Posted by: Olga Kharif on May 13, 2009
House Judiciary Committee today approved a performance rights bill that would require traditional radio stations to pay royalties to copyright holders for playing music over the air. This landmark piece of legislation strives to change practices that date back to the 1920s. In all the history of radio, stations have played music for free.
The bill and a related amendment seek to impose tiered royalty rates. Stations that make less than $100,000 in annual sales — that’s 77% of all radio stations out there — would pay a flat fee of $500 a year. Stations that make more money would pay more. The legislation also stipulates that stations won’t have to pay royalties for one to three years, to give stations time to recover from the current economic downturn. “It’s not the intention of this committee to make the economic situation more difficult for anybody,” Committee Chairman John Conyers (D-MI) said during the hearing. Broadcasters’ revenues have dropped from $21 billion annually to $16 billion this year, according to Stifel Nicolaus.
The bill is far from finished. There’s plenty of disagreement among members of Congress, who have been bombarded with letters and phone calls from the music industry and broadcasters. “There’s still much that we need to know, and further improvements we need to make to the bill,” said Congressman Lamar Smith (R-Tex.). Today, Congress commissioned a study into the impact radio royalties may have on smaller radio stations.
But the mark-up is bad news for the station owners, as the bill is likely to move forward. “….the bill still has a long way to go in the face of strong broadcaster opposition,” Stifel analyst Blair Levin wrote in today’s note. “But the measure is of major concern to radio broadcasters, which could eventually be forced to collectively pay hundreds of millions of dollars in royalties, which would be split between singers and the major record labels.”