Phoenix Center Disputes Terrestrial Broadcasters' Argument Against Performance Royalties
The Phoenix Center pushed back Wednesday against the broadcasting industry's contention that federal law shouldn't require most terrestrial radio stations to pay performance royalties, saying in a report that any promotional effect from radio plays of a song are “fully…
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internalized in a marketplace bargain” between the music and broadcasting industries. Broadcasters have cited the promotional benefits of radio play as a reason for opposing attempts to mandate performance royalty payments from terrestrial broadcasters. Broadcasters most recently cited the promotional effect in opposition to the Fair Play Fair Pay Act (HR-1733), which would in part require terrestrial broadcasters to begin paying performance royalties (see 1504160050). A “market-negotiated royalty rate balances the income derived by commercial users of music and any promotional effect those users provide, revealing that any promotional effect is fully internalized by the parties,” Phoenix said. “If the promotional effect is large enough to justify a zero royalty rate, then the music industry will voluntar[il]y accept a zero rate in a market negotiation. If not, then a positive royalty rate will be established.” Alleged promotional effect “provides no basis for federal law to mandate the free use of music by the radio broadcast industry," said Chief Economist George Ford in a news release. "Promotional effects, even if present and strong, are not a type of market failure requiring a legislative or regulatory fix.” NAB “is pleased that Congress has long rejected a job-killing fee on America's hometown radio stations while recognizing the unique promotional value that local radio provides record labels and performers,” a spokesman said in a statement. “Our stations are proud to be a primary platform for new music discovery, and NAB will strongly oppose RIAA-backed legislation that would transfer hundreds of millions of dollars from local radio to mostly offshore record labels.” The spokesman separately told us he assumes that the study “was funded by record label interests, and if so, it seems to me that should be fully disclosed.” The center didn't immediately comment on NAB's claims. A musicFIRST spokesman separately flagged the Phoenix Center report, saying in an email that as House Judiciary Committee Chairman Bob Goodlatte, R-Va., “prepares to move towards the next steps of the Committee’s copyright review process, this study debunks Big Radio’s promotional value case.”