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Aug 18, 2010 9:49 PM by Alison Haynes

Music royalty talks consider cell phone mandate

WASHINGTON (AP) - A long-running dispute between radio
broadcasters and the recording industry over music royalties has
taken an unexpected turn with a proposed settlement that threatens
to drag the mobile phone industry into the ring.
The compromise under discussion by radio broadcasters, recording
labels and recording artists could include a federal mandate that
all new cell phones come with a built-in FM radio chip. While a
deal is far from final, the prospect that the government could
dictate a key design decision for such a ubiquitous consumer device
has alarmed electronics manufacturers and wireless providers.
"This is two old-media industries attacking the new wireless
broadband industry," said Gary Shapiro, head of the Consumers
Electronics Association. "This is a battle that doesn't involve
us."
Building FM radio into cell phones requires an additional
antenna, which could add weight and bulk to devices prized for
their sleekness, Shapiro said. It could also drain battery life
more quickly, which could lead manufacturers to remove other
features from their devices, he added.
"We don't think Congress should accept a back-room deal on how
an iPhone should be designed," Shapiro said. "We think consumers
should choose and companies should choose."
For years, the National Association of Broadcasters has been
fighting a music industry proposal that would require radio
stations to pay music royalties to recording labels and performers
for the right to play their songs on the air.
Current law requires broadcast radio stations to pay royalties
to songwriters, but not recording labels or artists. Broadcasters
argue that the existing arrangement makes sense because radio
airplay provides free promotion and drives music purchases and
concert ticket sales.
But compact disc sales have dropped off, and sales of digital
albums haven't made up the difference, prompting labels and artists
- represented by a group called musicFirst - to step up their push
to start collecting royalties, too.
Successors to over-the-air radio, such as satellite radio,
Internet radio and cable TV music channels, are required to pay
performance royalties, noted Marty Machowsky, a spokesman for
musicFirst, which is backed by the Recording Industry Association
of America and the Recording Academy. Broadcast radio stations, he
said, get a "free ride" - paying nothing for "musical
performance which is the foundation of their business."
Both the House and Senate Judiciary Committees have passed bills
that would give recording labels and artists a cut of advertising
revenue that radio stations generate by playing their songs, but
neither contains an FM chip mandate. Both bills have stalled due to
fierce broadcaster resistance. Faced with a stalemate, lawmakers
have asked NAB and musicFirst to try to negotiate a compromise.
The proposed settlement would establish a tiered system of
royalty payments that would bring in a total of roughly $100
million for the music industry. Commercial radio stations with more
than $1.25 million in annual revenue would pay royalties totaling 1
percent of revenue. The smallest commercial and nonprofit stations
would pay either 1 percent of revenue or $100 annually, whichever
is less.
As this battle has dragged on, new rivals to broadcast radio
have grown stronger and drawn more listeners as digital music
players and streaming Internet radio have flourished. If Congress
approves the compromise with the FM radio mandate, it would be a
victory for NAB, which is seeking to expand radio station
audiences.
Both the recording industry and the broadcasters trumpet the
clause as a win for consumers. Machowsky said FM radio on cell
phones "would give consumers more ways to listen to and enjoy
music."
And Dennis Wharton, executive vice president of the National
Association of Broadcasters, which represents over-the-air radio
stations, said such a requirement would provide a valuable public
service - particularly in emergencies, when consumers often tune
into local stations seeking critical public safety information.
But Jot Carpenter, vice president of government affairs for
CTIA-The Wireless Association, which represents wireless carriers,
insists that while consumers do like to listen to streaming
Internet radio and music downloads on their wireless devices, there
is "not a huge desire to listen to over-the-air, ad-laden radio"
on mobile handsets. Phones with FM radio chips are not in high
demand, he noted.
At this point, NAB and musicFirst are pushing ahead. They are
taking the potential agreement back to their members to try to get
buy-in on a deal that they can take to lawmakers after the summer
recess. And they hope that Congress will act in the fall.
"Nothing is locked down just yet," said Mitch Bainwol, chief
executive of the Recording Industry Association, "but we're on the
precipice of an historic breakthrough."

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