Congress

Gov't policy paper acknowledges radio's "competitive advantage" over digital services regarding royalties

Thursday, August 1, 2013 - 10:40am

The U.S. Department of Commerce yesterday issued a policy statement that, among other things, supports the idea that U.S. broadcasters "enjoy a competitive advantage over emerging digital services" since they're not obligated to pay performance royalties for recordings.

"Pureplay" webcasters have long argued for parity for the licensed use of copyright recordings. While U.S. broadcasters have no obligation to pay sound recording copyright owners or performers, Internet-, satellite-, and cable-radio operators pay royalties which can amount to a majority of their revenues. Both broadcasters and newer digital forms of radio pay for the use of musical compositions.

The Department's Internet Policy Task Force paper reiterates the Administration's support for a broadcast "performance right" for sound recordings. A press release announcing the paper says it also "supports congressional or regulatory attention to determine how best to rationalize rate-setting standards for different types of music services; reform music licensing, particularly the mechanical license for musical compositions..."

The paper itself is here; the press release is here.

Rep. Mel Watt (N.C.-D) told colleagues last week he plans to introduce a bill that would recognize a performance right for sound recordings on radio, with the hopes of encouraging broadcasters and copyright owners to reach marketplace aggreements. More in RAIN here.

Radio lobbies against royalties, labels counter with ad, nothing changes for webcasters

Wednesday, March 6, 2013 - 1:10pm

Lawmakers have made it pretty clear they don't want to hear about webcasting royalties any more -- including the Internet Radio Fairness Act -- before they deal with sound recording royalties for broadcast radio.

Inside Radio reports some radio executives are using the occasion of a conference in D.C. to visit with members of Congress and ask support for the "Local Radio Freedom Act." The non-binding resolution opposes any measure requiring U.S. broadcasters to pay sound recording performance rights (more from RAIN here).

Meanwhile, the record industry group musicFIRST Coalition answered with an ad in Politico (that's the image, full-size here), accusing broadcast radio of being "stuck in the past" (since other forms of radio like satellite, cable, and webcasters pay).

While the record industry publicly cites Internet radio as a paying customer for its copyright licenses, its representatives remain adamantly against measures that would likely bring webcast royalty rates in line with those paid by satellite and cable radio. The IRFA (more here) would require judges to use the same legal standard to determine statutory rates for streaming radio that they use for satellite and cable.

While satellite and cable radio royalty rates are determined using a legal standard known as 801(b), the 1998 Digital Millennium Copyright Act requires Internet radio rates be set using a different standard known as "willing buyer and willing seller." Unlike 801(b), "willing buyer and willing seller" ignores the "real world" ramifications of a rate determination, and all notions of fairness and minimizing industry disruption -- considerations of the 801(b) standard.

So while satellite radio pays about 9% of its revenue to license copyright sound recordings, leading webcaster Pandora pays well over half.

A late-November House Judiciary subcommittee hearing on the IRFA quickly lost focus on the bill as record industry witnesses (and the committee members sympathetic to them) steered the discussion to the AM/FM exemption (our coverage here).

Writing in Huffington Post, musician David Fagin blames the AM/FM exemption for lack of progress on webcasting issues: "Congress is scared to go after big radio and their lobby, and the RIAA is 'just fine' with the status quo. In the meantime, both sides have decided to just kick each other's asses, instead." (More in RAIN here).

Reps. reintroduce measure to oppose radio royalties

Monday, February 18, 2013 - 12:10pm

Two Texas Congressmen on Friday reintroduced a resolution to oppose sound recording performance rights on AM/FM radio -- and brought back the term "performance tax" along with it.

Reps. Gene Greene (D) and K. Michael Conaway (TX) are behind House Concurrent Resolution 16: Supporting the Local Radio Freedom Act, with cosponsor support from 72 other lawmakers (57 Republicans, 15 Democrats). It's the same proposal the two introduced in February of 2011.

"The recording industry has lobbied for a new 'performance tax,'" reads a joint statement from Greene and Conaway. "Local radio already provides free advertising and promotion for the recording industry, and these fees could put the future of these stations in jeopardy."

