October 17, 2018

Music Industry Tries To Recruit FCC To Its Side In Radio Royalty Fight.

By: Carter Wyckoff

Inside Radio

October 17, 2018


Supporters of a performance royalty on AM/FM radio have said they’ll work to make life difficult for broadcasters until the industry begins paying the fee. The latest evidence that strategy is still part of the playbook comes from the Federal Communications Commission, where the musicFirst Coalition and the Future of Music Coalition have asked the agency to reject any requests for deregulation until the royalty issue is settled. While the two issues may seem disconnected, the groups said radio consolidation has already led to a “homogenization” of AM/FM radio playlists, meaning listeners “now hear a substantially less diverse swath of artists and recordings than before consolidation.”

The comments were filed as part of the FCC’s proceeding (MB Docket No. 18-227) examining the state of the audio marketplace. Under a law passed earlier this year, the Commission is required to submit reports to Capitol Hill in every even-numbered year on the state of competition in the audio services market, including how traditional AM/FM radio stacks up against newer audio services such as satellite radio and streaming services. The first report to lawmakers is due by the end of December.

MusicFirst and the Future of Music Coalition said even as new digital services grow their listener base, AM/FM radio still accounts for a “substantial percentage” of the listening done today, especially in cars. At the same time it said broadcasters enjoy a “significant competitive advantage” over every other audio delivery platform because AM/FM radio is currently exempt from paying royalties for on-air use of sound recordings.

“Considering the fact that AM/FM radio has not lost a substantial number of listeners, the competitive advantages that owners of large numbers of radio stations enjoy, and the public interest in protecting smaller broadcasters from reduced competition, we strongly urge the Commission to refrain from loosening the local radio station ownership caps in its upcoming quadrennial review,” the two groups told the FCC in a filing. The two groups want that message included in the report that the FCC delivers to Congress, a move that could give ammunition to their allies who are expected to continue to push for a performance royalty.

“AM/FM radio already enjoys a competitive advantage over their audio competitors—they don’t pay music creators while every other platform playing sound recordings does,” said Chris Israel, musicFirst’s executive director. “Congress’ unanimous passage of the Music Modernization Act demonstrates that updating old laws, leveling playing fields and fairly compensating music creators will win the day over anti-competitive practices.”

It’s not the first time musicFirst has waded into the debate over media ownership rules. Two years ago it publicly thanked then-FCC chair Tom Wheeler for rejecting calls to roll back radio ownership rules, including cross-ownership limits.

FCC Urged To Stay On Sidelines

Through the years the FCC has remained on the sidelines in the performance royalty fight. The National Association of Broadcasters thinks it should stay there. In response to the music industry’s efforts to ensnare the FCC in the battle, the NAB has urged the Commission to rebuff the attempt to become involved in the decades-long debate. The NAB said it recognizes the “frustration” felt by the record labels, but added that isn’t reason enough for the FCC to weigh in on a legislative matter outside its “regulatory jurisdiction and expertise.”

Recognizing the Commission may not take that advice, the NAB also offered a list of reasons why it believes the music industry is misrepresenting the current situation. That includes the FCC directly. The NAB explained that copyright law may treat different audio outlets differently, but terrestrial radio stations have other costs and burdens online companies don’t face. That includes buying an FCC-issued license, complying with dozens of FCC rules, participating in the Emergency Alert System, proving they serve the community every eight years during license renewal, all while charging no subscription fees. “Given these significant costs borne by terrestrial broadcasters but not by internet-based audio providers, current differences in copyright law do not result in AM/FM stations having a ‘huge’ (or perhaps any) competitive advantage and are not a valid reason for the FCC to retain radio ownership caps adopted in the analog era, as the Coalitions contend,” the NAB said in a filing.

The NAB also took on the idea that competition within radio is lacking, noting there are more than 4,700 owners in radio today with more stations on the air than when the 1996 Telecom Act was passed. It also challenged the music industry’s argument that further consolidation would hurt small broadcasters, pointing out that several small groups have explicitly asked the FCC to relax the current limits that they find outdated.

The message from broadcasters as the FCC has taken stock of the audio marketplace has largely been focused on how much things have changed for radio in recent years, although the introduction of the performance royalty issue will likely bring some pushback in the coming days.

It’s not yet clear just how big the FCC’s appetite for deregulation of the radio industry really is. Audio Division chief Albert Shuldiner said many in radio may be “getting out a little bit ahead” of where the Commission itself is on potential revisions to media ownership rules. “We’re at the early stages of this,” he told the Radio Show last month.

Shuldiner said one broadcaster was so convinced that the Commission would greenlight changes proposed by the NAB that they tried to get a deal approved by proposing that a waiver be issued in the meantime. “As you can imagine, we told them not to bother and that was something we were not going to even entertain,” he said, telling broadcasters, “You have to stand by and see where we come out on this.”