Well, maybe. And under some very specific conditions.
Given how opposed the National Association of Broadcasters (NAB) has been to the concept of paying performing artists and sound copyright owners for the over-the-air broadcast of their work, we think this is pretty significant. Of course “significant” doesn’t mean inevitable. Let’s review the facts.
For those just tuning in, the Public Performance Right for Sound Recordings would compensate performing artists (the folks singing and playing the tune) and the sound copyright owner (usually the label, but sometimes the artist) for plays on terrestrial radio (you know, like good ol’ FM).
Basically, it’s like this: when you hear Aretha Franklin’s version of “Respect” on regular radio, who gets paid? Not the Queen of Soul, whose performance made it a classic. Nor does her label. Yet the estate of Otis Redding (who wrote the song) and the publisher receive compensation. Nothing against Otis, but we at FMC think this is kinda weird, especially considering that satelite radio, webcasters and those non-video cable music channels all pay the performing artists. For more info, have a look at our Public Performance Right fact sheet.
The performance right debate has been going on almost since the dawn of radio. Last year, the rhetoric got pretty hot between the pro-performance right MusicFIRST Coalition and the broadcasters. Lately, however, temperatures seemed to have cooled, with negotiations between the two camps taking place throughout summer and fall 2010.
The fact that the broadcasters were even at the table can be seen as progress for those — like FMC — who have long supported compensating performers for terrestrial airplay. Yet the negotiations were not without their controversy. A couple of months ago, news broke that the NAB was looking to insert language into proposed legislation that would mandate the inclusion of an FM reciever in all so-called “smartphones” sold in the U.S. This didn’t sit well with cell phone manufacturers or the folks who sell mobile data. Nevertheless, the FM chip requirement was a major part of the NAB’s early provisions toward an agreement.
Now, there’s a new set of terms that has just been voted on by the NAB Radio Board. It’s a bit different than their earlier proposal, but still contains specific stipulations for an FM chip in smartphones. Interestingly, however, it does set a floor for royalty obligations even minus a legislatively-mandated chip. Radio Ink broke the story earlier, and had the following analysis:
Under the terms approved by the Radio Board, broadcast stations that play music would pay between .25 percent and 1 percent of net revenues. A law requiring cellphones to include a radio chip — with an “acceptable phase-in period” and the inclusion of HD Radio chips when that is “economically feasible” — is part of the term sheet, but if that can’t be accomplished right away, radio would agree to an initial performance royalty of .25 percent of net industry revenue.
Thereafter, the performance royalty would mirror the penetration of radio-capable cellphones. Once market penetration reaches and maintains a level of 75 percent, broadcasters would pay a full 1 percent performance royalty. That rate has no expiration date.
If a law requiring radio in cellphones passes, the streaming rates for simulcasts, webcasts, and other non-terrestrial music transmissions would be reduced through 2016. If that’s not achieved, the streaming rates would not be reduced until 50 percent of cellphones have radio chips.
There are other aspects to the proposal, including the removal of the Copyright Royalty Board as the rate-setting body. You can the entire list of terms here (PDF).
Reaction from MusicFIRST has been less than enthusiastic. S