NAB Radio Board Endorses Conditions for Performance Fee Resolution


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Washington - Oct 25, 2010 - The National Association of Broadcasters Radio Board of Directors, meeting at its regularly scheduled fall board meeting in Washington, voted in favor of presenting Musicfirst representatives a legislative term sheet designed to resolve the longstanding performance fee issue. The Radio Board conditioned their support for this term sheet on the understanding that all provisions would remain part of any legislative package. This vote is subject to ratification by the NAB Joint Board of Directors, which will meet Oct. 26, 2010.

Under language included in the term sheet, music-playing terrestrial radio stations would agree to pay a limited performance fee, which would be set at between 0.25 percent and one percent of a station's net revenue, depending on a provision related to the penetration of radio-activated mobile phones in the United States. The endorsement from the NAB Radio Board was made with the understanding that any legislative resolution supported by NAB must include the following (verbatim wording from the NAB):

  • 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 smart phones, 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 0.25 percent of net industry revenue. Under this scenario, the performance fee would mirror the actual percentage of radio-activated mobile phones in the United States. Once market penetration of radio-activated mobile devices reaches and maintains a level of 75 percent of all mobile devices, broadcasters agree to pay the full one percent 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 percent of mobile phones have radio chips.
  • 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 smart phones, 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 0.25 percent of net industry revenue. Under this scenario, the performance fee would mirror the actual percentage of radio-activated mobile phones in the United States. Once market penetration of radio-activated mobile devices reaches and maintains a level of 75 percent of all mobile devices, broadcasters agree to pay the full one percent 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 percent 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.

    The Radio Board's action is a culmination of more than a year of discussions and dialog between radio executives, the NAB and its membership, Musicfirst, and key leaders in Congress.

    The term sheet as approved by the NAB Radio Board of Directors is posted at the NAB website.

    Update


    In response, musicFIRST advisor Tom Matzzie made the following statement on behalf of the coalition. In response, musicFIRST advisor Tom Matzzie made the following statement on behalf of the coalition.

    “While we are pleased that the radio broadcasters have for the first time acknowledged their obligation to pay the artists who are the foundation of their business, we are disappointed that they failed to vote on the deal both parties agreed upon in July. After a quick review, this new term sheet differs significantly from that agreement. We will be reviewing their term sheet further.”

    NAB President and CEO Gordon Smith issued this statement in response to the suggestion that an agreement had been reached in July regarding the performance fee issue.

    Smith said: "We are disappointed by comments from our friends at musicFirst representing that there was a definitive July agreement or a handshake settlement with NAB on terms for resolving the performance royalty issue. This is demonstrably false. If this were true, why would our two sides have continued with negotiations in August, September and October?"




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