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Congress Considers Ending Royalty Exemption For Radio

A bipartisan bill introduced April 13 in the House would end royalty exemptions for AM/FM radio stations, which, unlike digital and satellite radio, pay no royalties for the music they broadcast.

In a letter sent to House members Monday, Thomas Schatz, the president of Citizens Against Government Waste (CAGW), urged lawmakers to support two bills that would end special privileges for radio stations. He said the votes would be considered in the group’s annual congressional scorecard.

“Currently, creators are compensated differently based on the source of the music when it is played over the airwaves,” Schatz writes.

Whereas digital radio services pay royalties at rates established by the market, he explains, satellite radio stations pay artificially low royalties determined by a government agency, while AM/FM radio stations pay no royalties at all “due to the anachronistic notion that playing music on AM/FM radio stations was equivalent to paying creators.” (RELATED: Conservative Groups Oppose ‘Bailout’ for Internet Radio)

The Fair Play Fair Pay Act, introduced in April by Democratic Rep. Jerrold Nadler and Republican Rep. Marsha Blackburn, would eliminate those distinctions, requiring anyone who transmits copyrighted content to pay market-dictated licensing fees to the content owner.

“For decades, AM/FM radio has used whatever music it wants without paying a cent to the musicians, vocalists, and labels that created it,” Nadler said in the press release. “Satellite radio has paid below market royalties for the music it uses, growing into a multibillion dollar business on the back of an illogical ‘grandfathered’ royalty standard that is now almost two decades old,” he noted.

“Many music creators struggle to make ends meet even when they write a hit song because of a quirk in the copyright law,” Blackburn added, claiming that, “The Fair Play Fair Pay Act will ensure that the intellectual property of artists can no longer be exploited by Big Radio without compensation.” (RELATED: Royalty Reform Must Put Equity for Musicians and Songwriters First)

To protect smaller stations that might not be able to afford the royalty fees, the bill caps royalties at $500 per year for stations with less than $1 million in annual revenues, and maintains royalty exemptions for “religious and incidental uses” of copyrighted content.

The other bill CAGW is supporting was also introduced by Blackburn, this time in conjunction with Democratic Rep. Anna Eshoo. According to a press release announcing the legislation, the Protecting the Rights of Musicians Act would require broadcasters who own both radio and TV stations to pay royalties on the radio content they transmit, just as cable and satellite stations already must pay licensing fees in order to retransmit content from local broadcasters.

To enforce the directive, the bill would prohibit any broadcaster that fails to compensate content owners for radio programming from charging retransmission fees for television content they own. (RELATED: Government Should Extricate Itself From the Music Business)

“Broadcasters receive billions of dollars annually when their local broadcast television programming is aired by cable and satellite operators, yet when it comes to the music played on their AM/FM radio stations, they refuse to compensate the creator of the music,” Eshoo said in the press release. “This double standard is patently unfair.”

Predictably, the radio industry is opposed to both bills, saying they would have a harmful economic impact, according to The Los Angeles Times.

“It is disappointing that [the Fair Play Fair Pay Act] retreads years-old policy positions rather than advancing the copyright dialogue through policies that help grow the entire music ecosystem,” Dennis Wharton, executive vice president of communications for the National Association of Broadcasters, said in a statement.

“The fees proposed by Rep. Nadler would kill jobs, hurt artist promotion, and devastate local economies across America,” he added.

Wharton also issued a statement in response to the introduction of the Protecting the Rights of Musicians Act, claiming, “This bill devalues the indispensable role that hometown broadcasters play in communities across America.”

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