Reverse payola: Group pushing radio stations to pay performers

Sunday, December 02, 2007

In the past, the radio industry was plagued by payola scandals: Stations took money from record companies in exchange for airplay. Now, a group representing recording artists is seeking to turn the pay-for-play strategy on its head: It wants radio stations to pay artists and their record labels when the stations play their music.

Under the current copyright system, songwriters and music publishers are compensated by radio stations through royalties when a song is played on the radio, but the people performing on the record — from superstars to session musicians — are not. That’s what the musicFIRST (Fairness in Radio Starting Today) Coalition is pushing to change.

Formed this summer, the coalition of music unions, performing artists and recording industry organizations including the Recording Industry Association of America is lobbying for a law requiring performance royalty payments to all performers on a recording, as well as to the label that released it. Other forms of radio — including satellite, Internet radio and cable music services — do this, as do radio stations in Europe and Canada.

“For almost the entire 50 years since the Grammys were created, artists have been talking about this inequity in compensation,” says Daryl Friedman, vice president for advocacy and government relations at the Recording Academy, the organization behind the Grammy awards. “The key issue is fairness. Every other platform compensates the creator of the recording — except terrestrial radio. If radio is making a $20 billion business around playing sound recordings, the least they can do is compensate those who created them.”

The musicFIRST initiative comes in the middle of a second contentious battle being waged by Internet broadcasters, who are required to pay performance royalties. Last March, the Copyright Royalty Board approved an increase in fees that Webcasters say will drive many of them, small and large, out of business. The Webcasters’ efforts to reverse that decision is headed to the U.S. Circuit Court of Appeals in Washington, D.C., in February, with hearings scheduled throughout the coming months.

The musicFIRST push also is akin to the issue that is at the heart of the Hollywood film and TV writers’ strike: The writers want to be compensated for their work that appears over the Internet. And like that very public and prolonged strike, in which the broadcasters have dug in their heels, radio station owners don’t appear willing to cede any ground to the upstart coalition.

“Were it not for radio’s free promotional airplay of music on stations all over America, most successful recording artists would still be playing in a garage,” says Dennis Wharton, executive vice president of media relations at the National Association of Broadcasters, the radio/TV/broadcasting trade association.

Wharton believes the record labels should look for other ways to improve revenues for the artists they represent.

“The giant record companies have not adapted to the times and have seen their revenues shrinking because they didn’t make music available on a digital basis. Instead of adapting their business model, they’ve spent the last few years suing college kids and grandmothers” over illegal downloads of online music. “Now they see radio stations as an opportunity to make up the losses that are the result of really bad business decisions on their part.”

Broadcasters also say they’re providing a valuable service to performers by playing and promoting the music, and generating record and concert ticket sales. “The relationship between radio and recording artists is a symbiotic one,” says John Rohm, regional vice president for radio giant Clear Channel. “The relationship as it exists is the appropriate one. It’s been a working model that has been in place for decades.”

But musicFIRST’s supporters argue that radio’s promotional punch isn’t what it used to be, since both listeners and artists have other options for exposure to new music.

“We’re going through a transformation,” says Rich Bengloff, president of the American Association of Independent Music, an organization representing independent music labels in the United States. “It used to be that people went to a music store and bought music and took it home and listened to it. It was a pretty simple model and easy to work with.”

“Consumer trends have changed” since those days, he said. “We’re going from a model where people purchased music to a model where people are now doing more listening to music” — through satellite radio, Webcasting, music on cable TV and podcasts, in addition to terrestrial radio. “More and more people are not being collectors of music in the conventional sense. Consumers are dictating how the business works.”

As this new model evolves, Bengloff says, independent artists and labels “felt they were going to get less out of these new revenue streams. The people who create the music and the labels that invest in that creativity need to be compensated.”

It’s not clear where this dispute will end up. The musicFIRST coalition is hoping to get legislation introduced in Congress to revise the royalty rules for radio, which haven’t changed in decades. Broadcasters contend such a change would force many local radio stations out of business or to stop playing music. “In a lot of cases, it could be devastating” for radio stations, said Clear Channel’s Rohm.

But observers note that there really aren’t that many “local” stations left in the country — the vast majority are owned by huge radio conglomerates such as Clear Channel, the nation’s largest, with more than 1,200 stations.

While a precise dollar amount has yet to be established for the performance royalties — the NAB has put estimates in the hundreds of millions to billions of dollars — advocates of the plan say large conglomerates such as Clear Channel would be able to afford it. But to protect smaller stations, college stations and public stations whose revenues fall under an established limits, musicFIRST is proposing exemptions or reduced fees.

From the independent labels’ perspective, Independent Music’s Bengloff says, small and noncommercial stations are “our lifeline to get access into the marketplace. In many markets, they’re the only ones who are playing our music, and we would never allow anything to happen to them that would cause them to run into financial difficulty.”

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