Music distributors Warner Music Group Corp, Sony Corp and Vivendi SA enlisted the Smashing Pumpkins’ Billy Corgan.
Clear Channel Communications Inc, Cumulus Media Inc and Citadel Broadcasting Corp sent out Steve Newberry, the owner of WOVO Radio, whose ‘My 105.3” in Glasgow, Kentucky, advertises “lots of great music.”
Music stars and hometown broadcasters are going toe-to-toe in Washington as they lobby lawmakers on legislation that would make stations pay royalties to music labels and performers for playing their songs. The radio industry may be hit with annual fees of $2 billion or more if the bill passes, according to David Oxenford, a broadcast-industry lawyer in Washington.
“We’re taking it very seriously,” said Martin Franks, an executive vice president at New York-based CBS Corp, which owns 137 stations. “We feel pretty strongly that this is a right that shouldn’t apply in the United States.”
Music labels and radio stations are both struggling with declining revenue as listeners turn to the Internet and devices such as the iPod from Cupertino, California-based Apple Inc, said Michael Gartenberg, an analyst with Interpret LLC, a Los Angeles-based market research firm.
The industries are spending millions to have their say in Washington. Broadcasters reported $45.5 million in expenses and campaign donations to influence Congress and federal agencies over the last two years, while the music industry doled out $30.8 million, according to the Center for Responsive Politics, a Washington-based research group.
Each group outspent the trucking industry, home builders and coal-mining companies.
‘Traction on this’
The early advantage may rest with music labels, which have won endorsements from committee chairmen in the House and Senate.
The House royalty legislation is sponsored by Judiciary Committee Chairman John Conyers, a Michigan Democrat, and had 33 cosponsors as of mid-March.
They received an average of $7,676 in campaign donations from the music industry for the 2008 elections, more than six times the average of $1,162 to other members of the House. Senate Judiciary Chairman Patrick Leahy, a Vermont Democrat, has introduced similar legislation in his chamber.
“The proponents seem to be getting a fair amount of traction on this,” David Kaut, a Washington-based analyst for Stifel, Nicolaus & Co, said in an interview. “But the broadcasters are still a very formidable opposition.”
The royalties at issue would be split between labels and artists including Corgan, who testified alongside Newberry at a March 10 hearing before the House Judiciary Committee. Satellite and Internet radio already pay the fees, as do traditional radio stations when they stream their broadcasts over the Web.
Kentucky stations
Radio stations pay songwriters and music publishers and leave performers with “no form of compensation at all,” Corgan testified. “This issue is one of fundamental fairness.”
Newberry, chief executive officer of Commonwealth Broadcast Corp, which operates 23 stations in Kentucky, said radio stations may reduce news programming or fire employees if forced to pay the fees. Broadcasters promote music with free airplay and are “the best friend of artists and record labels,” he said in his testimony.
The legislation may lead to payments of 20 per cent or more of radio stations’ revenue from playing music, depending on a decision by the rate-setting US Copyright Royalty Board, Oxenford, a partner in the law firm of Davis Wright Tremaine LLP, said in an interview. The firm’s clients include music users such as Web companies and broadcasters.
Broadcasters use “scare tactics and overinflated ‘estimates,’” Jonathan Lamy, a spokesman for the Recording Industry Association of America, said in an interview. Labels and artists support “a reasonable rate,” Lamy said. He declined to suggest one.
Radio revenue
Revenue of US radio stations fell 8.5 per cent to $16.7 billion in 2008 from the previous year, according to BIA Advisory Services, a Chantilly, Virginia-based research company.
Recorded music sales dropped to $10.3 billion in 2007 from $14.5 billion in 1999, according to the Recording Industry Association of America.
The labels are “really trying to get revenue out of wherever they can,” said Sonal Gandhi, a New York-based analyst for Forrester Research, in an interview. “This is one of the avenues they’re exploring.”
The Recording Industry Association is using lobbyists such as former House Majority Leader Dick Armey, a Republican, and two former aides to Democratic President Bill Clinton, Joel Johnson and Susan Brophy. The Washington-based trade group for New York-based Warner, Paris-based Vivendi, and Tokyo-based Sony also hired two new outside lobbyists in January.
Broadcaster lobbyists
The National Association of Broadcasters, which represents radio owners such as San Antonio-based Clear Channel, Las Vegas- based Citadel and Atlanta-based Cumulus, counts former Senate Commerce Committee staff director Lisa Sutherland and former Representative George Nethercutt of Washington, a Republican, among its lobbyists working against the legislation.
The royalty is “absolutely the No. 1 issue for radio broadcasters,” Dennis Wharton, a spokesman for the Washington- based broadcasters’ association, said in an interview. His association backs a non-binding resolution opposing performance royalties that had gained signatures of 158 of the 435 House members through March 25.
“It’s easy to sell free over-the-air radio,” the resolution’s chief Democratic sponsor, Representative Gene Green of Texas, said in an interview. “Every member knows their radio stations whereas they might not know their local performing artist.”
