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Internet radio’s strange copyright royalty week

Rep. Jerrold Nadler (D-NY)

Rep. Jerrold Nadler (D-NY), author of the “Interim FIRST Act.”

SoundExchange put out a happy face press release on Thursday, announcing that the performance royalty distributor has paid out no less than $204.4 million to artists and their representatives in the first two quarters of 2012. But attention through most of the week has focused on Representative Jerrold Nadler’s (D-NY) rather contorted effort to correct the perennially bass-ackwards situation for broadcast performance copyright policy.

The dilemma, as most Radio Survivor readers know, is that while online services like Pandora must pay performance royalties to artists, conventional radio stations need not for their over-the-air streams. Efforts to plainly add terrestrial radio to the mix have stonewalled in Congress. So Nadler has cooked up some new draft legislation that serves as a workaround. It basically tells the Copyright Royalty Board to jack up performance fees for the online streaming services of terrestrial radio stations.

Or as Nadler put it on Monday:

The draft Interim FIRST Act recognizes that artists do not yet have a performance right in sound recordings over terrestrial radio.  In order to properly compensate these creators, the bill would direct the Copyright Royalty Board to take the value of that intellectual property into account when deciding the royalty paid by a broadcaster for the Internet simulcast of its live radio music feed.  It also would remove the special treatment provision that applies to satellite and cable radio for royalty rates, thereby assuring that all digital radio services pay under the same market-based rate standard.

This is only intended as “an interim step until such time as terrestrial radio pays a performance royalty for music airplay,” Nadler’s statement added. The Recording Industry Association of America backed musicFIRST coalition praised the proposal.

“The only real solution is for Congress to create a legal performance right, but raising terrestrial radio’s digital royalties is an important interim step towards that goal,” the group declared.

But Pandora is panning the draft. “The current system for establishing royalty rates is astonishingly unfair,” Pandora chief Tim Westergren told The Hill on Wednesday. Westergren says he prefers draft legislation about to be floated by Rep. Jason Chaffetz (R-Utah) which takes nearly the opposite approach. It would lower Internet streaming royalty fees down to what satellite and cable pay. This is known as “801(b) standard” as per section 801 of the Copyright Act.

Needless to say the National Association of Broadcasters opposes Nadler’s proposal, although there was some flailing about in 2010 about terrestrials supporting a performance royalty tax if Congress would require device makers to put FM chips in mobiles. That rather strange train appears to have left the station, making room for these latest clunkers.

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