http://voices.washingtonpost.com/fasterforward/2010/08/radio_royalties_fix_require_fm.html?hpid=sec-techRadio royalties fix: Require FM radios in phones?
A tech-policy problem that's been festering for the last decade may be nearing a solution--but, in keeping with the sad history of this issue, the latest proposed fix has far more to do with lobbying than logic.
The issue should be familiar to politically-aware Web-radio fans: the disproportionate royalties that those sites pay to the musicians whose work they stream over the Internet. A flawed political process resulted in a panel of judges setting punitively high rates that would have put many Webcasters out of business, and even the more reasonable rates negotiated last year are substantially higher than those that the XM Sirius satellite-radio firm owes, and infinitely higher than those that AM and FM stations pay.
That's because in the United States--unlike in most other countries--radio stations don't pay "performance royalties" to musicians at all. Instead, they only pay "mechanical royalties" to songwriters, the same ones that Webcasters and other non-radio broadcasters also pay on top of performance royalties.
(Radio stations say they promote musicians by airing their work and note that record labels give them free promotional copies--something I remember from my days as a DJ at my college radio station. But by that logic, songwriters shouldn't get any extra compensation either. Since radio broadcasters seem unwilling to follow that line of thought, you're left with the argument that AM and FM should get a free ride on performance royalties... just because.)
A Performance Rights Act to even things out by requiring radio stations to pay performance royalties has slowly been gathering steam in Congress, and now broadcasters appear open to compromise.
For the most part, the proposal outlined in this release by the National Association of Broadcasters seems reasonable. Stations would pay, at most, 1 percent of their annual revenue, and those rates could no longer be ratcheted upwards by the same panel that tried to mug Webcasters. Stations would pay less to simulcast their content online and would be able to air the same commercials online and over the air.
But there's one weird wrinkle: The government would also have to require mobile-phone manufacturers to include FM tuners in every phone.
NAB spokesman Dennis Wharton defended that idea in an e-mail:
From a public safety perspective, it is critically important to have broadcast radio's unparalleled lifeline service available instantaneously in times of emergency. For that reason, NAB would oppose any legislation related to royalties that did not include that feature.
Somehow, the broadcasters did not think to make such a request earlier, even though an entire generation of Americans has grown up thinking "phone" means "mobile phone." So either the NAB has only recently begun to put a higher value on human life, or it thinks spending other people's money--that of phone manufacturers, the carriers who sell their products and their customers--will sell this proposal to its members.
Over at the MusicFirst Coalition, a lobbying group that advocates radio performance royalties, spokesman Marty Machowsky wrote that "inclusion and activation of FM chips in cell phones and PDAs would give consumers more choice and more ways to listen to and enjoy music." Which is a fair point, except it's not the government's job to make manufacturers provide those things.
Machowsky suggested that adding FM capability might not cost much. Indeed, iSuppli analyst Andrew Rassweiler, whose firm conducts "teardown" dissections of gadgets, noted that many phones, such as the iPhone, include unused FM support thanks to their use of consolidated chipset packages. He estimated that adding a separate FM tuner would add at most $1 in parts, not counting design and testing expenses.
But electronics manufacturers are predictably unamused by the idea of the government forcing them to add features customers don't seem to want--the Consumer Electronics Association denounced this proposal in a press release. But in a separate statement forwarded by a publicist, CEA president Gary Shapiro allowed for a compromise: some of this performance royalty would get kicked back to phone manufacturers to compensate for their added expenses.
Odds are this tuner-mandate proposal won't accomplish anything but demonstrate the sense of entitlement some industries have. There are just too many other companies opposed to the idea. Stifel, Nicolaus and Co. analyst David Kaut predicted its demise in a phone interview Tuesday: "If they want to get this done this Congress, I'm skeptical this survives."
Even without that provision, however, the proposed fix would still need work. To avoid distorting markets, it should impose the same royalty structure on broadcasters everywhere--whether they use the airwaves, satellites or the Internet to reach listeners. But that's far too fair, simple and logical an outcome to hope for, right?
By Rob Pegoraro | August 20, 2010; 2:56 PM ET
Topic: Require FM radios in phones? (Read 1275 times)
