Court Stays Streaming Royalty Decision

Few business subjects cause radio-station owners more aggravation than the mention of the royalty fees they must pay to songwriters and music publishers. But the digital age has given them another irritant.

The Third Circuit U.S. Court of Appeals stayed a lower court decision Oct. 17, making local radio stations that stream music over the Internet subject to payment of digital performance royalties to record companies and artists.

"The central question," the court opinion says, "is whether, in exempting 'nonsubscription broadcast transmissions,' Congress intended the [Digital Performance Right Act] to exempt nontraditional transmissions by broadcasters. The answer appears to be solidly in the negative.

"Our analysis," it concludes, "convinces us that the Copyright Office's arguments [that broadcasters should pay for digital streams] are persuasive. Nonsubscription broadcast transmission's exemption implicates only over-the-air radio broadcast transmissions and does not cover the Internet streaming of AM/FM broadcast signals."

A National Assn. of Broadcasters spokesman says the trade group "disagrees with the decision" and will be exploring "all of our legal and legislative options to overturn" it.

He adds: "This is above and beyond the more than $300 million that broadcasters pay each year to music licensing organizations like ASCAP, BMI and SESAC to compensate songwriters and music publishers."

It is unclear whether the already strapped NAB would decide to fund an expensive Supreme Court challenge for what amounts to digital small change at this point.

The radio industry fought hard for three decades to prevent the record industry from getting a performance royalty in which "traditional" analog radio stations would have to pay out fees to artists and labels in addition to songwriters and music publishers.

Their success through the decades was the result of a bargain that the still-small record industry struck when the Copyright Act was revised. The agreement left in place a "quid pro quo" situation with radio wherein record companies provided records with no performance royalty consequences in return for the "free" publicity airplay engendered.

As the '80s unfolded, the U.S. was the only developed country not to have a performance right in sound recording.

Lobbying by the record industry a decade ago has given artists and labels a limited performance royalty for Webcasting.

Whatever its future, few believe that traditional analog radio will ever have to pay similar royalties, but broadcasters are still fuming.

In a statement, Recording Industry Assn. of America president Cary Sherman says the industry "applauds" the ruling and, with perhaps a slight tweak of the NAB's nose, adds that the RIAA is pleased to have "already reached an agreement on royalty rates with the broadcasters through marketplace negotiations."