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RAIN 10/26: NAB Radio Board adopts term sheet for performance royalties with emphasis on FM-enabled mobile phones

Posted on: 10/26/2010


The NAB Radio Board yesterday voted to propose new terms regarding performance royalties to the musicFirst coalition representing sound recording copyright owners, with the NAB Joint Board scheduled to vote on the same proposal today.

If Congress does not mandate that future mobile devices include activated FM chips, the proposal’s envisioned rates for sound recording music royalties — for both over-the-air and streaming delivery — are dependent on the percentage of mobile phones in the U.S. that have FM receiver chips enabled. (Many or most cell phones today have the chips physically present, but not activated.)

In the case of performance royalties for streaming (i.e., online simulcasts, webcasts, and other non-terrestrial transmissions), broadcasters would receive a royalty rate reduction from their current deal with SoundExchange if either (A) the FM-chip legislation is adopted by Congress, or (B) if at least 50% of mobile phones “in the market” have FM chips activated. The proposed reduced rate — i.e., reduced from the rate that SoundExchange and the NAB agreed on last year — is the per-performance rate that pureplay webcasters pay plus $0.0007575 per performance (i.e., about 50% more than the pureplay rate, but without the pureplays’ “or 25% of revenues, whichever is greater” clause).

In such a case, broadcasters would pay an approximate per-performance fee of $0.00216 in 2015, about 15% less than they would pay under their current deal with SoundExchange. (See chart below for more details.)

If Congress mandates that FM chips be included in mobile phones, the proposal prescribes that broadcasters would pay 1% of large-market music station net revenues.

However, if the NAB and musicFirst mutually determine that legislation mandating the inclusion of radio chips on mobile devices is unattainable, then the percentage-of-revenue start at 0.25% of those industry revenues and rise as the percentage of mobile devices with FM receivers increases, reaching a maximum of 1% of net revenues once 75% of phones “in the market” have the chip enabled.

RAIN publisher Kurt Hanson has posted his analysis of the proposal, which you can read at right (or here).

Additionally, radio industry attorney David Oxenford has more coverage on the issue here — although RAIN’s analysis above differs slightly from Oxenford’s — and you can find the NAB’s Term Sheet here (PDF).

Even if the NAB Joint Board approves the proposed term sheet, it is not clear that musicFIRST will accept the deal, as the term sheet apparently varies somewhat from what the parties agreed to in negotiating sessions last summer.

RAIN will continue coverage of the proposal in coming days, so stay tuned!


The number of American adults who’ve visited a radio station website in the past month has grown 38% since 2006, The Media Audit says. According to its National Radio Format Report, 17.7% of U.S. adults have done so (less than 13% did so in 2006). Not surprisingly, website visitors are likely to be “heavy” or “moderate” radio listeners, and significantly more likely to shop online. [The press release did not indicate, though it seems likely, that actual radio station website traffic increased.]

Adult Alternative listeners, says The Media Audit, are the most likely to visit radio station websites (the study says nearly 34% of all “Triple-A” listeners have visited a station site in the past month), followed by Modern Rock (31.6%), Sports (29.4%), News Talk (27.1%), Rock (26.9%), Public Radio (25.8%), Hot Adult Contemporary (HAC) (25.8%), Classic Rock (25.7%), Contemporary Christian (25%), and Dance CHR (24.4%).

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