Recording industry group musicFirst Coalition executive director Ted Kalo points to recent voluntary marketplace deals between broadcasters and record labels (e.g. Clear Channel and Big Machine) argue against the supposed danger to radio of performance royalties.

Read more in FMQB here.

From today's early edition: Pandora CEO Kennedy, Hubbard CEO Reese, SoundExchange Pres. Huppe to speak on Capitol Hill

Wednesday, November 28, 2012 - 11:25am

The Internet Radio Fairness Act will get its first exposure in Congress today since its introduction, as the House Judiciary's Subcommittee on Intellectual Propery, Competition, and the Internet will hold a hearing called "Music Licensing Part One: Legislation in the 112th Congress" at 11:30am ET (10:30am CT). You can stream video here.  

IRFA backers contend the bill is necessary to allow Internet radio to more fairly compete against other forms of digital radio (more details here). Joseph Kennedy, Chairman/CEO of leading webcaster Pandora will speak in support of the bill, as will Hubbard Radio President/CEO Bruce Reese, who'll appear on behalf of the National Association of Broadcasters.

Former eMusic COO/CEO and Apple Music Group cofounder David Pakman will also appear. Pakman is now a partner at Internet and digital media investment firm Venrock, and writes the Disruption blog.

Critics of the IRFA say the bill would only result in lower payments to copyright owners and performers. Some support a draft of a bill called the Interim FIRST Act (more here), which may also be discussed in the hearing. Representing copyright owners and the music industry will be producer, songwriter, and recording artist Jimmy Jam (who's also The Recording Academy Chair Emeritus). He'll be joined by SoundExchange president Michael Huppe. Also speaking will be economist Dr. Jeffrey Eisenach, Managing Director/Principal of Navigant Economics.

To get the most out of today's hearing, it may help to have a handle on a couple key concepts:

801(b): That's the section of the Copyright Act (you can read it here) that sets out four important criteria Copyright Judges are required to follow when they decide royalty rates. Paraphrasing, they are:

  • Maximize the availability of creative works to the public;
  • Insure a fair return for copyright owners and a fair income for copyright users;
  • Reflect relative roles of capital investment, cost, and risk, and;
  • Minimize disruptive impact on the industries involved.

"Willing buyer willing seller": This is the standard upon which Internet radio royalties are currently based, as per the 1998 Digital Millennium Copyright Act. With that law, Congress decided the webcast royalty process should eliminate 801(b)'s concern for the public's access to creative works, minimizing disruption, and fairness -- and instead require judges to devise a rate solely on what they think reflects the "fair market value" of the licensed works. That is, what a hypothetical "buyer" would be willing to pay to a hypothetical "seller" (the "buyer" being the licensing service, the seller being the copyright owner) in a free market.

The Internet Radio Fairness Act: The focus of the bill is to move webcast royalty determinations from the "willing buyer willing seller" standard to 801(b), the standard used for determining the royalties paid by Internet radio's two most-similar competitors: satellite radio and cable television radio. (It also happens to be the standard used to determine what record labels pay for the use of copyright song compositions when manufacturing recordings.)

The Interim FIRST Act: Draft legislation that's main focus would be to make all three digital radio platforms (Internet, satellite, and cable radio) use the "willing buyer willing seller" standard in royalty determinations.

Performance royalty: One final note that what will (most likely) be discussed will be the royalties these services pay for the use of copyright sound recordings (as opposed to song compositions). The beneficiaries of this royalty are copyright owners (usually record companies), and recording artists and performers.

We'll have follow-up coverage and analysis of the hearing later today. Please check back.

Leading webcaster enlists D.C. law firm to lobby for bill, creates user resources page

Wednesday, September 26, 2012 - 2:40pm

Pandora is once again enlisting the power of its massive listenership -- not to mention some good old-fashioned professional lobbyists -- in hopes of getting lawmakers on board the recently-introduced Internet Radio Fairness Act.

