Radio stations caught up in public-service dispute

A growing dispute about whether radio stations should pay royalties to artists when their music is aired may be temporarily eclipsed by a potentially precedent-setting fight about radio stations' public-service obligations.

Lobbyists and activists are preparing to descend on the Federal Communications Commission after the agency said it will accept comment by Sept. 8 on whether Clear ChannelCCMO, CBS CBS and other broadcasters are distorting public debate. They run ads against the royalty proposal, called the Performance Rights Act, but refuse to accept ads supporting it from a music industry group called the MusicFirst Coalition, which includes the Recording Industry Association of America.

"This is not something that the FCC has seen before in this form," says Samuel Feder, a former FCC general counsel who's representing MusicFirst.

For example, it differs from a dispute in 2003 when many country music stations refused to air music by the Dixie Chicks after they opposed the Iraq war. "We haven't seen a concerted campaign where broadcasters' own economic self-interests were so directly implicated," Feder says.

The group says that broadcasters' spots often distort the issue — for example, by calling the royalty a "tax." But radio stations say that no law requires them to sell airtime to political adversaries.

"These ads are designed to put free radio out of business — we stand by our decision not to accept them," says Andy Levin, chief legal officer at Clear Channel Communications.

MusicFirst "has a virtually endless supply of other media outlets to choose from to run these ads. There is no 'inability' to get its message out," he says.

National Association of Broadcasters spokesman Dennis Wharton adds that "There is well-established law that says a broadcaster is not required to air every ad by any interest group."

The royalty proposal, supported by Sen. Patrick Leahy, D-Vt., and Rep. John Conyers, D-Mich., would require music stations that generate $1.25 million a year or less in revenue to pay up to $5,000 annually for the artist royalty. Larger stations would negotiate their payment, or have it determined by the federal Copyright Royalty Board.

The royalty would be similar to ones paid by Sirius XM satellite radio, cable channels and radio broadcasts over the Internet.

Music radio generated about $15 billion last year in ad sales.