just trying to use the issue to recover from the disastrous impact of the iPod, which has encouraged music sharing and online downloading and sent sales of CDs plummeting. And, note broadcasters, they already pay $500 million a year to compensate the songwriters and music publishers who write the music.

“With the iPod, music fans no longer have to shell out 20 bucks for an album that only has one good song,” said Kristopher Jones of the National Assn. of Broadcasters. “It’s 99 cents. Apparently, the record labels have decided that bankrupting their number one promotional vehicle – free radio airplay – is a better business strategy than adapting to technology.”

The Record Industry Assn. of America acknowledges that the music industry is definitely in a period of re-invention but argues that digital revenues are actually increasing. “The music industry is reinventing itself by transitioning from a CD-based model to a performance-based model,” said the RIAAs Cara Duckworth. “A performance right for AM/FM radio just makes sense. The landscape has changed, and the time is ripe.”

The musicFirst effort has attracted considerable support on the Hill. Both of California’s senators, Dianne Feinstein and Barbara Boxer, and many in the California congressional delegation have signed on, as have the chairmen of the House and Senate Judiciary Committees.

Look for this issue to move this year.