NAB Radio Board Offers Term Sheet to musicFIRST

RADIO ONLINE | Monday, October 25, 2010

During NAB's Radio Board of Directors meeting in Washington on Monday, voted in favor of presenting musicFIRST a legislative "Term Sheet" designed to resolve the longstanding performance fee issue. The Radio Board conditioned its support on the understanding that all provisions would remain part of any legislative package. Today's vote is subject to ratification by the NAB Joint board on October 26.

"NAB remains 100% opposed to performance royalty legislation pending in Congress," said NAB Radio Board Chair Caroline Beasley, who is also CFO of Florida-based Beasley Broadcast Group. "However, in a good faith effort to resolve this issue in the best interests of both radio and the music industry, we have endorsed a solution ensuring that broadcasters have a foothold in digital platforms of tomorrow."

"Today's endorsement includes provisions that are essential to the future of free and local radio, and we're hopeful that the musicFIRST Coalition finds it in their best interest to say 'yes' to this proposal," Beasley said.

Under language included in the Term Sheet, music-playing terrestrial radio stations would agree to pay a limited royalty fee, which would be set at between 0.25% and one% of a station's net revenue, depending on a provision related to the penetration of radio-activated mobile phones in the U.S.

The endorsement from the NAB Radio Board was made with the understanding that any legislative resolution supported by NAB must include the following:

• Permanent removal of the Copyright Royalty Board from rate-setting of transmissions of terrestrial on-air music or Internet streaming.
• Resolution of the "AFTRA issue" outside of the legislative process by the musicFIRST coalition that would facilitate simulcast of over-the-air radio commercials on the Internet.
• musicFIRST's acknowledgment and recognition of the unparalleled promotional value of terrestrial radio airplay.
• Simplified airplay reporting requirements similar to the model used by ASCAP/BMI.
• Congressionally-mandated radio-activated chips in mobile devices such as cell phones and BlackBerry smartphones, with an acceptable phase-in period and inclusion of HD Radio chips when economically feasible. If a legislative mandate (which musicFirst has agreed to support) becomes initially unattainable, radio broadcasters would agree to an initial performance fee payment of .25% of net industry revenue. Under this scenario, the performance fee would mirror the actual percentage of radio-activated mobile phones in the U.S. Once market penetration of radio-activated mobile devices reaches and maintains a level of 75% of all mobile devices, broadcasters agree to pay the full one% terrestrial transmission performance fee.
• Assuming a successful mandate of radio-activated chips in mobile devices, streaming rates that broadcasters pay for simulcasts, webcasts and other non-terrestrial transmissions of music through 2016 would be reduced. In the event that a legislative mandate for radio chips in mobile devices is not achieved, the streaming rate reduction would not take effect until 50% of mobile phones have radio chips.

The Term Sheet provides accommodations for small radio station operators, noncommercial stations, religious broadcasters and incidental uses of music by News/Talk and Sports stations. The Term Sheet also envisions that both the radio and music industry will work cooperatively to offer consumers more and better ways to listen to music. "From a position of strength, we have fashioned a Term Sheet for resolving the performance fee issue that in the long run is acceptable for radio," said NAB Joint Board Chairman Steve Newberry, who is also President and CEO of Kentucky-based Commonwealth Broadcasting. "No broadcaster that I know relishes paying a new fee, but the terms of this agreement provide badly needed certainty for our business to move forward, and the positives of this accord far out-weigh the negatives."

NAB President and CEO Gordon Smith said the Term Sheet "represents a path forward for radio broadcasters and musicFirst to resolve this contentious issue in a manner that is fair and equitable to both sides. Radio stations, artists and the record labels have more commonalities than differences, and adoption of legislation that reflects this Term Sheet will provide a framework for untold new revenue opportunities for both sides. We look forward to working with musicFIRST and its allies for swift legislative adoption of this entire package of initiatives that will help our businesses flourish in the digital age."

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