Law could mean big changes to radio industry

The way Ken Misch sees it, the love affair between music and radio has hit a rough patch.

But when this spat is resolved, Misch, who serves as program director at B95 WDKB 94.9 FM in DeKalb, and other radio executives worry that the local face of radio may be forever altered.

“It was a mutual lovefest, up until recently,” said Misch. “Things are rather different now, though, and where that will take us, only time will tell.”

For decades, the radio industry and the music recording industry have generally enjoyed a mutually beneficial relationship, as their products complement each other to draw in listeners and advertisers.

But as selling recorded music has become more challenging, the relationship between broadcasters and recording artists has become strained.

Most recently, the two sides have squared off in the fight over new legislation pending in Congress that could force radio stations to pay more to play music.

Known as the Performance Rights Act of 2009, the legislation has secured strong support of such groups as the Recording Industry Association of America and the MusicFirst Coaltion, a lobbying group representing recording companies and artists.

The law would require AM and FM radio stations to pay a fee to record labels and artists for each song they play. The fees would be assessed in addition to the royalties already paid by broadcasting companies to songwriters.

MusicFirst and others supporting the legislation argue that the law would close “an archaic loophole” in the law that radio stations have “exploited” to avoid paying musical artists for their work.

They note that artists, as well as songwriters, are already paid royalties by cable, satellite and Internet stations and European radio stations.

Broadcasters, however, argue that the law – which they refer to as “the performance tax” –  would add hundreds of millions or even billions of dollars to the operating budgets of radio stations nationwide.

They argue the fees would be unfair as radio continues to provide free promotion of the work of recording artists daily.

Broadcasters have lobbied heavily against the bill in Washington. Many stations have run ads urging listeners to take their side in the fight, warning that such added costs could prompt  many local music-playing stations to go off the air or switch formats to news and talk.

Jeff Dinetz, president and chief operating officer of Colorado-based NextMedia Radio Group, said his company is among those concerned.

NextMedia  operates 42 radio stations nationally and nine in the Chicago area, including The River, WERV 95.9 FM in Aurora and WWYW 103.9 FM in northern Kane County.

Even in good economic times, Dinetz said NextMedia and other broadcasters would likely oppose this law, which he said is “bad in concept.” But given current economic circumstances, he said the timing on the law could not be worse.

“Advertising in radio is down 20 to 25 percent right now,” Dinetz said. “Stations are struggling as it is.

“The timing on this is just real, real bad.”

He could not speculate on what NextMedia might do, should the Performance Rights Act become law, as no one can say exactly how much radio stations might be forced to pay.

But Dinetz said NextMedia has already begun discussing what some possible next steps might be, including consolidation or format changes to some local stations.

“If the cost is in the range of what we pay now in royalties, it’s going to force some changes,” he said.

Misch said he also could not predict what the future might hold for his station.

“But no matter what happens, it will probably change a lot of radio as we’ve known it,” Misch said.