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Government May Require FM Receivers in Cell Phones

If someone told you that Congress may pass a law requiring that all cell phones include FM receivers, you might tell that person that they are crazy. After all, why in the world would we take a high tech device, capable of accessing streaming media, satellite radio, Internet broadcast radio and, of course, your own digital media collection, and outfit it with a device that let you tune into the medium of yesterday? Why not just take an iPod and strap a cassette player on it while you’re at it?
As nonsensical as it all seems, mandating that all new smartphones include FM tuners is actually somewhat on the table. And it has nothing to do with consumer demand or technological advances (or regressions). It all revolves around a quibble between broadcasters and record labels.
Historically, radio stations have paid royalties to songwriters for the right to play their songs on the air. However, they didn’t pay performance royalties to the record labels or the artists themselves. The free promotion that drove sales of CDs and live concert tickets were assumed to be incentive enough for labels to allow their music to be broadcast over the airwaves. This arrangement was tolerable enough for both parties—that is, until the rise of digital music.
Digital music has had two big impacts on both record labels and radio broadcasters: music sales are down and radio listenership is down. Meanwhile, legal and illegal trafficking of digital media files is up and Internet radio—such as Last.FM, Pandora and Rhapsody—is way, way up. This is bad news for both record labels—who make their money off music sales—and radio broadcasters—who make money from advertising , who, with radio audiences dwindling, aren’t paying top dollar for air time anymore.
In an attempt to recapture some of the high profits from its glory days, the recording industry is lobbying the government to change the royalty structure for broadcasters. Their ace in the hole: the fact that Internet broadcasters, unlike radio broadcasters, pay performance royalties. This disparity, argues the recording industry, amounts to a “free ride” for radio broadcasters and should be rectifeid in the form of increased royalty payments to artists and labels for songs played on the air.
A radical restructuring of on-the-air royalties, however, would deal a crippling blow to an already faltering broadcasting industry. As such, the win-lose legislation giving artists and labels bigger cuts for on-air play has been deadlocked on Capitol Hill. And this is where the FM transmitter mandate comes in. An FM transmitter in every cell phone would help offset the revenue lost by giving artists and labels a larger slice of the pie by widening the audience—and therefore profits—of radio broadcasters.
The broadcasters and recording industry are calling this a compromise—but the cell phone industry hardly sees it that way. There simply isn’t a market for FM transmitters in cell phones—otherwise, more of today’s cell phones would already have them, argues the cellular lobby. Besides, an FM transmitter would add weight, shorten battery life and raise costs for smartphones. In this way, it seems that the consumers and the cell phone industry would pay the price for the inability of record labels, recording artists and radio broadcasters to maintain their profits in the digital age.

Broadcasters and record labels are optimistic over the prospect of rejiggering the royalties structure and including FM receivers in cell phones. But the likely outcome will be the joining of the fight by interests from the cell phone industry. Stay tuned—no pun intended—for the next big “compromise.”

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Tags: Cell Phones

This entry was posted on Monday, August 23rd, 2010 at 8:59 am by Jack Busch and is filed under Cell Phones. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.