Legislators propose new royalties for Big Radio

LOS ANGELES (Reuters) - Lawmakers on Tuesday introduced legislation to undo a 50-year-old exemption that lets big radio companies like Clear Channel Communications Inc and CBS Corp air songs without paying record labels or performers any royalties.

For decades, the $20 billion radio broadcasting industry has paid royalties to songwriters and music publishers for the underlying rights to the songs played on the air, but have been excused from paying royalties to artists or labels for when their sound recordings were used.

It was a long-held view within the music industry that radio airplay was a critical and necessary marketing expense.

But with music sales in a protracted decline and with new types of broadcasters, like satellite and Web radio operators, being forced to pay performance royalties, the music industry has begun pushing for compensation from terrestrial radio.

Earlier this month, U.S. copyright authorities set new song recording royalty rates for proposed merger partners Sirius Satellite Radio and XM Satellite Radio Holdings Inc. requiring them to pay 8 percent of gross revenues by 2012.

"It's just plain wrong for (terrestrial) radio to be allowed to build profitable businesses with growing revenues on the backs of artists and musicians without paying them fairly for it," said singer-songwriter Tom Waits, a founding member of the musicFIRST Coalition. The group, comprising various performance and music industry organizations, has led the lobbying effort to reverse the exemption.

"The bottom line here is that radio plays music to attract listeners and bring in advertising dollars," he said.

Joining musicFIRST in pressing Congress to change the law are the music labels' lobbying entity, the Recording Industry Association of America (RIAA).

Clear Channel called the effort and legislation backwards.

"Everyone knows the record labels receive a huge promotional benefit from having their music played on the radio. They essentially receive free advertising for their product, and now they want radio stations to pay them for the privilege. That's just plain backwards, and the ironic thing is it will drive their customers to other entertainment sources," the nation's leading radio operator said.

CBS was not immediately available for comment.

The National Association of Broadcasters (NAB) said it will oppose the legislation. "After decades of Ebenezer Scrooge-like exploitation of countless artists, the RIAA and the foreign-owned record labels are singing a new holiday jingle to offset their failing business model," NAB Executive Vice President Dennis Wharton said in a statement.

"NAB will aggressively oppose this brazen attempt to force America's hometown radio stations to subsidize companies that have profited enormously through the free promotion provided by radio airplay," he said.

The bill was jointly introduced by Sens. Patrick Leahy, a Vermont Democrat, and Orrin Hatch, a Republican from Utah, and House Reps. Howard Berman, a California Democrat and Darrell Issa, a California Republican.

SoundExchange, which collects and distributes royalties on behalf of artists and labels, welcomed the legislation.

"Today's legislation is a sign that Congress is beginning to recognize the inherent inequity in failing to provide fair compensation to recording artists from the multimillion-dollar radio conglomerates that use our members' music to drive ad sales," SoundExchange executive director John Simson said.

(Reporting by Sue Zeidler, editing by Carol Bishopric)