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Recording Industry Decries AM-FM Broadcasting as 'A Form of Piracy'
By David Kravets EmailJune 23, 2008 | 4:56:44 PMCategories: Intellectual Property

Radio 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.

While radio currently pays the songwriters who pen the music and lyrics, it doesn't have to pay the performers; by contrast, satellite radio and Internet radio have to pay both groups. As music label revenues have declined, labels and artists have naturally turned to what they see as a huge potential revenue source. The two bills under consideration in Congress would make all forms of broadcasting liable for public performance fees, but broadcasters militantly insist that they provide crucial promotional support for artists and should be able to keep spinning discs without paying.

Nothing says "I have disdain for your
ideas" like canned herring

The spat between artists and record labels on one side and broadcasters on the other has exploded into the open recently as Congress has taken up a piece of legislation that would force radio to start paying artists for music. At a House subcommittee hearing this morning, HR 4789 was marked up and passed on to the full committee for a vote, while S 2500 waits for action on the Senate side.

"Today's vote comes as a complete nonsurprise, given the House IP Subcommittee's history of support for the RIAA-backed tax on local radio stations," said the National Association of Broadcasters after the vote. "Despite today's action, there remains broad bipartisan resistance to the RIAA tax from members of Congress who question whether a punitive fee on America's hometown radio stations should be used to bail out the failing business model of foreign-owned record labels."
New tax or old loophole closed?

The rhetoric of taxation and punishment might seem a bit extreme, considering that radio does pay such a royalty already to songwriters and that other media have to pay the artists as well. Indeed, the artists claim that this isn't so much a tax as an attempt to close a Congressional loophole only brought about through the power of the broadcasting lobby back in the 1930s.

Nancy Sinatra (daughter of Frank) sent a letter to House Speaker Nancy Pelosi this week in which she said that "the fact is people who do the work, regardless of any promotional effect either way, should have the right to be paid fairly for it." All other developed countries do require radio to pay performers.

musicFIRST, a group backed by the RIAA and SoundExchange, certainly has an argument to make, one that Congress is currently considering. But it's also not above stooping to odd publicity stunts, such as sending the National Association of Broadcasters a can of herring and then issuing a press release about it. The goal? To show that the broadcasters' arguments are nothing more than "red herrings." Clever.

The broadcasters weren't amused, with NAB Vice President Dennis Wharton saying that the stunt was "so lame that it barely warrants a response. Instead of sending fish to radio stations that advanced the careers of artists, RIAA should send food to the entertainers that foreign record labels have abused for decades."

The dig about "foreign record labels" should give you a clue about just how nasty this debate is going to get.