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It’s time for Radio to charge labels for airplay – legally

This is Part 2 of my interview with broadcast attorney David Oxenford. Part 1 focused on the legality of podcasting music (see it here – and listen to the podcast). Part 3 comes tomorrow.

In terms of the additional rights fees that Music First Coalition and others are lobbying for from the radio industry, where does that stand right now? What do you think the odds are of those new rights fees actually moving through Congress and becoming reality?

Right now, the radio stations do not pay anything for the use of a particular song to the artist or the copyright holders. They pay only ASCAP, BMI and SESAC. That’s money that goes to the composer, not the actual performer of the music or the copyright holder and the performer.

Certainly, the Music First Coalition and the record labels are doing their best to get that as a source of revenue because, you know, that’s a huge amount of money that they see out there, and in fact, it’s almost a scary amount when you look at the amounts that they’re asking for from the digital services where they already have the rights to get that kind of royalty. In the digital services, they’ve been asking for 20% of gross revenue in services that they’re getting their royalties as a percentage of revenue or more, you know, you just imagine what that would do to the radio industry if they suddenly had to start paying 20% of gross revenue for the use of music on radio stations. They’re out there pushing, the Music First Coalition, the RIAA Sound Exchange and their allies, and have a lot of supporters in Congress who want to do that, but you also have a very aggressive effort by the NAB and other broadcast associations and folks in other industries like bars, restaurants, and others who would be affected if this change were made.

This issue has come up from time to time over the last 20 or 30 years, and it’s always been beaten back, and one would hope and expect that it’s nothing that’s going to be imposed anytime in the next couple of years just because it’s going to be a gargantuan battle.

Based on which way you see the wind blowing what would you expect to happen now?

There are a lot of folks on Capital Hill who are pushing for this royalty. There are a number of digital companies who are paying this royalty and see it as a matter of fairness. In the rest of the world, this royalty is collected from over-the-air broadcasters and U.S. artists are not getting their share of this royalty. So there are a lot of very good arguments about fairness and equity.

Long term, I could see that something might have to be worked out in order to address those issues, but I just don’t see it happening in the short term.

Okay, so how about if the radio industry turns the tables on the music business and charges them for the extremely valuable airtime so many advertisers are paying dearly for? What’s the first step for the radio industry to begin charging the labels for airing their content?

Right now, broadcasters gave the labels free promotion for their material, and because they get free promotion, the argument goes, broadcasters should not have to pay a performance royalty. If some sort of performance royalty was adopted, then, I think that bargain is no longer being upheld and broadcasters would be in the position where they could charge the labels or the artists money for playing those songs and getting that promotional value.

So if this performance royalty issue has any traction on Capital Hill, that would likely be factored into the mix.

So, do you think it’s possible at some point in the future that the performance royalty fee would be met with an equal and opposite promotional fee on the part of the radio station?

I think that it might – I think that’s one of the reasons not to upset the balance.

If you get into the sort of situation where you have a performance royalty, but you also give broadcasters the rights to collect money for featuring music on the air without any sort of announcement that you have to do now to avoid the payola rules, you’re going to make the richest artists richer because, for example, if you’re a rock station you can’t avoid playing U2. So U2 gets richer.

But the new artist who’s not a core artist or who doesn’t offer core songs would be the one the broadcaster would need the pot “sweetened” in order for it to receive airplay. And that creates exactly the wrong incentives, I think, for the music industry and exactly the wrong incentives for what Congress wants to create. If you’re paying royalties to the popular artists and getting payment from new artists, you’re almost stifling the introduction of new music and entrenching those existing big artists who are there – exactly the opposite of the intent of Congress and the intent of what is professed intent by all these people testifying for the performance royalty.

Where’s the line between the scenario you just described – stations charging labels for airplay – and “payola”?

I’m describing a legalized version of payola. You can do this now; it’s just a matter of disclosure. All you’d be talking about is, in the future, not having to disclose that you’ve been paid to play a particular artist.

You know, when you go to the doctor’s office and the doctor prescribes a particular drug for you, the doctor isn’t required to disclose that he was just taken out to lunch by the drug company as promotion to feature their drug.

Or when you walk into the grocery store to buy some food and see the big display of corn chips at the end of an aisle, the grocery store doesn’t have a sign there saying that Doritos has paid for this premium placement.

For medicine and food, the basics of life, no disclosure is required by law, but music, which everybody loves but isn’t life and death – requires disclosure or you go to jail, and it’s kind of silly.

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