Radio Stations Propose Paying to Play Music

For more than 70 years, over-the-air radio stations have played music without paying the performers who recorded the songs.

That could be changing.

This month, the National Association of Broadcasters released what it described as a framework of a deal in which stations would pay a total of about $100 million a year in performance fees.

“It’s a crack in the dam,” said David Kaut, a regulatory analyst for the research firm Stifel Nicolaus.

The association’s outline suggests that the largest stations pay a performance fee of 1 percent of net revenue, and smaller stations a lower rate or none at all. While labels and musicians have long sought performance fees, broadcasters have argued that the stations provide important promotion for artists, and that a fee might put small stations out of business.

Even if a final compromise is reached, it would still need Congressional approval.

Monday, the broadcasting group will hold an online discussion to answer questions from its members.

“I think some people inside the industry think we should fight and fight and fight,” said Peter Smyth, a board member of the radio group and chief executive of Greater Media, which owns 23 stations. “But at the end of the day, we have to make good deals that help us move forward.”

Mitch Bainwol, chief executive of the Recording Industry Association of America, a trade group that represents record labels, said that the plan released by the broadcasters “signals a new day where two very significant sectors that should be partners ride off together in a productive way.”

Last year, after the both the House and Senate judiciary committees approved bills that would require performance fees for broadcast radio, lawmakers asked the two sides to work out a deal themselves. The groups have regularly discussed the issue since February.

Laws passed in the 1990s require fees to be paid for online radio. Last year, SoundExchange, the organization that collects performance fees, brought in more than $180 million. The money is generally split between the copyright holder, often a record label, and the artist. Under the new plan, fees for online radio would be reduced.

The record industry would welcome any additional income, as revenue from recorded music has been cut almost in half over the last 10 years.

“It took me a really long time to come to the conclusion that I would pay performance royalties,” said Mr. Smyth. “Eight months ago, I’d say it’s nuts.”

Mr. Smyth said his feelings changed when he realized the risk involved in trying to oppose the bill. Stations fear that Congress could eventually require higher fees than they are proposing.

Although the two sides appear closer than ever before to a deal, serious hurdles remain.

The framework released by the broadcasters calls for a federal mandate that every cellphone sold in the United States include a chip to allow FM radio reception — a “critically important” part of the plan, said Dennis Wharton, the group’s spokesman. Having radio available in all cellphones could help broadcasters compete with online streaming services like Pandora, which are popular on mobile devices. Mr. Wharton said the chip would help provide a public service, as information during a local emergency could be heard on a phone.

The record companies are in favor of the chip requirement, but the cellphone industry has expressed serious concerns, saying that it could make phones bulkier and shorten battery life. “We are completely, inalterably opposed to this,” said Gary Shapiro, chief executive of the Consumer Electronics Association, which represents some wireless companies.

Mr. Bainwol said that in the last year many potential deal-breakers had arisen, but that the two sides had so far found ways to work around them. The chip question, he said, just happens to be the “issue du jour.”

The music labels would like to put something in front of lawmakers shortly after Labor Day, in hopes that something could be passed before the end of the current Congress. Whatever the timing, Marty Machowsky, a spokesman for the MusicFirst Coalition, which represents labels and musicians, said that the outline distributed by the broadcasters’ association was an important development.

“There’s really a sense,” he said, “that this has the potential to be a significant breakthrough.”

By JOSEPH PLAMBECK - NY Times

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