[Congressional Record (Bound Edition), Volume 159 (2013), Part 10]
[Extensions of Remarks]
[Pages 14806-14807]
[From the U.S. Government Publishing Office, www.gpo.gov]




        THE INTRODUCTION OF H.R. __, THE FREE MARKET ROYALTY ACT

                                 ______
                                 

                          HON. MELVIN L. WATT

                           of north carolina

                    in the house of representatives

                       Monday, September 30, 2013

  Mr. WATT. Mr. Speaker, today I introduced H.R.__, the Free Market 
Royalty Act (FMRA), which creates a ``performance right'' that will 
obligate AM/FM radio stations to compensate performers for the use of 
their music just as cable, satellite, and Internet radio are obligated 
to do. Currently, cable, satellite, and Internet radio compensate 
writers, publishers and performers for the use of their music. However, 
when a song is played on AM/FM radio, the songwriter and publisher 
receive compensation, but the performer does not. The failure of 
terrestrial broadcasters to compensate the vocalists, musicians, and 
background performers sets the U.S. apart from most industrialized 
nations where performers are compensated for their performances. As a 
result of this lack of reciprocity, royalties collected internationally 
for over-the-air performances are not available to American sound 
recording artists.
  As part of the revision process that culminated in the Copyright Act 
of 1976, the Register of Copyrights was directed to examine whether the 
performance right should be extended to sound recordings. The 
Register's study considered whether a law should be enacted providing a 
performance right for sound recordings and also evaluated copyright 
systems developed in foreign countries. The exhaustive study 
transmitted to Congress in 1978 found that ``[s]ound recordings fully 
warrant a right of public performance'' that would address a major gap 
in the copyright laws. However, AM/FM broadcasters have fought against 
this equitable change for the last 35 years contending that AM/FM 
stations provide unique and valuable promotion to performers.
  In 1995, the Clinton Administration noted that ``[t]he copyright 
owners of sound recordings should be able to decide for themselves, as 
do all other copyright owners, if `free advertising' is sufficient 
compensation of their works. If the users' arguments regarding the 
benefit copyright owners derive from the public performance of their 
sound recordings are correct, the users should be able to negotiate a 
very low rate for a license to do so.''
  In 2009, I joined a broad, bipartisan majority of the House Judiciary 
Committee in favorably reporting the ``Performance Rights Act'' to the 
full House. The Senate judiciary Committee reported similar legislation 
to the full Senate. These bills would have established in law a 
performance right for sound recordings.
  Airtime on AM/FM radio is no different from exposure on other 
mediums. Cable, satellite, and Internet radio also promote artists to 
new audiences, yet all these services pay performance royalties because 
clearly the value in these relationships runs both ways. AM/FM stations 
profit from advertising revenue. Why do advertisers pay? Because people 
listen. Why do people listen? To hear the songs. For many stations, 
take away the music and you take away the audience.
  I was happy to hear Bob Pittman, the CEO and president of Clear 
Channel, the nation's largest broadcaster, say ``[t]here are plenty of 
people in radio who think we already give the record labels so much by 
giving them free promotion to break their artists, and they say that 
ought to be enough. But clearly that is not enough, or there wouldn't 
be a decades-long battle over it.'' I agree that promotion is not 
adequate compensation.
  I was less happy to hear the National Association of Broadcasters' 
claim that certain direct licensing deals that Mr. Pittman has reached 
with a handful of record labels illustrate that performance rights 
legislation is not needed. In fact, those deals expose the unfairness 
and inadequacy of the current system and they strongly point out the 
need for a legislative solution that will apply market wide. Indeed, 
Scott Borchetta, the president and CEO of Big Machine Records and one 
of the architects of the first private deal with Clear Channel that has 
become the template for others, wrote Congress in November that ``the 
absolute need for legislation cannot be emphasized enough.''
  What these deals really highlight is the uneven patchwork of rights 
that infects any effort to negotiate in the market as it stands today. 
AM/FM broadcasters get songs for AM/FM airplay without paying a single 
cent to the performers. That gives them a source of revenue

[[Page 14807]]

they can leverage in negotiations, for example to obtain lower royalty 
rates for digital radio play. But digital-only services don't have this 
unfair advantage. Meanwhile, only some labels and artists and only some 
broadcasters are in a position to undertake the costly negotiations 
that these deals require.
  At the same time, Internet broadcasters have come to the Judiciary 
Committee to complain of the separate unfairness in the market under 
which they pay performance royalties at a different rate than satellite 
radio (which has its own illogical grandfathered exception) while AM/FM 
doesn't pay at all. In some respects, I agree. The Obama Administration 
recently echoed some of these concerns noting that ``in the context of 
the growing digital audio market . . . there is still no public 
performance right when sound recordings are used by over-the-air FCC-
licensed broadcasters. As a result, over-the-air broadcasters enjoy a 
competitive advantage over emerging digital services.'' The solution to 
all these problems is for everyone to pay and for all royalties to be 
set under the same fair-market standard. That is essentially what the 
2009 bill did.
  Unfortunately, however, we've reached a legislative stalemate in 
which a reasonable compromise that virtually everyone agrees makes 
sense has become stuck. And the parties have all become locked into 
their positions and unwilling to make a move.
  The FMRA seeks to end that stalemate by putting a new idea on the 
table that respects the equities and responds to the arguments of all. 
This bill creates an AM/FM performance right, to match the digital 
right that already exists in law. This would jumpstart meaningful 
private negotiations for all.
  The FMRA's solution for royalty setting is the one the broadcasters 
have called for: let the market decide. But it also provides equal 
rights and bargaining power to both sides by allowing recording artists 
to reject offers they find unacceptable--something they currently 
cannot do under the copyright laws because the compulsory license 
requires them to make their music available. To implement this free 
market approach, the bill would repeal the existing compulsory license.
  Internet radio says it pays too much, that the current ``willing 
buyer, willing seller'' standard results in rates that are too high. 
Under this bill, they may negotiate any rates they can. While Congress 
will establish a right, it will get out of the business of essentially 
establishing a price for that right. The value of music will be 
determined by the market.
  There are of course many useful features of the current system that 
we should retain. Radio services have been able to use the compulsory 
licensing as one-stop licensing, allowing them to get access to any 
music they wish to use at an established price. To preserve that 
convenience to radio, the bill empowers broadcasters, and rights 
holders with SoundExchange as their agent, to collectively negotiate a 
one-stop licensing rate that will be available to all. Broadcasters and 
music creators are also free to negotiate separately alternative 
arrangements on top of those backstop terms.
  Current law also contains critical protections for artists requiring 
that they receive a statutorily mandated fair share of performance 
royalties and that those royalties be paid directly to them through 
SoundExchange. The bill retains those requirements.
  In 2009, we hoped all stakeholders could reach an agreement that 
would end the years of waiting for fair pay for airplay. This proposal 
makes it in everyone's interest to reach such an agreement.

                          ____________________