Recording Industry Decries AM-FM Broadcasting as 'A Form of Piracy'

June 23, 2008
by David Kravets

The recording industry and U.S. radio companies have squared off for decades about whether AM and FM radio broadcasters should pay royalties to singers, musicians and their labels.

But now the debate is getting meaner; there's more at stake as the recording industry seeks new income avenues in the wake of wanton peer-to-peer piracy and declining CD sales in part due to the iPod and satellite radio. A U.S. House subcommittee could vote as early as Thursday on a royalty measure.

On Monday, the recording industry sent the National Association of Broadcasters -- the trade group representing the $16 billion a year AM-FM broadcasting business -- a can of herring to underscore that it believes its arguments against paying royalties are a red herring. The NAB says its members should not pay royalties because AM-FM radio "promotes" the music industry.

The herring present followed another gift -- a dictionary, a bid by the recording industry to explain what it saw as the difference between fees and taxes. The NAB describes the latest royalty proposal as a tax.

And two weeks ago, the recording industry, under the umbrella group musicFIRST, sent the NAB four digital downloads: "Take the Money and Run" by the Steve Miller Band; "Pay me My Money Down" by Bruce Springsteen; "Back In the U.S.S.R" by Paul McCartney and "A Change Would Do You Good" by Sheryl Crow.

Broadcasting music without payment is akin to piracy, the industry says.

"It's a form of piracy, if you will, but not in the classic sense as we think of it," said Martin Machowsky, a musicFirst spokesman. "Today we gifted them a can of herring, about their argument that they provide promotional value. We think that's a red herring. Nobody listens to the radio for the commercials."

The coalition includes the Recording Industry Association of America, Society of Singers, Rhythm & Blues Foundation, Recording Academy and others.

The argument boils down to this: Radio is making billions off the backs of recording artists and their labels; and the recording artists gain invaluable exposure because they're on the radio, so royalties should not have to be paid.

A House subcommittee is expected to approve a royalty bill perhaps as early as Thursday. The measure, HR 4789, sponsored by Rep. Howard Berman, D-California, would move to the full House Judiciary Committee -- legislation that the National Association of Broadcasters said would cost the industry as much as $7 billion annually.

An identical proposal, S 2500, is in the Senate Judiciary Committee. Rates under both proposals would be negotiated, although small and public stations would pay a flat $5,000 annually.

Internet, cable and satellite broadcasters pay royalties to all participants involved. Singers, musicians and the labels get no royalties when AM-FM radio broadcasters air their songs.

That would change under both the Senate and House proposals. Composers and songwriters, however, do get AM-FM royalties, which are set under a complicated and negotiated rate.

"If it wasn't for radio play, most of the performers wouldn't be known," said Dennis Wharton, a NAB vice president.

The group says that free airplay generates as much as $2.4 billion a year for the recording industry.

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