Free Market Royalty Act

Clear Channel cuts revenue deal with Black River Records

Monday, October 21, 2013 - 11:00am

Adding to its portfolio of custom royalty-payment deals with record labels, Clear Channel reached an agreement with Black River Records, a country label whose roster includes Kelly Pickler, Craig Morgan, and Glen Templeton.

Details were not announced, but this deal could be modeled on previously-struck arrangements with Warner Music Group and smaller labels like Big Machine, Glassnote, Dualtone, Naxos, and Suburban Noize. The template includes new royalty payments to the label for terrestrial airplay, a cost that radio stations are legally exempt from paying under U.S. regulations. In the Warner Music deal, the label agreed to lower royalties for streaming play of its content by Clear Channel webcasts, where the statutory exemption does not hold. There is also a promotional component to that agreement, wherein Clear Channel stations commit to featuring WMG albums and artists.

Revenue-share deals that follow along these lines are sometimes skeptically considered a new form of payola. (See this critical article in Forbes.) The reasoning is that by giving up a portion of streaming revenue, which is bound to grow in the future, the label is essentially paying radio for promotion, plus a royalty for terrestrial play, which might shrink in the future.

Putting aside legal theories, it is deal-making like this which provides the radio industry with a rationale for rejecting governmental attempts to force radio into paying performance royalties to labels and artists for terrestrial play. The most recent proposed legislation is the Free Market Royalty Act, which would force royalty negotiations between broadcast radio and labels. (See RAIN coverage here.) The idea behind the slate of rev-share deals is to stitch together broadcast and webcast into a single royalty-paying framework.

RAIN Weekend Perspective

Friday, October 4, 2013 - 10:30am

RAIN’s Weekend Perspective reviews the week's main events, and refreshes your synapses for next week.

The week started with a legislative bang when Rep. Melvin Watt introduced the Free Market Royalty Act in Congress. (Just in time for a general governmental shutdown.) The bill has two main planks: first, to withdraw the terrestrial radio exemption from paying artist and label royalties, and second, to remove the government from its traditional role as arbiter of royalty rates. RAIN interviewed attorney and consultant David Oxenford. Today, Oxenford posts a comprehensive analysis of the bill on his Broadcast Law Blog.

METRICS

On the metrics front, important measurements arrived from Triton Digital and Pandora.

Triton’s Top-20 Web Metrics Ranker for August revealed broad, if incremental, webcast gains across broadcast streams and pureplays measured in the report.

Meanwhile, Pandora (which is included in the Triton report) released its own monthly Audience Metrics report for September, announcing substantial year-over-year gains in active listeners, listening hours, and share of all U.S. radio listening. Small month-over-month gains were reported as well. September was the first month in which Pandora and iTunes Radio operated concurrently, a competition undergoing much scrutiny. The results of that half-month of activity bolsters Pandora’s claim that Apple’s new service does not pose a dangerous threat to Pandora’s audience growth or retention. But, of course, it’s early days.

PARTNERSHIPS:

A few business development scenarios enlivened the week. First, and most significantly, Rdio augmented its service model by introducing free, unlimited Internet radio-style streaming to its mobile apps, which previous allowed only a 14-day trial before asking customers to subscribe for ongoing listening. The new feature, called Stations, is ad-supported, thanks to Cumulus Radio repping Rdio’s inventory as part of the recently completed deal between the two companies. Rdio and Cumulus wasted no time putting their alliance into action. 

Songza linked arms with FourSquare, inviting users of the lean-back streaming service to check in at select FourSquare locations to receive Songza rewards -- including six months of free premium service in some cases.

Clear Channel-owned iHeartRadio moved to flesh out the Talk section of its radio aggregation platform, snagging rights to distribute certain Turner Broadcasting content. The new shows and clips will help balance an already strong ABC presence in iHeart Talk.

 

Free Market Royalty Act: Plenty of swirl around an unlikely law

Tuesday, October 1, 2013 - 12:35pm

Rep. Melvin Watt yesterday introduced the Free Market Royalty Act (FMRA) which would address the lack of parity in statutory royalty requirements levied on terrestrial broadcasters and Internet radio services. (Read Rep. Watt’s statement and rationale here.) 

