Copyright Tug of War: How May "Fair Play Fair Pay" Fare?

Music industry and NAB gear up - again - for war over performance rights.

Like the swallows returning to Capistrano, the debate about "performance rights" has again returned to Washington - this time signaled by the introduction of H.R. 1733, the "Fair Play Fair Pay Act" (FPFPA). While this year's version of the perennial effort to impose additional copyright obligations on broadcasters features some new twists, its passage is far from guaranteed, although no one should be surprised if it advances at least part way through the legislative process.

"Performance rights", of course, is the short-hand expression for a particular type of copyright interest, one held by recording artists. The right covers the artist's particular recorded performance. (For more detail, check out my 2009 blog about an earlier performance rights effort.) While the "performance right" has been around since the 1990s, broadcasters have not been subject to it. That's because Congress acknowledged that recording artists and radio broadcasters enjoy a unique relationship through which each side benefits from the other: radio stations get program content from recording artists who in turn get free promotion from airplay. The classic win-win situation. Rather than disrupt that, Congress chose instead simply not to impose any performance rights obligations on broadcasters for over-the-air play. (Note: Webcasting is another story: broadcasters are liable for performance rights royalties for material that they webcast, even if that material is identical to the broadcaster's over-the-air programming.)

But for years the recording industry has been pressing Congress to eliminate that exemption. The FPFPA - which is sponsored by a bipartisan group of folks including Rep. Jerrold Nadler (D-NY), Rep. Marsha Blackburn (R-TN), Rep. John Conyers (D-MI) and Rep. Ted Deutch (D-FL) - is this year's try. It would amend the Copyright Act in several ways. You can read the entire 26 page bill if you want, but for a very good summary of all provisions, I suggest you check out this post from the Future of Music Coalition.

How would this bill affect broadcasters?

Negatively, of course. That's because, where radio stations currently pay no royalties at all for the right to broadcast sound recordings over the air, FPFPA would require stations to pay some royalties - obviously a negative as far as broadcasters are concerned. The bill also specifically incorporates the "RESPECT Act", which makes it clear that the performance right applies to pre-1972 sound recordings. (If you're a regular CommLawBlog reader, you should recognize that, while Congress initially declined to create a performance right for pre-1972 recordings, a body of case law in state courts is moving in the opposite direction.)

If FPFPA were to be enacted, how much would a station end up having to pay? We can't say, at least with regard to most stations. The bill simply directs the Copyright Royalty Board (CRB) to get started "as soon as practicable" to develop royalty rates and terms. In doing so, though, the CRB will be subject to at least one major constraint: Another FPFPA section specifically says that, in setting rates, the CRB must employ the same "willing buyer/willing seller" standard it uses to determine the webcasting rates.

But that doesn't necessarily mean the resulting rate for broadcast performance rights would be the same as the "per performance"-based webcasting rate. That's because the "willing buyer/willing seller" considerations in the over-the-air broadcast context are different from those in the webcasting context, even if the parties involved (i.e., radio licensees and recording artists) are the same in both settings. The assertion that radio airplay helps album sales would certainly come into play and could carry some weight in keeping the rates down. Plus, there may not even be a basis on which to impose a "per performance" rate upon an over the air service. You'd probably be more likely to see something tied to a station's overall listenership, AQH numbers or revenue.

We do know a couple of things about limits that the PFPFA would impose on rates:

There would be a minimum fee for each station, meaning all stations would definitely be on the hook for at least some payment in the future if this bill passes; but

Fees would be capped for certain types of station. For instance, small commercial stations with an annual revenue of under $1 million (and this appears to be per station, not per company) would pay $500.00 per year. An FCC-licensed public broadcast station would pay no more than $100. No royalties would be owed for broadcast of music used in religious services or incidental uses of music (which may protect talk, sports and news stations).

But the big questions I've been getting over recently are: (1) How likely is FPFPA to pass; and (2) if it does, when will I start paying more in royalties?

