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Terms Of Royalties Proposal Announced

August 6, 2010: In the interest, it said, of accurate reporting on the subject, the NAB has released the proposed terms of the royalties agreement now under discussion by the NAB Radio Board and representatives of MusicFirst.

No votes have been taken and no agreement has been reached. But among the items on the table are tiered rate of 1 percent or less of net revenue, which cannot be changed except by mutual agreement or a change in the law, and the permanent end to Copyright Royalty Board jurisdiction over terrestrial and streaming rates.

"The NAB Radio Board had a full and productive exchange of ideas today on the status of discussions with MusicFirst representatives," NAB EVP Dennis Wharton said. "The talks are part of an ongoing dialogue with the board and NAB membership on possible alternatives to pending legislation that would be devastating to the future of free and local radio. No votes were taken at today's board meeting. The board reiterated its strong opposition to the pending bill in Congress, while agreeing that it is appropriate for NAB representatives to continue discussions with MusicFirst. Interested parties will be updated quickly if and when new developments emerge."

The Details

Direct from the NAB fact sheet:

• Tiered rate of 1% or less for all net revenue (roughly $100 million for the industry) which is permanent and can not be adjusted without changing statute or by mutual agreement
• PERMANENT removal of CRB jurisdiction for terrestrial and streaming
• Streaming rate reduction from current rates
• Inclusion of radio chips on all mobile phones
• AFTRA issues resolved (agency commercial replacement on webcasts)

The tiered rate of 1% or less for all net revenue would be as follows:

• Commercial and non-profit stations with revenue less than $50,000 annually would pay the lesser of $100 or 1% of revenue annually
• Commercial and non-profit stations with revenue between $50,000 to $100,000 annually would pay $500 annually
• Non-profit stations with revenue more than $100,000 annually would pay $1,000 annually
• Commercial stations with revenue between $100,000 to $500,000 annually would pay the lesser of $2,500 or 1% of revenue annually
• Commercial stations with revenue between $500,000 to $1,250,000 annually would pay $5,000 annually
• Commercial stations with revenue more than $1,250,000 annually would pay 1% of revenue annually

It is important to note that stations with incidental music use -- news, talk and sports radio -- would not pay for music. Additionally, religious services -- not religious music -- would be exempt from music fees.

The above referenced rates would be permanently fixed by statute and can only be changed by act of Congress or joint agreement between both parties.

GAO Weighs In -- Sort Of

In the midst of this, the Government Accountability Office this week provided a report to Sen. Arlen Specter of the Senate Judiciary Committee in response to a request that the GAO look at the impact of a provision in the Performance Rights Act under which the Copyright Royalty Judges setting rates would not be required, as they have been in other cases, to "minimize any disruptive impact" of the royalties on the industries involved.

The GAO looked at some other cases where the disruptive-impact standard has been applied, including the determination of royalties for satellite radio in 2008, and said that standard resulted in lower royalties for satellite because the Copyright Royalty Judges "determined that the cost of a royalty could have a negative impact on the ability of the satellite radio industry to continue operating" if the rate were set at the high end of the "zone of reasonableness" the judges had determined.

But, says the GAO, it is unclear how the removal of that standard would affect future rate-setting proceedings, particularly because the judges found that impact standard to be "intertwined" with another standard that requires them to "reflect the relative roles of the copyright owner and the copyright user in the product made available to the public" in various area, including creative contribution and capital investment.

The letter to Specter says, "Based on the previous rate-setting decisions, the application of the standards depend upon the evidence and relevant testimony, and the same standard that led to a lower royalty rate in other proceedings might bring a higher rate in other cases."

Ink View: 
While the radio vet in me bristles on long-held principle at any imposition of fees, the pragmatist knows sometimes you have to accede to progress. If mobile phone chips and lower streaming rates can be realized as part of the deal, it may be time to place vision (and survival) ahead of tradition.
-- Deborah Parenti, VP/GM

Ink View: 
 A potential $100 million hit is not a pleasant prospect for anyone in radio. The question is whether it's a fair price to pay for certainty, particularly when the labels have no reason not to bring this back to lawmakers again and again -- and a fair price to get the rights-holder-loving and unpredictable Copyright Royalty Board out of the rate-setting process in both radio and streaming.   
-- Brida Connolly, Editor-in-Chief

(8/6/2010 4:34:59 PM)
"Want to Kill HD Radio?"

"Let’s say that radio companies have to start paying royalties on the music that they play. Even if it is a flat percentage of all revenue like other outlets are going to be charged, HD Radio streams would do nothing more than serve to drive up royalty payments for NAB members. The overwhelming majority of terrestrial listeners ARE NOT listening to HD Radio. Ads on HD Radio will be dirt cheap for a very long time. The HD streams may not be able to cover royalty on music from ad revenues. Do you think that Clear Channel will continue to pump money in to HD Radio equipment, expanding services and coverage if the payoff in the end is an INCREASE in copyright royalties and nothing more?"

Anything that helps kill this HD Radio Farce is a good thing!

- HDRadioFarce
(8/6/2010 1:53:42 PM)
NAB, you are opening up a big can of worms that will come to bite you back. Remember the TV Networks that walked away from your membership for years and just recently returned? I think that will happen when the large radio groups get to see their huge invoices from RIAA, they will have to take the NAB fees/dues to pay RIAA and MusicFirst. Once this door is opened, the fees will only keep going up every contract period... we will be screwed from now on! Are we going to have to pay each label a fee, like we have to do with BMI, ASCAP and SESAC and whoever comes along? Or are they forming one monopoly group to scam radio stations?
Can someone with intelligence please check into why the labels are getting away with payola, listen to all the product endorsements, especially on country songs on the radio today, mostly beer, but plenty others are in the songs as well. We need to charge RIAA back for the airtime to promote products in their songs.
Radio needs the ability to charge back RIAA a processing fee for us to process their invoices. I can't wait to see what will happen radio stations come to agreements with performers that opt out of the PRA deal in exchange for FREE airplay, what are you going to do then? Will you let RIAA try to charge us for talk programming too?
NAB once you open this can of worms, it's going to be the death of the NAB as you know it.
Just in case you don't see it, broadcast radio has been the beating ground for everyone from the politicians, the FCC and the sponsors who still think we should be charging 1970 rates. Why is everyone trying to kill FREE broadcast radio? When we start to go under, it will not be something easily fixed, then the FCC can provide government provided radio and we can kill off democracy altogether!
Finally, I will do all I can to get our state's legislature to make sure they pass laws to charge the RIAA, MusicFirst and the poor concert performers who earn money in our state and charge them an INCOME TAX. We need to screw everyone just like broadcast radio gets from everyone else.

- Al Sergi

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