NAB Radio Board endorses "term sheet" for PRA


If the full NAB Board of Directors agrees at its meeting on Tuesday (10-26) the Performance Rights Act (PRA) ball will be in musicFIRST’s court. The NAB Radio Board on Monday endorsed a “term sheet” for a legislative package that NAB would support. The broadcasters group emphasized that it is still opposed to the current PRA legislation and that if any change is made once a deal is struck – the deal is off.

“NAB remains 100% opposed to performance fee legislation pending in Congress. 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,” said NAB Radio Board Chair Caroline Beasley, CFO of Beasley Broadcast Group.

“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 added.

The NAB action, however, drew a tepid response from musicFIRST. “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,” said a statement from musicFIRST.

Under language included in the Term Sheet, music-playing terrestrial radio stations would agree to pay what NAB is calling “a limited performance fee,” which would be set at between 0.25% and 1% of a station’s net revenue, depending on a provision related to the penetration of radio-activated mobile phones in the US. If the legislation mandates FM chips in all cell phones – and HD Radio chips when economically feasible – the fee would be 1%. However, if the cell phone companies succeed in blocking that provision of the legislation, the fee would begin at 0.25% and increase along with the marketplace penetration of radio-enabled cell phones up to the 1% maximum rate. The 1% rate would not be achieved until 75% of all cell phones in the United States are able to receive over-the-air radio broadcasts.

The “term sheet” adopted Monday by the NAB Radio Board is much like the outline made public in early August. The major change is what would be done if outside forces manage to block the FM chips in cell phones mandate. The new “term sheet” is attached to this page as a five-page pdf.

As with the earlier outline, the NAB Radio Board is insisting on permanent removal of the Copyright Royalty Board (CRB) from rate-setting of transmissions of terrestrial on-air music or Internet streaming. Broadcasters have been dead-set against having anything to do with the CRB after watching its rate-setting for Internet-only streaming stations.

While it would not be part of the actual law, the NAB is insisting that the “AFTRA issue” be resolved outside of the legislative process by the musicFIRST coalition using its influence with the union to allow for the simulcast of over-the-air radio commercials on the Internet.

As part of the deal, musicFIRST would have to give its formal “acknowledgment and recognition of the unparalleled promotional value of terrestrial radio airplay.”

Broadcasters would report airplay to musicFIRST so that it can divvy up the money to the artists and labels, but the NAB is insisting on simplified airplay reporting requirements “similar to the model used by ASCAP and BMI” –  not the extremely detailed 24/7/365 lists that musicFIRST currently demands for streaming.

The provisions for a phase-in of the fees if FM chips are not mandated by Congress are described six paragraphs above. But if the mandate is enacted – which both NAB and musicFIRST would agree to push for – the 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.

NAB notes that 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. Small stations could pay as little as $100 per year and News/Talkers who use only incidental music would pay nothing. Broadcasts of religious services would be completely exempt.

“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,” declared NAB Joint Board Chairman Steve Newberry, 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,” he insisted.

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.”

RBR-TVBR observation: Regardless of the outcome of next month’s election, it appears unlikely that PRA legislation will be a high enough priority for passage in the upcoming lame duck session of Congress. Even though the NAB Radio Board has given its blessing to the term sheet, there is still lots of opposition within the industry and the NAB will need to do a much better job of making the case to broadcasters that this is a deal worth doing.