Is a Radio Button Coming to Your Smartphone?

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This is Celia Hirschman with On the Beat for KCRW.

The record industry used to be the model of a closed loop marketing system. Record labels controlled the stream of music. Radio supported the releases, as did press and retail. Each area was paid indirectly or directly for their loyalty. And by controlling the flow of music, labels also controlled the flow of money. The system was financially steady for everyone.

But in the digital age, the record business has become anarchy. While Arcade Fire and Eminem top the sales charts, thousands of other releases vanish in obscurity. Retail space is endless, press is fragmented, and radio must now compete with gaming, the Internet television and video.  The music flow is on, full blast, but the audience isn't necessarily paying attention.

All the while, broadcast radio has had the best ride. For sixty years, terrestrial radio has been exempt from paying performance royalties for music. Back in the day, when radio advertising was the main source of a politician's election campaign, radio convinced Congress they didn't need to pay a performance royalty for music. Airplay was its own reward. Getting your music played on the radio was payment enough, and as the years went on, this unfair law stayed on the books. Until now.

Ars Technica, the industry blog, is reporting that the NAB, (or National Association of Broadcasters) and the RIAA (or Recording Industry Association of America) have reached a compromise on this sticky issue. The solution is, not surprisingly, a win-win for themselves. Radio would pay $100 million a year in royalty fees. The record labels and artists would finally get that performance royalty they've been fighting for. And under this agreement, Congress would mandate that all cell phones and PDA's include an FM radio chip. Broadcast radio pays music royalties, and simultaneously gains a new marketplace.

The royalty free exemption was a bad law.  Mandating that all cellphones and smart-phones have an FM chip is probably not the best solution, but it is a solution.  While I don't applaud the methods to get there, it's time broadcast radio paid its fair share to the people who make radio successful.

This is Celia Hirschman with On the Beat for KCRW.