Satellite radio officials are complaining that new legislation introduced in the Senate unfairly discriminates against them, and would treat them differently than their terrestrial counterparts are treated.
The legislation, known as the Platform Equality and Remedies for Rights Holders in Music Act of 2006, or PERFORM Act (S. 2644) would change the way royalties are paid to performing artists.
The PERFORM Act amends the system for setting royalty rates for copyright licenses under sections 112 and 114 of title 17 of U.S. code, requiring additional royalties to be paid when material broadcast over the Internet or via satellite can be recorded by the user.
The legislation would require Internet, cable and satellite service providers to pay what it calls “fair market value” for that music. Previously, the code said “the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.”
The PERFORM Act also would prevent satellite radio providers from allowing their listeners to record their broadcasts in an MP3 format, and limits how a person can record what is being broadcast.
XM Satellite Radio of Washington, for example, introduced a line of portable products last year called XM2GO, which makes it possible to record up to five hours of programming so an XM subscriber can listen to XM programming on the XM2GO device in locations where they cannot get a signal.
Under the new restrictions proposed in the Senate bill, a listener could set their satellite radio device to record a particular radio program at a certain time, but setting the device to record a certain artist’s work would not be permissible.
The PERFORM Act was introduced by Sens. Dianne Feinstein (D-Calif.), Lindsey Graham (R-S.C.) and Bill Frist (R-Tenn.). It is supported by a number of organizations that represent the recording industry, including the Recording Industry Association of America and the National Music Publishers’ Association.
“While I strongly support advancements in technology and believe it is important that these new service providers succeed and grow, I believe our laws must strike the proper balance between fostering new businesses and technology and protecting the property rights of the artists whose music is being played,” Feinstein said during an April 26 hearing of the Senate Judiciary Committee.
Testifying at the same hearing, XM Radio Chairman Gary Parsons said the legislation unfairly targets satellite providers. The bill contains no provisions that would affect terrestrial radio.
In his testimony, Parsons said satellite radio companies already pay significant royalties to artists for the use of their music.
“As an industry, satellite radio is the single largest contributor of performance royalties to artists and record labels. In fact, XM and Sirius [Satellite Radio of New York] pay more in performance royalties than all other digital broadcasters and Webcasters combined,” Parsons said.
XM also disputed that its new-generation recording devices promote Internet piracy. Using the devices, users can only record to their individual portable players, not download the files to their computers, Parsons said. He also observed that, unlike with services previously targeted for piracy, such as MP3 exchange network Napster, XM subscribers have no ability to choose what songs XM plays or what they can record.
“Just because a device makes personal recording convenient does not, and should not, make it illegal,” Parsons said in his testimony.
During a conference call with investors May 2, Sirius Satellite Radio Chief Executive Officer Mel Karmazin said that his company supported Parson’s testimony, had submitted its own written testimony to Congress and would be fighting the legislation.
“We believe what they’re talking about is not very consumer-friendly,” Karmazin said during the call. “We think, clearly, that we are providing a great service to the music industry, and we are paying them a significant amount of money in royalties.”
Karmazin said Sirius was not particularly worried at the moment about the bill’s potential consequences. “I can’t tell you where the government is ever going to come out, so it would be presumptuous for me to speculate … but we would be very surprised if there is any movement on that bill,” Karmazin said during the call.
XM Chief Executive Officer Hugh Panero said during a conference call with investors April 27 that he expected it would take some time before the issue was resolved.
“This is a dialogue, and these kind of debates are going to go on until we reach some kind of resolution,” he said. “Our strategy is just to get our message out.”