The recording industry scored a significant victory today with news that the Obama administration will provide its "strong support" for the Performance Rights Act. The bill would force over-the-air radio stations to start coughing up cash for the music they play; right now, the stations pay songwriters, but not the actual recording artists.

This has been a dream of the recording industry for decades, but it has taken on new importance as the revenues from recorded music have plummeted over the last decade. The broadcasters refer to the idea as a new "tax" that will largely benefit foreign record companies such as Universal (France), Sony (Japan), and EMI (UK).

Taking sides

Today, a letter from the Commerce Department's general counsel, Cameron Kerry, makes clear which side has the administration's support: the recording industry. (We double-checked with Kerry's office; this is no April Fools' joke.)

"The Department has long endorsed amending the US copyright law to provide for an exclusive right of public performance of sound recordings," says the letter. It pledges "strong support" for the current bill and approves the idea that radio's payment exemption is nothing more than "an historical anomaly that does not have a strong policy justification."

A copy of the letter was sent to Sen. Patrick Leahy (D-VT), chair of the Senate Judiciary Committee. In the letter, Kerry says that making radio pay for music is really a matter of fairness—not just to artists, but to Internet webcasters and satellite radio, too.

That's because both webcasters and the satellite radio folks currently do have to pay a public performance right on the music they play; the exclusion granted to over-the-air broadcasters thus distorts the market and makes it difficult for new technologies to gain traction. "It would also provide a level playing field for all broadcasters to compete in the current environment of rapid technological change, including the Internet, satellite, and terrestrial broadcasters," says the letter.

In addition to rationalizing the performance rights scheme in the US, Commerce points out that the US is the only major industrialized country to have such an exemption for over-the-air radio. Making a change isn't just a case of bowing to peer pressure; real money is at stake, since many artists are unable to collect the public performance money due them in other countries because of "the lack of reciprocal protection under US copyright law."

The National Association of Broadcasters, which represents radio, hasn't yet responded to the letter—but its position is clear. "This new performance tax could financially cripple local radio stations, stifle new artists trying to break into the recording business, and harm the listening public who rely on local radio," it says, and the NAB has managed to round up 260 House members in support of a resolution called "The Local Radio Freedom Act."

In addition, the NAB (correctly) points out that it has been the broadcasters who repeatedly engaged in "payola" over the years; not only has radio paid nothing to the recording industry, but the industry has gone to the trouble of paying extra to radio, just for the privilege of promoting particular songs.

However the issue is decided, some major corporations are going to benefit. If radio keeps its exemption, it's a win for big broadcasters like Clear Channel. If radio's exemption gets the axe, much of the money being paid will flow into recording industry coffers. But, as the Commerce filing points out, the current system is ridiculous; it needs to be decided in one way or another. Requiring some broadcasters to pay for music while others get a free ride, based simply on a difference in delivery mechanism, is no way to run a system, and it's no way to encourage innovation.

Congress has already tried locking both sides in a room to solve the issue; at some point soon, it will just have to vote.

Update: NAB has issued a statement. "NAB was aware this letter was coming, which is a position taken previously by the Bush Commerce Department. We're disappointed the Commerce Department would embrace legislation that would kill jobs in the US and send hundreds of millions of dollars to foreign record labels that have historically exploited artists whose careers were nurtured by American radio stations. The good news is that 260 members of the House of Representatives and 27 US Senators are standing with hometown radio stations and against the RIAA."