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April 1, 2009

Congressional bill could cost radio industry billions

By Arthur E. Foulkes

TERRE HAUTE — Terre Haute radio stations are joining the fight against a bill in Congress that critics say could cost the radio industry billions of dollars annually.

WWSY, better known as “The Valley,” and other radio stations owned by Midwest Communications in the Terre Haute radio market are airing “informational messages” asking the public to contact their members of Congress to oppose the bill, which would require broadcast radio stations to pay “performance fees” to singers and musicians.

At the same time, James Conner, general manager of radio stations Hi-99 and WWVR, “The River,” has been in Washington this week lobbying against the performance fee bill with other members of the Indiana Broadcasters Association.

“This is one of the most important issues that radio broadcasters will face in the coming months,” Conner said. “The long and short of it is the big record labels are wanting to find another way to increase their revenue … on the backs of broadcasters.”

If it passes, the performance fee bill would cost the radio industry between $6-8 billion per year, said Jeff McCarthy, vice president of programming at Midwest Communications.

Nevertheless, supporters of the legislation say the current system needs to change. Radio stations earn billions of dollars every year playing music without paying royalties to the performers or creators of that music, said Marty Machowsky, a spokesman for the Music First Coalition, which represents musicians, singers and recording companies. “Artists and musicians have been fighting this for 80 years,” he said.

At present, radio broadcasters enjoy an exemption in copyright law allowing them to avoid paying royalties to artists and musicians, Machowsky said. At one time, this may have made sense because radio stations provided an important service for artists and record companies by introducing the public to their music.

“It’s so different now,” Machowsky said. Today people get music in many ways other than the radio, meaning recording artists are no longer dependent on broadcasters for CD sales and concert promotions, he said. “Radio’s promotion argument … is long gone.” What’s more, other sources of recorded music, such as television, satellite radio and Internet radio, are required to pay performance royalties, Machowsky noted. “Those platforms all pay.”

But radio broadcasters say they still provide an important service to artists and record companies by playing their songs on the air. In fact, Midwest Communications’ McCarthy said, record company representatives call radio stations on a regular basis urging them to play their music. “It’s a double standard here.”

Under the current version of the performance fee bill, about 70-75 percent of radio stations would be required to pay $5,000 per year to artists, record companies and performers. Talk radio and religious radio stations would pay nothing while public radio and college radio stations would pay $1,000 per year. However, the biggest revenue-generating stations could pay millions per year, McCarthy said.

Radio stations are already paying significant royalties to songwriters, said Doug Edge, general manager of Crossroads Communications, which operates five radio stations in the Wabash Valley including WBOW. Crossroads stations pay “several thousand dollars” per month in songwriter royalties, he said. “Additional fees obviously would mean we’d have to cut something else” such as local weather coverage, he said. “I think [new fees] would really hurt the communities that we serve.”

“With the current economic situation, no one is wanting more expense,” WTHI’s Conner said.

Advocates of the performance fees say the bill now before Congress has been designed to keep costs low for most small- and medium-market radio stations. But because many small-market stations are owned by companies that also own major-market stations, the new fees could still harm smaller stations, McCarthy said. Some local stations could even close down, he said. “That’s our biggest fear.”

But Machowsky said his organization does not want that to happen. “We love radio,” but efforts to negotiate with broadcasters have been fruitless, he said. “They just said, ‘No, no, no.’”

If sponsorship in Congress is any indication, the performance fee bill may be facing an uphill battle. This week, the bill had just 37 sponsors or co-sponsors in the House while a rival bill aimed at blocking performance fees had around 160 sponsors or co-sponsors, including Eighth District Congressman Brad Ellsworth.

But if big-name music stars can generate congressional support, the performance fee bill may yet have a fighting chance. Some of the recording artists endorsing the performance fees include Bruce Springsteen, Tony Bennett, Rod Stewart, the Doors, America, the Dixie Chicks and Alanis Morissette. Last month, Billy Corgan of the Smashing Pumpkins went to Capitol Hill to testify on behalf of the performance fee bill.

It’s not clear when the House or Senate might vote on the performance fee bill, but Machowsky said he expects the current Congress to deal with the issue. The bill is currently in the House Judiciary Committee.

For the broadcasters’ side of the story, see www.NAB.org. For the performers and recording companies’ side, see www.musicfirstcoalition.org.



Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.

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