There has been an uptick in activity on the issue of performance rights in the past few weeks, with the addition of co-sponsors of a key House resolution opposing imposition of a performance right for over-the-air radio and introduction of a similar resolution in the Senate leading to speculation that the issue will come to a head this summer and also having possible repercussions with regard to the royalty rates paid for performance of sound recordings over the Internet.

We have touched on the issue of performance rights in several past postings.  Efforts to overturn the sharp increase in royalty rates applicable to Internet webcasters were the subject of significant discussion during the Spring and Summer of 2007 after the Copyright Royalty Board issued a final decision on March 2 and then dismissed a Motion to Rehear its Decision on April 16.  A Motion to Stay the implementation of the new rates was denied by the United States Court of Appeals on July 11, resulting in implementation of the new rates four days later.

Angered by the prospect that they would pay three times the royalties in 2010 that had been paid in 2005, webcasters turned to Congress for help.  The Internet Radio Equality Act was introduced in the House and Senate  but neither gained much traction, largely because legislators were appeased by promises originating from SoundExchange, Inc., representing recording artists, that early discussions regarding a more tenable rate were proving fruitful. As is often the case, a month later, there was no resolution of the issue and Congress had begun to focus on other issues. 

With one fire out, the RIAA, also representing recording artists, set another.  It began pushing for application of a similar royalty to be paid for performance of sound recordings on over-the-air radio (while broadcast stations had long paid the performance rights organizations ASCAP, BMI, and SESAC for the use of the underlying musical works — the music and lyric composition created by a songwriter — they had never been required to pay for the sound recording, that version played by the recording artist).  

The Performance Rights Act was introduced in each House of Congress in late 2007. Our predictions that it would not move very far have, so far, proven true (then again, we put $ 20 on the Caps win the Stanley Cup at far longer odds).    We stick by that decision in the face of the growing opposition movement that has taken the form of the "Local Radio Freedom Act".  Simply stating "Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over the air, or on any business for such public performance of sound recordings" this nonbinding resolution is gathering steam and shows a demonstrated commitment by over 200 Members of the House to vote against the Performance Rights Act.  A companion to Texas Representative Gene Green’s H. Con. Res. 244 has been introduced as S. Con. Res. 82 by Senators Blanche Lincoln (D-AR) and Roger Wicker (R-MS).  A week after introduction on May 12, it has 6 co-sponsors.

With members of both Houses in opposition to the Performance Rights Act (and in numbers the House face approaching the 218 needed to defeat the bill), is there cause for worry about implementation of an over-the-air performance right?  With the Internet Radio Equality Act continuing to struggle, will webcasters continue to overpay?  Well, the answers could be related.  One worry percolating in the industry is that some legislators might be willing to help webcasters by moving the Internet Radio Equality Act if the loss incurred by recording artists were made up in the form of over-the-air royalties.  These rumors were fueled by the Kansas Senator Sam Brownback’s introduction of the Internet Radio Equality Act as an amendment to Orphan Works legislation that was being marked up by the Senate Judiciary Committee on May 15.  The amendment was withdrawn after Committee Chairman, Patrick Leahy (D-VT) — also a primary sponsor of the Performance Rights Act in the Senate —  suggested that the measure be considered as part of an overall hearing on the issue of performance rights that will be held in June. 

We find it hard to believe that the NAB will abate in its opposition to over-the-air performance rights to salvage the Internet Radio Equality Act, so our guess is that the status quo remains through 2008.  But crazier things have happened (for instance, when we made the aforementioned Capitals bet at a Las Vegas casino in March, we got 100-1 odds because the team was 6 points out of the playoffs and some had given up; the next thing we knew, the Verizon Center was awash in red for Game 7 against the Flyers).