Posted by: cinnamonlaw | May 16, 2009

“Performance Tax” for Radio Closer to Reality

The battle between performing artists and radio station owners intensified this week when the House Judiciary Committee voted 21-9 in favor of sending the Performance Rights Act to the full House of Representatives for a vote.  That bill would, according to Open Congress, impose a flat fee in lieu of payment of royalties for radio stations with less that $1.25 million in annual gross revenues.  PC Magazine reports the sliding fee scale would be as follows: $500 payment per year for stations making less that $100,000; $2,500 for stations making between $100,000 and less than $500,000 and $5,000 for stations making between $500,000 and less than $1.25 million.  Stations $1.25 million or more will have to negotiate a separate deal with the Copyright Royalty Board.   These fees will be in addition to the fees radio stations already pay to ASCAP, SESAC and BMI.  Radio and Records offered a wonderful summary of the debate among the Members of Congress who debated the measure.

As one might imagine, the NAB is opposed to the measure and the RIAA is in favor.  The most interesting thing for me is to note how the tables have turned over the course of  time.  Record labels and their artists have used radio stations to boost sales since radio was invented.  “Payola”, the illegal practice of compensating radio stations for playing certain songs, was rampant.  Record companies understood that more airplay over radio invariably led to the sale of more records.  And in terms of places to get your recordings promoted, radio was the only game in town.

Fast forward to the age of computers, satellite and internet, and RIAA is betting that the dynamic has changed.  RIAA believes it no longer needs radio to promote artists and their recordings, so it is looking to destroy the symbiotic relationship between artists and radio stations by charging radio stations to play music (over and above the ASCAP, BMI and SESAC fees stations already pay).

The folks at Techdirt summed this up nicely:

“[T]he most damning argument against the recording industry’s demand for money here is the fact that, for decades, the industry has (illegally) had the money go in the other direction. The system of payola has shown, quite clearly, how much the recording industry values airtime, in that it’s willing to pay radio stations to play its music.

So, can anyone explain why it’s illegal for record labels to pay radio stations to play music, but it’s okay for Congress to force radio stations to pay the record labels for playing their music? It defies common sense.”

For radio stations, this could not come at a worse time.  Advertising revenues are down, cash for upgrades for station improvements or to purchase or sell stations is very tight.  The NAB is not taking this lightly and has set up its own webiste in opposition to the performance tax.  The radio industry has had to beat back teh performance tax questions before, but it seems to have more momentum this time.  How many stations in smaller cities and towns would turn to “all talk” because of the econimic impact (or maybe just the principle) of this new tax?  I hope we don’t have to find out.

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