Royalties

For years the radio industry has lobbied mightily to thwart efforts to impose a performance royalty on over-the-air broadcasting. Now, with a new bill dubbed the AM-FM Act introduced last week in Congress that would do just that, is it time for the industry to change its royalty message on Capitol Hill? At least one broadcaster thinks so.

Under new legislation introduced last Thursday by Senator Marsha Blackburn (R-TN) and Rep. Jerrold Nadler (D-NY), radio stations would be required to pay royalties whenever a record is played on-air.

Rich Morena, Chief Financial Officer and Principal at New Jersey-based radio and TV station owner Press Communications, says that instead of communicating the potential harm that a performance royalty would have on local radio, it’s time to flip the script and reinforce all the benefits broadcasters bring to recording artists and record labels.

Morena and his company have been active on the issue in the past, working with the New Jersey Broadcasters Association and the National Association of Broadcasters in lobbying lawmakers on the Hill. Proponents of the NAB-supported “Local Radio Freedom Act” stress how a government-mandated royalty “could decimate the economics of America's hometown radio stations,” adversely affecting their ability to provide communities with localized content, news, Amber and EAS alerts and other life-saving information. Morena thinks that narrative is coming up short. He contends the argument “has been waning and does not resonate with certain legislators who honestly do not understand the true inner workings of day-to-day radio broadcasting and the symbiotic relationship between radio, artists, songwriters and the music labels.” And he worries that a “lack of understanding” will convince some lawmakers to sign on to the AM-FM Act, which has so far not attracted any cosponsors in either the House or Senate.

That’s a far cry from the 205 House members and 25 U.S. Senators that have signed on to the “Local Radio Freedom Act,” the non-binding resolution that signals members’ opposition to any potential performance royalty legislation for radio. But Morena notes that these numbers fall short of a majority, which he blames on “a key narrative” that is being overlooked in radio’s lobbying efforts.

He’s calling for the focus to emphasize “the symbiotic reciprocally interdependent relationship” that’s long existed among labels, artists and broadcasters. This mutually beneficial partnership, he argues, goes beyond airplay to include air personalities promoting new artists with the latest news about their releases, tour dates and other related information. “This role is nothing short of a significant free active promotional and marketing campaign for the labels and their artists,” Morena says, countering the music industry argument that radio unilaterally benefits from artist airplay.

In addition, local radio stations often work with concert promoters to get artists placed at local venues, Morena adds, which benefits not only the artist but often their record labels, which have increasingly adopted so-called 360-degree deals, where the label shares in the artist’s other revenue streams, such as concerts and merchandise. “Simply said, the marketing and promotional value that the broadcasting industry is playing is indisputable,” he says. “That value is recognized by the songwriters and artists, but greedy music label management will never acknowledge that… at least publicly.”

NAB spokesperson Dennis Wharton notes that the trade group has used as arguments “both the support that radio provides to artists and labels along with the harm that a performance fee would bring to hometown radio.” And he points to a NAB-commissioned study showing the promotional value of local radio airplay to be about $2 billion per year. “Radio is the best friend of artists and helped countless artists launch careers,” Wharton says. “Contrast that with the countless artists who've sued their record label for being cheated out of money owed them, and you can decide for yourself who really is the friend of artists.”

Pay For Play

Along with rewriting radio’s anti-royalty talking points, Morena has a bombshell proposal: Congress should remove payola laws and allow broadcasters to charge artists, labels and songwriters for playing their music and marketing and promoting their products. This he says would allow the broadcast industry to bypass the record labels and negotiate a “pay for play” arrangement directly with artists and songwriters. Beyond contractual limitations that may prevent artists from doing this, Morena’s legal payola suggestion takes the central tenet of the Ask Musicians for Music Act or AM-FM Act (S.2932/H.R. 5219) and turns it upside down. If enacted, the bill would give copyright owners the authority to require stations to obtain their consent to use their recordings, a move that would come at a price.

“If the labels now wish to re-write the rules, then broadcasters should equally be allowed to reach back into the past in a quid pro quo and make similar demands of the labels and artists for broadcast remuneration that the broadcasting industry played in getting artists their starts,” Morena insists. “I firmly believe that the radio industry would win that negotiation as the cost to find alternative ways to market and promote artists would bankrupt the music labels and the music industry.”

Calling for an end to anti-payola regulations may not be as far-fetched as it sounds. FCC Commissioner Michael O’Rielly has questioned whether some of the decades-old payola statutes need to be updated or repealed altogether. “Once again, we see a legacy regulation remaining in place for broadcasters that other substitute services are not required to abide by,” O’Rielly said two weeks ago during a speech to the Massachusetts Broadcasters Association. “It should not be lost on me or anyone else observing the industry that this is another area where the cutting edge high-technology companies operate without similar restrictions.” - Paul Heine