As to whether, I think the odds are below 50% - probably between 25-35% - but they're slightly higher than they have been in the past. The NAB continues to mount strong opposition to imposition of any performance right; its previous opposition has proven effective. And we have a pretty good idea of how many "NO" votes there might be, thanks to the Local Radio Freedom Act. That's a nonbinding resolution which has been introduced in both the House (as H.Con.Res. 17) and Senate (S.Con.Res. 4) which simply says that:

Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over the air, or on any business for such public performance of sound recordings.

Since the Radio Freedom Act is, in effect, the anti-FPFPA, it's safe to assume that any member of Congress who signs on to one will vote against the other. Currently, the Local Radio Freedom Act is supported by 158 Representatives and 12 Senators. Of course, those who remember their U.S. government classes will know that 218 Representatives and 51 Senators would be needed to pass any bill. The Local Radio Freedom Act has always garnered at least 218 Representatives in the past.

Keep an eye on the Local Radio Freedom Act, then, to get a good idea of whether the momentum is heading toward radio stations or recording artists. It's interesting to note, for instance, that ten Representatives have signed on to the Local Radio Freedom Act since the FPFPA was introduced. Keep in mind, too, that many Representatives and Senators won't commit on an issue until they absolutely have to. So while the Local Radio Freedom Act is currently 60 votes short of the crucial 218 that would signal likely defeat of the FPFPA, radio stations probably need to start worrying only if (a) the uptick in co-sponsors of the Local Radio Freedom Act stalls out and/or (b) we don't see a similar bump result after significant upcoming mileposts in the legislative process, like a committee hearing or vote on the bill.

I fully expect, by the way, that FPFPA will get both a committee hearing and a vote. Rep. Nadler is the Ranking Member of the Subcommittee on Courts, Intellectual Property and the Internet of the House Judiciary Committee. Rep. Conyers, an original co-sponsor of the FPFPA, is the Ranking Member of the full Judiciary Committee. Under these circumstances, protocol dictates that the bill would normally get a hearing and vote. I won't be surprised if the bill passes out of the subcommittee and full committee.

But what might happen on the House floor is another matter. Given the limited amount of time available to actual legislating in this, the 114th Congress, I'm not sure that this bill would get floor time this year even if the Local Radio Freedom Act doesn't get the support of 218 Representatives or 51 Senators. And the fact that 2016 is an election year means that little will get done then; it also means that anything passing the House and Senate this year must be relatively non-controversial because floor time is too precious to waste on things like reasoned debate.

Things could change, though. For instance, what if the performance right proposal were to be included in a broader bill in an effort to give some "wiggle room" to Representatives and Senators who are co-sponsors of the Local Radio Freedom Act. Would that give them the opportunity to somehow rationalize a vote for such a broader bill because, arguably, there are broader, more laudable interests at? Based on the plain language of the Local Radio Freedom Act, I'd still say "NO".

Another possible game-changer: the "divide and conquer" approach the FPFPA's sponsors appear be taking. The capping of royalties for smaller commercial and non-commercial broadcasters is a pretty clear attempt to try force the NAB off its argument that a performance right will harm local broadcasters. After all (the argument would go), annual royalties capped at $500 aren't all that onerous; that being the case, by opposing the FPRPA, the NAB is only trying to protect big corporate companies who can afford to pay. That spin by the FPFPA sponsors might garner a few votes to their side.

As far as timing goes, if the bill is to pass at all, I think that would have to happen in 2015 or very early in 2016, since (as mentioned above) election year activities in 2016 will likely distract Congress. And if it doesn't get passed in 2016, the process will have to start anew in 2017.

Even if the FPFPA does pass, though, you're likely looking at another year or two before royalties are imposed. Even if the CRB starts its rate-making proceeding "as soon as practicable" after the enactment of the FPFPA (as required by the bill), experience shows that such a proceeding can take as long as two years to complete. (Just look at the current Webcasting IV proceeding, setting the streaming rates for 2016-2020: it began in January 2014 and likely won't conclude until December 2015.)

So there is a lot in play here, especially with regard to politics. The bill's passage still seems pretty unlikely and, even it were to pass, its effect may not be felt for several years, but the debate should be fun to watch.