New York Business Lawyers

By: Jeannine Coppola

Part 1 | Part 2

The Broadcasters’ Perspective

Dennis Wharton, executive Vice President of the National Association of Broadcasters (NAB) was quick to point out that this type of legislation could not have come at a worse economic time.  He claims the Performance Rights Act will lead to a great loss of jobs in the broadcasting industry and will send millions of dollars to foreign record labels, which have exploited American artists in the past.  Labeling the bill, “the biggest threat to radio in 50 years”, NAB has gathered 260 House members and 27 Senators in support of a resolution against performance fees called “The Local Radio Freedom Act.”

In a June 2008 hearing on the Performance Rights Act, NAB laid out its arguments against the bill, first reasoning that the recording industry alone is responsible for its financial crisis due to its mistreatment of artists, failure to respond to illegal downloading and its participation in payola scandals. Therefore, broadcasters should not have to pay a tax to correct this when they have nurtured artist’s careers for decades. NAB goes on to suggest that the bill is little more than a plea for Congress to reallocate funds to the struggling record labels and evade more anti-piracy regulations.  It also warns that in addition to many radio stations dissolving, the surviving ones will limit their playlists or switch formats to talk-only radio, in an effort to keep costs down, stifling exposure to new musical acts.

The performance fees will take an especially hard toll on small, local radio stations, which account for about 68 percent of all commercial radio.  College radio stations, although non-commercial, will be affected by the bill, as well, possibly having difficulty logging every artist they play.  Warren Kozireski, president of College Broadcasters Inc., complained, “The record labels are completely out of touch as to how college radio stations operate.  The extensive record keeping requirements that will be required by the Copyright Royalty Board alone will add hundreds, if not thousands of dollars to the true cost of a performance fee.  It’s relatively easy to do that book-keeping if you have a narrow playlist and rarely deviate from it, as is the case with most large commercial radio stations. But if you have a library of thousands of albums and 45s, many of which were never reissued on CD, and if you allow your DJs to choose which ones they play—or even to bring in still more music from their personal collections of rare soul or jazz or bluegrass or electronica obscurities—then tracking the data suddenly becomes a full-time job.”

Some advocates of the bill maintain that emerging independent artists have the most to gain from performance fees.  Ideally with the Performance Rights Act, money would go to performers and copyright owners, and in the case of independent artists, this entity is one and the same. A boom in college radio stations and artist-run labels could then develop.  Nevertheless, in reality, playlists at major stations are chosen by advertising revenue, not the DJs.  The additional fee for every song played will make stations less willing to take risks on non-mainstream, unproven artists, and independent artists already have a hard time getting played on commercial radio.  Furthermore, their success is often fueled by file-sharing and downloading among friends and peers, rendering their status unchanged unless they manage to transcend the virtual divide.

Lastly, the National Association of Broadcasters sets out to differentiate between electronic and FM/AM Band radio, holding that terrestrial radio should remain exempt from the performance fees because Congress created a narrowly tailored performance right based on its need to address piracy and copyright infringement issues, none of which are applicable to non-digital stations.