During the Obama years, Americans have become well acquainted with crony capitalism. But it is hard to imagine a more audacious attempt to use government to help a favored industry than legislation just introduced by Rep. Mel Watt (D-NC).
In a bailout for Hollywood and the Recording Industry, Watt’s bill would force AM/FM radio stations to pay a “royalties tax” for music played on the air. Worse, the bill would let the record companies themselves set the fees, or tax, that radio stations play.
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Historically, music played on the radio has been seen by stations, record labels and artists alike as a form of advertising for the performers. Artists want their songs played on the radio, because that air time can make their song a massive hit, making them millions of dollars. Companies like Apple or Coke pay radio stations for their advertising, but performers get their ads, their music, to run for free.
The current system recognizes the value artists receive and so broadcast radio does not have to pay royalties. For music streamed on the Internet or played on satellite radio, artists receive royalties at a rate set by the Copyrights Royalty Board at the Library of Congress. This board has contributed to an erratic, disparate treatment of various mediums. Rates for Internet radio stations are six times those for satellite radio requiring them to pay a majority of their revenue in royalties fees. Worse yet, broadcast stations streaming music online, pay rates twice as much as stations like Pandora.