House Committee OKs radio payments to music labels

Wed May 13, 2009 11:14pm BST

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* House Committee OKs Performance Rights Act for full vote

* Act would make AM, FM radio stations pay to play songs

By Yinka Adegoke

NEW YORK, May 13 (Reuters) - Broadcast radio stations may finally be forced to pay music labels for playing their songs, as proposed U.S. legislation moved a step closer toward approval on Wednesday.

While newer media such as satellite, cable and Internet stations pay music companies to broadcast their music, terrestrial U.S. radio stations have resisted for decades.

The U.S. House of Representatives Judiciary Committee voted 21 to 9 on Wednesday to send the Performance Royalties Act to the full House for a vote.

Music companies, struggling with rapidly declining CD sales and online piracy, said the proposed law supported artists and rights holders in their fight for fair compensation when music is broadcast on AM and FM radio stations.

"Corporate radio's days of hiding behind a loophole in the copyright law are over," said Jennifer Bendall, executive director of industry lobbyist musicFIRST Coalition, calling for similar pay-to-play contracts for all radio stations.

But the National Association of Broadcasters said, if enacted, 50 percent of the new fee would go directly into the coffers of the major labels.

"Record label abuse of artists from Count Basie to Prince is well documented, as evidenced by scores of lawsuits filed by musicians cheated out of royalties," NAB Executive Vice President Dennis Wharton said in a statement.

"Moving forward, the fundamental question is this: If the debate is about 'fairness to artists,' why should the record labels get one penny from a performance tax on radio stations?"

Broadcast radio stations have long argued that they serve as an important free-to-air promotion outlet for music fans to discover new songs and albums to buy. In other words, they say they have provided free advertising for the record labels.

But as music sales have plummeted, the recorded music industry has become louder in their calls for changes to a system which could provide an important new revenue stream.

Warner Music Group WMG.N Chief Executive Edgar Bronfman told Wall Street analysts last week that if the Performance Rights Act is passed "it would result in a meaningful improvement" to his company's results.

The labels say the United States is at odds with many major music markets in Europe and other countries, where radio stations usually pay some sort of licensing fee to play songs.

Broadcast radio stations are not likely to give up easily on the passing of a law, which could significantly raise their costs.

Radio advertising, the main revenue source of most stations, is one of the worst hit sectors of the ad business in the ongoing recession. It is also facing a secular decline as advertisers move some of their radio spending to new areas like the Web. (Reporting by Yinka Adegoke; Editing by Richard Chang)

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