The IRFA would instruct copyright judges who determine copyright royalties to use the same legal standard for Internet radio royalties as are used for satellite and cable radio. Internet royalties are currently based on a different standard, and webcasters pay a vastly higher percentage of their revenue to use music than other forms of radio.

Shortly after the bill dropped this week, Pandora began directing users to its dedicated "Support the Internet Radio Fairness" page. The page features a one-minute video of founder Tim Westergren explaining the bill and how to contact their Reps and Senators (using links on the page). There's a "frequently asked questions" section with further explanation, and links to post to Twitter (you can search the hashtag #FairNetRadio to see the traffic) and Facebook. Pandora listeners also received an e-mail from Westergren (here) requesting their help.

Pandora has in the past asked listeners to get behind its legal fights, with enthusiastic results.

Meanwhile, the company has also reportedly enlisted Washington, D.C. law firm Constantine Cannon for lobbying help with lawmakers. According to LegalTimes' blog The BLT (here), Pandora spent $90,000 on federal lobbying during the first half of this year.

Bill would potentially raise satellite, cable and AM/FM streaming royalty rates

Tuesday, August 21, 2012 - 1:00pm

Rep. Jarrold NadlerA new draft bill from U.S. Representative Jerrold Nadler (D-NY; pictured) aims to raise AM/FM streaming royalty rates, in effect implementing an over-the-air performance royalty. It would also potentially raise royalty rates for satellite and cable radio to the same levels as those for Internet radio.

Nadler's bill, dubbed the Interim FIRST Act and currently in "discussion draft" form, would "put cable and satellite radio services on the same royalty-setting standard as Internet radio," reports The Hill. That would mean switching cable and sallelite from the 801(b) standard, to the "willing buyer/willing seller" model currently used to determine web radio royalty rates.

Additionally, the Interim FIRST Act would "make traditional radio stations pay a higher fee for live-streaming their broadcast online." Nadler intends for this extra free to "make up for broadcasters not paying a fee when they play artists' songs over the air," writes The Hill.

Quote from Rep. NadlerThat extra fee would wind up being what the Copyright Royalty Board decides "most clearly represents the royalty that would have been negotiated in the marketplace between a willing buyer and a willing seller for the public performance of sound recordings by means of over-the-air non-subscription broadcast transmissions by affiliated terrestrial broadcast radio stations," reads Nadler's draft bill (Section 3).

Technically, it's not royalty on over-the-air radio. But it amounts to paying a royalty for over-the-air (plus the streaming royalty) if a station also chooses to stream.

An over-the-air performance royalty appears to be the overall goal here. Comments from the musicFIRST Coalition seem to explain the Interim FIRST Act's name: "The only real solution is for Congress to create a legal performance right, but raising terrestrial radio’s digital royalties is an important interim step towards that goal." Said Nadler in a statement: "The lack of a performance royalty for terrestrial radio airplay is a significant inequity and grossly unfair. We can’t start a race to the bottom when it comes to royalty rates and compensation for artists."

As for changing the standard for satellite and radio platforms from 801(b) to "willing buyer/willing seller," how much of a difference will that really make? While we'd have to wait for a determination from the Copyright Royalty Board to definitively answer that question, consider this: satellite radio operator SiriusXM pays around 8% of its revenues for the right to use copyright sound recordings in its broadcasts, based on a determination using the 801(b) standard. Pandora, on the other hand, says nearly 70% of its total revenue (based on its Q1 FY 2013) will go to royalty payments (and that's based on on a deal Pandora struck that actually decreased its obligation from the CRB decision -- a decision based on "willing buyer/willing seller").

In July, we reported on (here) separate in-progress legislation from Rep. Jason Chaffetz (R-UT). That bill also aimed to bring more equality to radio royalty rates, but did so by potentially lowering web radio rates by determing streaming rates using the 801(b) standard.

Nadler says Chaffetz's bill -- which has Pandora's support -- could potentially "hurt performing artists." Not surprisingly, the musicFIRST Coalition has voiced support for the draft bill while the NAB opposes it.

You can find the discussion draft version of Nadler's bill here (PDF). The Hill has more coverage here.

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