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Mobile Phones Would Get FM Signals in Radio, Music Label Accord

Apple iPhone
Itunes music application currently works on a Apple iphone and soon cell phones may receive FM radio signals. Photographer: Chris Ratcliffe/Bloomberg

Aug. 19 (Bloomberg) -- Mobile telephones sold in the U.S. would need to receive FM radio signals under a proposal pushed by broadcasters as part of a tentative agreement to end a dispute over music royalties.

Requiring phones to become radio receivers would be part of a deal to pay artists for airplay between the National Association of Broadcasters, representing radio companies led by CBS Corp. and Entercom Communications Corp., and the MusicFirst Coalition of artists and record labels. A trade group for makers of mobile phones opposes the plan.

The possible requirement is a “back room scheme” and “the height of absurdity,” Gary Shapiro, chief executive officer of the Consumer Electronics Association, said in an e-mail. The group in Arlington, Virginia, lists among members Amazon.com, Apple Inc., Hewlett-Packard Co. and Motorola Inc.

“Forced inclusion of an additional antenna, processor and radio receiver will compromise features that consumers truly desire, such as long battery life and light weight,” Shapiro said. Broadcasters and the music industry are “like buggy-whip industries that refuse to innovate and seek to impose penalties on those that do,” he said.

Music labels that sell compact disks and radio stations that play recordings are struggling as consumers use the Internet and devices such as the iPod from Cupertino, California-based Apple.

The broadcasters and the recording industry say they would endorse adding the FM radio requirement to legislation Congress is considering that would for the first time require payment to artists and labels when their recordings are played on stations. Broadcasters have opposed the measure. Satellite and Internet radio already pay such fees.

‘Tremendous Breakthrough’

An agreement over royalties is “a tremendous breakthrough,” Marty Machowsky, a spokesman for MusicFirst Coalition, said today in an e-mail. The Washington-based group includes musicians and the Recording Industry Association of America that represents labels.

“There is no deal yet,” Machowsky said. He said his group will continue to push for legislation.

Radio executives meeting Aug. 6 in Washington said they oppose the pending legislation, and urged more negotiations, NAB spokesman Dennis Wharton said in an e-mailed statement that listed features of “potential terms.” The group didn’t vote on the agreement and discussions are continuing, he said.

“It is critically important to have broadcast radio’s unparalleled lifeline service available instantaneously in times of emergency,” Wharton said today in an e-mail. “NAB would oppose any legislation related to royalties” that lacked the FM radio feature.

Removes Uncertainty

The compromise may remove uncertainty for both sides, David Kaut and Rebecca Arbogast, Washington analysts for Stifel Nicolaus & Co., said in an Aug. 13 note.

The wireless industry also has voiced opposition to requiring FM chips, making it unlikely Congress would include the mandate in a bill, Kaut and Arbogast said.

Under the terms, broadcasters would pay about $100 million annually, “less than what they feared they would have to pay -- several hundred million dollars or more a year” under the pending legislation, Kaut and Arbogast wrote.

Broadcasters would benefit from a rate reduction for online streaming, the Stifel Nicolaus analysts said.

The Washington-based Recording Industry Association of America members include Warner Music Group Corp., Sony Corp.’s Sony Music Entertainment and Vivendi SA’s Universal Music Group.

The broadcasters’ association has pushed for FM chips in mobile phones since at least June 2008, according to disclosure filings at the Federal Communications Commission.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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