The Performing Arts Battle between the Music Industry and Radio

For many months, the recording industry (music industry) has been lobbying Congress to enact legislation that would provide a performance royalty to artists (those who actually sing/play the music) from radio revenues.  The music industry has never had the votes yet to pass the legislation, but they keep trying.  There has been a lot of rhetoric on both sides about the issue, with radio claiming that the music industry benfits from free airplay and promotion, while the music industry points out that radio stations benefit from content and avoid paying a performance tax (whoops, I mean royalty) as in many other countries.

Surprisingly, the NAB Board has now brought forward a template for such a royalty, to be between .25 and 1% of radio revenues.  But there is a catch.  The royalty is tied to requiring that radio chips for FM and HD radio channels be required for mobile phones.  The radio industry has been after chips for mobile phones for some time, but the electronics industry and major phone makers are not interested.  And they probably won't be interested in this issue either.

Apparently, the NAB sees making concessions on the performance royalty critical to getting radio chips on mobile phones.  I probably don't get something, but to me these seem like mutually exclusive issues.  If I'm Apple, why do I care if there is an FM/HD chip on new versions of an iPhone?  Let the industry create an app for that (actually several already exist).  And if I am RIM or Nokia or another phone manufacturer, what do I get for putting this chip in the phone except for another cost?

And is anybody asking what consumers want?  Thousands of people are listening to Pandora and Internet radio on their phones every day instead of local radio.  They listen to these services because they have given up on radio and its repetitive, sounds the same in every market programming.  If consumers have a radio chip on their phone, how many are actually going to listen to local radio?  I get it if there is severe weather, or maybe a sporting event of a local nature I want to receive.  But just to listen to music?  That train has already left the station.

There are lots of issues here that are not resolved by this first step.  But this is a huge economic gamble for the NAB and the radio industry.  Giving away any revenue when you have been losing money for years in hopes of building more audiences online is a big risk.

Stay tuned.  This is far from over.

Former FCC Chairs Say "End the Ownership Rules"

This is an interesting item from another blog written following a C-SPAN program called "The Communicators" that brought together former Federal Communications Commission Chiefs Reed Hundt (Clinton administration), Michael Powell (G. W. Bush administration) and Kevin Martin, who took over the agency after Powell during the last years of the George W. Bush Presidency in a lively discussion on the FCC and the agency's ownership rules.

The central message from the three former Chiefs:  Throw the rules out.  But it won't happen for many reasons, with Powell citing politics as the primary reason.

It is an interesting program illustrating how policy decisions impact the media economy.

Televisa and Univision Extend Partnership

The media economy received a buzz this week with the announcement that Mexican media conglomerate Televisa is investing $1.2 billion for a 5% ownership stake in Univision, and at the same time extending the critical exclusive programming contract through 2020.  And these are the same two companies that have spent millions battling each other in court the past few years?

Clearly, this is a smart strategic move for both companies.  Univision gets an influx of cash, and perhaps more importantly they can continue to count on high-quality novellas from Televisa for their prime-time schedule.  Televisa CEO Emilio Azcarrage Jean has made a lot of noise about starting a Televisa channel in the US; this deal effectively mitigates that possibility.

But Televisa wins as well.  They will continue to have a key showcase for their programming in the US through the powerhouse Univision broadcast network.  Televisa will also receive higher royalty payments for this new deal, which also resolves the question of digital (Internet) rights to broadcast the programs. 

This deal also widens the gap among competitors in the Spanish language space in the U. S., especially for second place Telemundo and the struggling Azteca America.  We can expect Univision to continue to play the dominant role in the SL market going forward.