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Senate Bill Targets Sat-Radio Recording

5/08/2006 02:00:00 AM Eastern

Proposed legislation before the Senate Judiciary Committee would force satellite radio broadcasters XM and Sirius to limit consumers' ability to record satellite radio programming, and it would raise the royalties that the companies pay to copyright holders.

The bill, dubbed the Perform Act, would force satellite broadcasters to disable a network feature that lets subscribers digitally record blocks of satellite programs onto such devices as MP3-type headphone stereos, then select the recorded content for playback by song title, genre or artist. Like a VCR, the digital recording devices would still be allowed to record a block of programming and play back the full block.

Recording of digital AM/FM broadcasts isn't included the legislation because over-the-air radio is covered by FCC regulations and therefore falls under the jurisdiction of the Senate Commerce Committee. The Judiciary Committee, in contrast, oversees copyrights regulations related to satellite, cable and webcasting.

The Recording Industry Association of America (RIAA) contended the legislation would ensure that satellite services play by the same royalty rate and copy-control rules currently applied to radio-like music services delivered on the Internet and local cable TV. The legislation would also erase unfair royalty-rate advantages that Sirius and XM enjoy over Internet download services and interactive music-on-demand streaming services, the RIAA claimed.

During a committee hearing on the bill, Warner Music Group chairman/CEO Edgar Bronfman explained that satellite radio broadcasters are getting an unfair subsidy because they “are obtaining their content through compulsory licenses that were designed for listening only, or purely passive services traditionally referred to as radio.” The satellite broadcasters, however, “are quickly being transformed into much more than the traditional passive, listening-only experience” into download services, he contended. Traditionally, royalty payments are levied according to “how much control the user has over the music,” he explained.

The convergence of “radio-like” services and downloading capability, the RIAA continued, requires changes in the law “to ensure that satellite services play by the same set of rules everyone else does and not profit from becoming a download/subscription model without acquiring the appropriate license and compensating artists and songwriters.”

With current and announced satellite radio/MP3 headphone stereos, consumers can record an entire song even if they hit the record button a few seconds after the song has begun playing. Consumers can also store all of the songs recorded during a block of time and later delete individual songs they don't want. The stored songs can be “disaggregated,” or sorted and played back, by title, artist and genre.

The Perform Act would force satellite- and Internet-radio broadcasters to use digital rights management technology to prevent digital recording devices from disaggregating recorded music streams.

The Digital Media Association (DiMA), which represents webcasters and download services, endorsed key elements of the legislation, contending that satellite radio pays far lower royalties than webcasters and music-download services. DiMA, however, wants to include AM/FM broadcasters in the package to bring their royalty rates up to webcaster levels. It also wants the DRM mandate imposed only on radio services that take “affirmative steps to authorize, induce or actively encourage consumer recording of radio-like programming,” said N. Mark Lam, chairman/CEO of Internet radio broadcaster Live 365 and DiMA spokesman.

Citing the Supreme Court's Grokster decision, Lam suggested that “basic radio services that are merely performing music for consumers' listening enjoyment — like those who are merely offering technology that has legitimate purposes but can also be misused — are not making a business from or otherwise promoting consumer recording, and accordingly should not have a technological policing obligation imposed.” Sirius and XM, in contrast, are promoting their disaggregation devices, presumably by designing their MP3-style devices and promoting them on their Web sites.

The home Recording Rights Coalition (HRRC) criticized all aspects of the legislation, contending it would rescind recording rights that consumers have enjoyed since the availability of the analog cassette. “You could edit tapes and create your own mixes [for personal use],” HRRC general counsel Robert Schwartz told TWICE, but the Perform Act would prohibit the creation of personal mixes from recorded satellite content, he said.

Schwartz also denied that XM and Sirius have morphed into over-the-air download services. With download services, he said, consumers pick a song from a menu for download. Sirius and XM, on the other hand, are not interactive, so subscribers can't search for a particular song to store. Often, he added, the recording of a song also captures an announcer's commentary at the beginning and end of a song. Schwartz also pointed out that recording devices are already available to disaggregate Internet radio content by song, title, artist and genre.

As for the assertion that satellite radio doesn't pay its way, Schwartz pointed out that recording companies, artists, publishers and songwriters are paid a royalty for each satellite recording device sold. Under the 1992 Audio Home Recording Act, the copyright holders are paid a total of 2 percent of the wholesale value of a digital recording device up to $8 each.

During a Senate hearing on the act, XM chairman Gary Parsons called the bill anti-consumer, said it would stifle innovation, and pointed out that XM's royalty payments were established “under the structure put in place by Congress in 1998 and supported by the major record labels at that time.” Now, he said, “the record industry is back, asking you to rewrite the established rules for performance rights just as we begin the renegotiation of rates for the next five years. Based on our current rates alone, satellite radio will pay hundreds of millions of dollars over this period.”

Terrestrial radio broadcasters, Parsons noted, pay royalties to music publishers and songwriters but not to music companies and artists for performance rights. Yet satellite radio pays royalties to all those copyright holders, he added. "The proposed Perform Act is not about piracy. And given that it changes the rules for XM but not for broadcast radio, it is not about parity either," he concluded.

Although the bill doesn't include digital-AM/FM recording restrictions, private market negotiations to restrict the recording of digital AM/FM broadcasts are underway, the RIAA noted. The association also noted that Rep. Mike Ferguson (R-N.J.) introduced legislation in the House of Representatives to mandate private market negotiations between the music industry and digital AM/FM broadcasters to protect content.

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