Is it a proposal for a new tax or a proposal to ensure payment of copyright fees? The answer may depend on whether you are a broadcaster of music or a performing artist and recording industry executive. But the eventual official answer, to be decided by Congress, may impact the music you hear over the air on AM and FM radio.
There is static in the radio business these days, as record companies and some recording artists seek to have Congress end a decades-old exemption from paying royalties to artists whose songs they play over the airwaves.
The dispute is now being played out in Congress, where competing legislation is being debated, some of which would require radio stations to make payment for playing records, and some bills which would essentially keep the status quo. The debate is also being played out on dueling websites.
Radio executives say that over-the-air radio provides incalculable benefits to record companies and artists through the free publicity received by playing their music for the general public. The record company position, one joined by some artists, is that radio broadcast station”™s should pay royalties, just as they do for their new online streaming services.
“I think the performance royalty tax is nonsense,” said Jason Finkelberg, general manager with Pamal Broadcasting, which owns several stations in the Hudson Valley, including 100.7 WHUD and K104.7. “The record labels have made millions of dollars, billions of dollars on the back of free promotion from radio stations. Their business has changed and they have mismanaged their business. But still the number one way people are exposed to their music is through radio, and without radio, there I no recording industry. So, again, to now charge radio stations a performance tax is nonsense.”
“It”™s not a tax, it”™s a copyright payment,” said Marty Machowsky, spokesman for musicFIRST (Fairness in Radio Starting Today) Coalition, the organization that is actively supporting measures to make radio stations pay for over-the-air broadcast of musical recordings.
Machowsky said satellite radio, Internet streaming of radio station signals, television shows and movies all pay artists a fee when they use their recordings. He said that broadcast radio, which does pay songwriters when they play a song over the air, has never paid the artists who are performing the song and said it is a longstanding injustice that should be rectified.
The split in the music industry and in Congress is neatly illustrated in the competing bills. There are currently two bills pending in Congress that would levy a performance tax on local radio; HR-848 sponsored by Rep. John Conyers of Michigan and S.379 sponsored by Sen. Patrick Leahy of Vermont.
Additionally, anti-performance tax resolutions have been introduced in the House and Senate in support of local radio. In the Senate, Sens. Blanche Lincoln of Arkansas and John Barrasso of Wyoming introduced S.Con.Res 14. In the House, Reps. Gene Green and Mike Conaway, both of Texas, introduced H.Con.Res.49. Both are known as the Local Radio Freedom Act.
The United States is one of the few nations in the world that does not pay a radio performance fee, Machowsky said. The others are China, North Korea, Iran and Rwanda. “That”™s the company we”™re keeping on this issue,” he said.
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Since the U.S. does not have a performance fee for broadcast radio, he said, there is no reciprocity agreement when American artists are played over the air in foreign countries. American music is extremely popular and he said it is estimated $100 million in fees would be received by American artists and record companies if the performance fee bill is passed.
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He said the financial effect domestically is impossible to estimate because 75 percent of the broadcast stations nationally would fall below the size threshold requiring payment for each song and could instead “pay $5,000 or less a year to clear the rights for all the music they use.” Large radio conglomerates or radio stations will negotiate a fee structure, if the bill passes.
“Five thousand dollars is not chicken feed,” said Will Stanley, who with his wife, Barbara, co-owns WKZE in Red Hook, which they call “Literally a mom and pop radio station.”
“I hate to tell you that $5,000 is real money,” Stanley said. “Would it bankrupt us? No, but when we first started five years ago, it would have been a real kick in the pants.”
“Why was there payola back in the old days, when money was sent from record companies to radio stations?” Stanley asked. “They used to pay us to play their records because they knew its value.”
“They say that without radio there would be no record industry,” Machowsky countered. “But they have it exactly backwards. Without the record industry there would be no music to play on the radio.”
