Performance Rights Act sending radio into a spin

Broadcasters call the Performance Rights Act a tax. To the music industry, it’s more like a royalty fee. But the legislation, which is gaining momentum in both the House and the Senate, is making radio stations nervous.

For more than 80 years, commercial stations have aired songs without paying royalties to musicians. Sound recordings were exempted from “performance rights” fees even after they became copyrightable in 1972; and the Digital Performance Right in Sound Recordings Act, passed in 1995, applied only to new technologies such as cable, satellite and Internet radio.

The bill making its way through Congress would require AM and FM stations to pay fees, to be split evenly between the artists and copyright owners. The annual flat rate would be calculated according to a radio station’s revenue, with the smallest paying $500 a year, medium-size stations paying as much as $5,000 and the largest paying more.

But foes of the legislation -- including the National Assn. of Broadcasters, which represents about 6,500 radio stations -- say airplay gives “promotional value” to artists because radio reaches more than 235 million listeners a week, providing free advertising that produces $1.5 billion to $2.4 billion in music sales annually.

Broadcasters’ opposition to the bill also comes as radio stations, collectively accustomed to earning billions each year, are losing ad revenue.

“It’s a bad idea in a good economy. It’s a horrible idea in the economy we’re facing right now,” said Kris Jones, a NAB spokesman.

Dennis Wharton, NAB’s executive vice president of media relations, called the Performance Rights Act “the biggest threat to radio in 50 years.”

The millions -- and probably billions -- of dollars in annual performance fees could prompt stations to lay off workers, decrease charitable donations, convert to all-talk formats or go dark, Wharton said.

The NAB has launched an extensive campaign to oppose the legislation. In print, radio and TV ads, it suggests that music artists owe their careers to radio and asserts that performance fees would be paid to such major record labels as EMI, Sony and Universal that are based outside the U.S.

But musicians and record labels say they’re also hurting, and perceive their quest for compensation from the radio stations’ billions per year in profits as an issue of fairness. They cite cases of musicians who have had to perform into their 70s to earn money and contend most of the royalty fees generated by the act would be paid to musicians, who increasingly own their labels.

“All we’re seeking is a fundamentally fair radio performance right for the artists and musicians who’ve created the music that we enjoy listening to on the radio,” said Marty Machowsky, a spokesman for a music community coalition.

Since the act was introduced in 2007 -- and reintroduced in Congress in February -- Sheryl Crow, Nancy Sinatra, will.i.am, Herbie Hancock, Billy Corgan and other performers have appeared on Capitol Hill to voice their support.

The Performance Rights Act is getting more playtime than in previous Congresses. Senate Judiciary Chairman Patrick J. Leahy (D-Vt.) recently said the bill would be a priority for the committee this summer. In May, the House Judiciary Committee approved the act after adding an amendment to protect smaller and noncommercial broadcasters by creating a sliding-scale fee.

Still, more than 200 lawmakers have signaled their opposition to the legislation by co-sponsoring the Local Radio Freedom Act, a nonbinding resolution introduced in February that declares opposition to “any new performance fee, tax, royalty or other charge on radio for music airplay.”

Nonetheless, Machowsky detects progress, not only in Congress but also from the intensifying opposition from broadcasters. “If you look at the level of angst on the other side -- the amount of radio airtime they are devoting to this issue, either through advertising or commentary by on-air personalities -- it’s really indicative of the progress we’re making,” he said.

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ksherry@tribune.com