Various news sources are reporting that the radio industry, under pressure to pay performance royalties for over the air song plays, has come up with a proposal to pay – along with a list of demands. It’s a very telling list that exposes the radio broadcasting industry’s desperate desire to turn back the dial and ignore the growing popularity of online streaming and other digital platforms with listeners.
Realizing that they’re going to have to pay performance royalties, the radio broadcasters have come up with a proposal that offers a (1) tiered rate of 1% or less. In exchange for that they want the (2) Copyright Royalty Board’s jurisdiction forever removed from their rates, (3) lower streaming royalty rates, (4) inclusion of FM chips in cellphones, and (5) “AFTRA issues” resolved for streaming broadcast ads.
I get the relationship between #1, #2, and #3. They’re negotiating with the same folks, and they want to use their negotiations to improve and simplify their overall deal, including streaming. The CRB has been unfriendly in this regard, so they would like to take them out of the equation.
But what does all of this have to do with FM chips in cellphones? Nothing. Or AFTRA issues? Not much – performance royalties are paid to musicians, AFTRA monies are owed to actors and voice talent employed by advertisers and agencies to record commercials. These are pretty arbitrary demands.
So what’s so telling about this? It’s a list that is all about going backwards. Cellphones are already radio enabled – for streaming that is. Smartphones have proven to be enormously popular mobile streaming devices. Why fight a battle that’s already won?
As far as the whole AFTRA thing….I’ve gone on and on about this one, you can read some of my opinions here. Simulcasting over-the-air radio commercials on a streaming station is a BAD IDEA. It discourages advertisers and broadcasters from developing ads that have an online/interactive call to action. It encourages broadcasters to view their streams as simulcasts of their broadcasts. WHICH THEY ARE NOT. It’s the fast lazy train to ineffective online radio…
Last week, after news that Pureplay Webcasters had reached an agreement with Sound Exchange on performance royalties, Internet radio industry darling Pandora made more news by announcing support for the Performance Rights Act before Congress. That bill would require AM/FM broadcasters to pay performance royalties as well.
Deep background, for those who don’t have it, is that in 1998 the Digital Media Copyright Act (DMCA) was passed requiring various forms of new media, including satellite and Internet radio, to pay performance royalties on digital media transmissions. Traditional broadcasters have not paid performance royalties. Broadcasters have maintained that the benefits that musicians receive from having their songs played on radio stations is substantial and therefore replaces the need for additional payments.
While I believe that’s true – that the value of playing a song on the radio is substantial – the fact remains that record companies are suffering from an enormous shift in the way music is purchased, and their business is way down. I’ve been saying for a long time that future of the music industry – both record companies and music services (AM, FM, online, whatever) is going to be one of sharing revenue. Radio stations can’t survive if record companies do not find a way to profit.
There are many ways to argue against Pandora’s stance. Just because they have to pay royalties, why does that mean broadcasters should. Isn’t that an eye for an eye mentality? Sure, I think that’s a good point – why should Pandora want broadcasters to be penalized in the name of fairness?
A much better point, also made by Pandora, is that they want to see musicians get their fair share. Because, whether broadcasters like it or not, if musicians and their labels can’t make money, the system is flawed, and the industry is doomed.