Hill showdown over performance royalties


Should broadcasters pay to play music over the air, or is the promotional value of playing the music over the air compensation enough? The NAB, RIAA and others locked horns in a session of the House Judiciary Committee over the issue. The upshot will likely be a 3rd party study of the matter.

Smashing Pumpkin frontman Billy Corgan had some telling testimony. He believes that performers deserve to be compensated, and pointed out how difficult it is to make a living in music, particularly below the star level. He repeated the point that he in no way considers radio to be the enemy – and that radio is incredibly valuable as a promotional tool. At the same time, he said he is no fan of the labels, and has had his run-ins with them over the years. He said that it took three albums to get his own band established, and nowadays it seems bands get one try and if it doesn’t hit, that’s it – which would seem to be a label problem, not a radio problem.

Speaking on behalf of broadcasters, Larry Patrick and Steve Newberry made numerous points – pointing out that even the supposedly minor annual fee of $5K which has been bandied about for smaller broadcasters could be a make or break amount for many small town mom & pop stations. Not that this is a great time to be hitting any broadcaster, big or small, with a brand new fee. They pointed out that putting a pricetag on each and every spin would turn each and every spin into a bottom line decision, favoring established acts and making it even more for new acts to break. And the money would have to come from somewhere, damaging localism, weakening news coverage, costing jobs and in some cases precipitating bankruptcies.

RIAA’s Mitch Bainwol still felt that the fee should be put in place, saying that new delivery platforms such as the internet have decreased the value of airplay – and that alternative media do pay royalties. Newberry noted that other platforms are different in that they are subscription based, and broadcasters pay to stream on the internet just as internet-only services do. Patrick also reminded that the raw number of ears commanded by alternative outlets pale in comparison to radio’s 235M audience.

John Conyers (D-MI) and Howard Berman (D-CA) led the charge in support of H.R. 848, but many other legislators took a more measured approach to the issue. Many called for a third party study, to determine just what the value of airplay promotion is, to determine where the line is as to what broadcasters could conceivably pay without going into further distress, and other issues.

RBR/TVBR observation: Newberry pointed out that radio and artists have a long history of friendship – and said the labels – with one-sided contracts and siphons at the ready to scoop up royalties for themselves should the Performance Rights Act pass – are the ones musicians should be concerned about. Corgan seemed to underscore this even as tried to make his case. When is Conyers going to delve into the artist/label relationship? That’s a hearing we’d like to see.

Selected legislator opening statement summaries:

* John Conyers (D-MI) believes some musicians are reluctant to testify, and some legislators are reluctant to support legislation, for fear of broadcaster backlash. North Korea, China, Iran are only other nations without royalties.

* Lamar Smith (R-TX) Short term – asks for objective third-party study of the situation before moving forward. Party would have to be neutral.

* Howard Berman (D-CA): Says bill takes into account the value of promotion. Broadcasters will pay for sports and talk programming, so why not music? This is not a debate about economic impact, it’s about the right of artists to get paid for their creations. Please sit down and hammer out agreement, or Congress will do it without NAB input.

* Bob Goodlatte (R-VA): Availability of music from other sources diminishes importance of broadcast airplay. On the other hand, must do what we can to keep local radio offering local news/info. Exemption for small broadcasters is good, but may not be enough.

* Ted Poe (R-TX) asks parties to work out differences without legislative intervention, wonders about record company’s standing in all this.

* Maxine Waters (D-CA). Statutes must be modernized. Small-to-moderate sized minority broadcasters are struggling and she doesn’t want to make it any harder on them, but says this bill is a good starting point. Wants to work to improve it. Would like to find a way to reconcile the value of promotion.

* Howard Coble (R-NC): Friends on each side of this issue. Asked committee member, “are you with broadcasters or the performers, and he said ‘yes’.”

* Steve Cohen (D-TN): Echoes idea that times have changed and broadcast exemption no longer necessary. We need to recognize the performer’s contribution.

* Dan Lundgren (R-CA): Notes radio stations are hurting, difficulty of knowing where to draw the line, calls for study.

Witness testimony summaries:

* Billy Corgan, Vocalist and Lead Guitarist, The Smashing Pumpkins: 20 years experience. Radio helped me find my audience, and introduced him to many of his own influences. In no way sees radio as the enemy. Authors are compensated for airplay, performers are not. Says it’s an 80-year-old distinction based on archaic business model, created when sound recordings were in their infancy. Not everyone who hears a song buys the music or related paraphernalia, meaning only radio and its advertisers benefit. Artists established radio as a great vibrant medium, and should be rewarded.

* Paul Almeida, President, Department for Professional Employees, AFL-CIO: Apears in solidarity with members of the music industry. Most musicians have to patch together multiple income sources to achieve a middle class income. They should be fairly compensated from the $16B in advertising spent on radio annually. Gives AM/FM an unfair advantage over other audio platforms. Because of US lack of royalty, artists cannot collect same overseas.

* W. Lawrence Patrick, President, Patrick Communications: Owns 14 small-market Wyoming radio stations. Economy is devastating local radio, this bill will exacerbate the problem. 9% revenue loss in 2008, looking worse for 2009. Dozens of elderly owners looking to retire cannot sell now. Groups facing stock delistings. Workouts are becoming common. Dozens of groups have had to lay off employees and/or cut pay. HR 848 will do significant long-term damage. More workouts, less local programming. Even $5K would be devastating to local broadcasters, some of whom earn only $25K annually from their station. Recording industry is living in a fantasy world.

* Stan Liebowitz, Ph.D., Ashbel Smith Distinguished Professor of Managerial Economics, University of Texas at Dallas: Does radio airplay benefit the performer? Says record sales dropped after the introduction of radio decades ago. Evidence suggest radio airplay decreases overall record sales. However, it does increase the sale of individual records – but time spent with radio decreases time spent listening to recorded music.

* Steve Newberry, Chariman of the Radio Board, National Association of Broadcasters: Commonwealth: 23 stations in Kentucky. Sharp economic downturn has intensified concern about its bill and its impact on stations. Pits radio v. artists, who have been friends for a long time, but sends much of the cash to record labels, who will get more money than the artists. Real issue is between musicians and labels. Local radio stations will be forced to cut services, or maybe face bankruptcy. Bill creates financial disincentive to play music, hurting composers, new artists, music diversity. Even a $5K fee will send some from barely getting by to failing. Will hurt minority stations. Listeners will be hurt, as local stations begin to disappear. This bill has significant unintended consequences that seem not to have been considered. Where does money come from? What is radio supposed to cut to come up with the new fee?

* Mitch Bainwol, Chairman and Chief Executive Officer, Recording Industry Artist Association: Issue unites musicians, industry and labor. Issue isn’t as complicated as broadcasters suggest. This isn’t a tax, as broadcasters suggest – broadcasters uses our music to build their business and cut us out. Radio is unique among platforms and nations in not paying royalties. Logic behind promotion/symbiotic relationship argument is collapsing, particularly since half of what is now played is oldies. The value of a hit is diminished. Bill focuses on big corporate radio and tries to accommodate small broadcasters. NAB refuses to negotiate on this topic – David Rehr “would rather slit his throat than talk.” Issue is not about transferring money from one company to another – half of cash goes to artists.