By law, broadcast radio is exempt from paying a performance royalty to artists and labels. Broadcast stations do pay royalties to publishers and songwriters. Also by law, Internet radio is not exempt, and must pay for use of recordings in addition to paying songwriters and publishers.

The Free Market Royalty Act introduced by Rep. Watt aims to remove government from setting royalty rates, and to turn the matter over to free market negotiations. As such, the bill has a compulsory impetus, but no compulsory mechanism. It would repeal the existing blanket license that makes label-owned recordings available to broadcasters free of charge. To gain a license for playing music recordings over the air or in an Internet radio stream, programmers would negotiate with labels directly, or with SoundExchange, a performing rights organization that represents labels and performing artists.

Labels and broadcasters are already striking out on the non-statutory path, ditching government compulsory licenses for negotiated ones. This summer, Warner Music and Clear Channel Media & Entertainment agreed to establish broadcast royalties payable from Clear Channel radio stations to Warner labels, and to lower label performance payouts on Clear Channel digital streams. (Clear Channel operates iHeartMusic, a streaming platform that features broadcast webcasts.)

Is it a good idea to push government out of its long-standing role as copyright arbiter? RAIN spoke to David Oxenford, law partner of Wilkinson Barker Knauer LLP in Washington, who specializes in broadcast regulation, and who has represented radio groups and digital media companies. “No. The government has almost always been involved, either through the Copyright Royalty Board, or through rate courts that ASCAP and BMI go through on the publishing side. The only collective in the performance rights world that is not subject to government oversight is SESAC, and SESAC is being sued by radio and TV broadcasters to bring it under that kind of oversight.”

The National Association of Broadcasters, radio’s chief lobbying voice, unsurprisingly disputes the bill. NAB head of communications Dennis Wharton cited the Warner Muisic/Clear Channel deal in his refutation of the FMRA as an unnecessary correction: “NAB believes market-based negotiations like the recent Warner Music-Clear Channel accord demonstrate that this issue is already being addressed in the free market. This legislation would impose new costs on broadcasters that jeopardize the future of our free over-the-air service.”

From the other side of the opinion fence, burdensome costs are exactly what the bill might correct. Pandora and other Internet radio pureplays arguably serve the same music-discovery mission as terrestrial radio, and provide a corresponding benefit to performers and labels that broadcast does, yet are legally bound to add a cost line item that doesn’t exist on traditional radio balance sheets. Rep. Watt’s statement on that point: “Those deals expose the unfairness and inadequacy of the current system and they strongly point out the need for a legislative solution that will apply market wide.”

Previously introduced bills have sought to even the balance from the opposite direction -- by lowering or eliminating performance royalties on the Internet side. The Internet Radio Fairness Act was put into congressional play last year, suggesting an adjustment to the makeup of the Copyright Royalty Board, and the standards by which it sets compulsory royalties to labels and recording artists. According to David Oxenford, “They deal with things totally differently. Essentially, the structure that Watt is proposing makes the Internet Radio Fairness Act meaningless.”

The MusicFIRST Coalition, which advocates for musicians, clearly had its PR gun locked and loaded, ready for the Watts bill. Executive Director Ted Kalo delivered an instant response supporting the FMRA with plenty of historical context and criticism of the NAB. (Read it here.) “After saying no to each and every approach to date, the broadcasters have run out of excuses. [...] This bill sends all parties back to the bargaining table [...] and critically, for artists, it preserves protections in current law.” 

Casey Rae, Interim Executive Director of the Future of Music Coalition, puts a global spin on his organization’s support of the FMRA: “First, there is no defensible excuse to not pay recording artists for the use of their music, especially considering that the rest of the developed world recognizes the contributions of performers. Second, the lack of a reciprocal right internationally means that millions of dollars are left on the table that would otherwise go to American creators. You’d be hard pressed to think of another export that the United States would freely give away in the global marketplace with no expectation of remuneration.”

Will the FMRA become law? Oxenford doubts it. “I think Congress has a few other things to deal with. Besides that, the NAB has got over 100 Congressional representatives signed on the anti over-the-air bill, I think it’s unlikely to pass. Most copyright legislation -- unless you get all parties to agree on it, Congress is reluctant to act on it.”

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