The battle over performance royalties for broadcast stations seems to have been officially joined. We wrote last week about the rumors of a coalition of record companies and musicians that was reportedly forming to lobby Congress to enact a performance royalty on broadcast radio for the use of sound recordings, and the NAB’s immediate reaction, writing a letter to Congress to oppose the new royalty. Now, the press reports that the pro-royalty group has responded with their own letter to every Congressman, asking that immediate action take place to impose the royalty. Two letters in one week indicate that this summer may be a hot one for broadcasters on Capitol Hill.

The royalty being discussed would be one new to broadcast radio in the United States, but one well known to non-broadcast digital music providers such as Internet radio – as it is the same royalty that has been the subject of so much controversy since the Copyright Royalty Board released its Internet radio royalty decision in early March, more than doubling between 2005 and 2010 the royalty that those stations pay for the use of sound recordings. The royalty on the use of sound recordings (the song as recorded by a particular artist) is in addition to the royalties that are paid to ASCAP, BMI and SESAC for the underlying musical composition. So, if imposed, this would be a new royalty for US terrestrial broadcasters.

Recently, the radio industry has been fighting the perception that it is an industry with declining growth and increasing competition, leading some publicly owned radio companies into stock doldrums as investors seek sexier investments. If a performance royalty was added to the costs of operating terrestrial radio stations, what impact would that have on the performance of these companies? And, for some of the smaller stations in big markets, or ones serving very small rural markets, how would another hit to the bottom line be handled, especially if it were a significant one (like the one that was just imposed on Internet radio)? It could be a real concern – one that all broadcasters will want to vigorously oppose.