New Spin in Recording May Force Broadcasters to Pay

Not so long ago, phonograph records were dust-catching vinyl platters etched with grooves and radio DJs were hitmakers, beaming the latest albums to an eager audience.

Record companies would do just about anything to get radio station turntables spinning with their wares. It was a two-step process: Hear it on the air, buy it for the home sound system. Broadcasters, awash in free promotional discs, focused on a certain market and lived off the advertising income.

For decades, there was harmony.

Then in the early 1980s, the digital technology revolution, led by the compact disc, brought sweeping changes to the industry. Today, those changes threaten to alter distribution patterns and market relationships in a way that record companies fear will lead to declining retail sales of tapes and CDs.

Forcing the issue into the foreground are international talks, scheduled in Geneva this summer, on how the new technology affects performers’ rights. To get in step with other major trading partners, Congress may have to consider important changes in U.S. copyright law, forcing broadcasters to begin paying the record industry for the right to play their recordings.

BACKGROUND: Tapping into broadcast revenues is not a new idea for the record industry. In 1971 Congress refused to grant the industry the broad copyright protections it sought--the right to authorize or prohibit performance.

Such “performance rights” would allow the industry, recording artists and producers to demand compensation from broadcasters. Composers and music publishers already get such payments.

The Copyright Office of the Library of Congress has consistently recommended extending performance rights to sound recordings but has recognized the fierce opposition of broadcasters.

ISSUES: Advances in digital technology raised the stakes dramatically. Record companies fear their “revenue stream”--retail sales of recordings--will be replaced by a “celestial jukebox” of near-perfect, easily copied transmissions from digital audio broadcasts. Even more ominous are interactive pay-per-listen or audio-on-demand services that could seriously erode retail sales.

The National Assn. of Broadcasters, however, sees the push for performance rights as “a bold attempt to force redistribution of money” from thousands of U.S. broadcasters “into the bank accounts of the handful of giant, mostly foreign-owned record companies.”

Not only would more broadcasters be nudged toward bankruptcy, the association says, but they would have to sacrifice news, sports and public affairs programming to come up with the new licensing fees. It says broadcasters already pay $300 million annually to composers and music publishers, while advertising revenues are slipping in an increasingly fragmented market.

Nearly 70 countries have some form of performance right. But American performers whose recordings are broadcast in those countries are denied millions in potential royalties because most nations grant rights to foreigners only on a reciprocal basis.

OUTLOOK: Congressional hearings in March, called by Rep. William J. Hughes (D-N.J.), chairman of the House intellectual property and judicial administration subcommittee, brought together all sides of the issue.

Hughes, aware that the World Intellectual Property Organization (WIPO) had scheduled June meetings in Geneva to discuss performance rights, wanted to “help shape the position of the United States before that position is placed on the table in Geneva.”

“An Israeli politician once remarked about Middle East negotiations: ‘If you’re not talking about land, you’re not talking,’ ” said Hughes. “In the context of the WIPO (talks), it might be said that if you’re not talking about changes to the U.S. copyright law, you’re not talking.”