Four key representatives have written a dear colleague letter asking that radio stations not be saddled with a brand new and controversial expense during a period of severe financial strife; the Congressional Budget Office has determined that the cost of PRA to broadcasters will likely be substantial; and a New York Times columnist noted over the weekend that recording companies brought much of their problems down on themselves.
Gene Green (D-TX), Mike Conaway (R-TX), Solomon Ortiz (D-TX) and Cathy McMorris Rodgers (R-WA) are the authors of the letter. “Just like every other industry, the recording industry is suffering both from the economic situation of this country, but also from the technological changes that have provided a-la-carte music service on iTunes, Amazon.com, and other online music services,” they wrote. “But rather than adapting to the new technologies, the recording industry is trying to bite the hand that feeds it by imposing a new tax on its biggest promotional tool, as if free radio were immune to the economic downturn.”
CBO noted that it was impossible to accurately predict the impact PRA would have on broadcasters, but said it certainly looked like it would be substantial. “Data on the amount of royalty fees currently paid by cable stations, satellite operators, Internet broadcasters, and other digital media suggest that the total cost of new performance royalties for commercial radio broadcasters affected by the bill could be substantial.” It estimated that 1.8K radio stations grossed over $1.25M annually and would be subject to top-drawer royalty payments.
NAB’s Dennis Wharton commented on both developments, saying, “”The CBO report and today’s Dear Colleague letter raise fundamental questions about the record label money grab from local radio. Exactly how much money would radio stations be required to funnel to RIAA companies? How many radio jobs in America would be lost if a performance tax becomes law? How many charities supported by local radio stations would suffer? How many music stations would switch to an all-talk format to avoid paying onerous fees to offshore labels based in Japan, the UK and France?”
Meanwhile, New York Times columnist Charles Blow wrote in the OpEd page of the Saturday 8/1/09 edition that “[t]he music industry’s deathwatch kicked off about a decade ago, but it seems the vigil could soon be over.” He said, “The speed at which this industry is coming undone is utterly breathtaking. First, piracy punched a big hole in it. Now music streaming — music available on demand over the Internet, free and legal — is poised to seal the deal.”
He noted that teens are listening to more music than ever, they just aren’t buying it. But at no time did Blow suggest that radio had any part in the record companies’ decline.
He noted that when the recording industry finally did embrace selling over the internet, and adopted a singles mentality for most sales, it chopped itself at the knees – what it could charge for a single isn’t enough to sustain income levels, and the lack of album space denies both labels the opportunity to test and experiment.
(Speaking as a buyer of music, we are painfully aware that the best material for many great artists is included on albums where lower quality but more mass-appeal material pays the freight – we anticipate missing out on the very best music because of this.)
Blow quoted the study noting the availability of 13M songs for sale on the internet. 10M grossed not one penny during the term of the study, and 52K out of the 13M generated 80% of total online revenue.
He said Apple is now trying to promote the album concept again but fears the effort will be too little, too late.
RBR/TVBR observation: The recording industry knows better than anybody how critical broadcast airplay is to selling recorded music. Their problem is they failed to adapt to the revolution in how recorded music is distributed. So now they’re looking to radio to fill in their revenue gap. It simply will not work.
Think about the key stat in Blow’s piece: The vast majority of tunes available on the internet do not inspire so much as a single sale. Promotion is still the driver for music sales, and radio remains the key venue for that promotion. And the value of that promotion has always been and still is sufficient compensation for radio’s use of the music it airs.
The labels are simply hiding behind musicians in an attempt to fill their own dwindling bank accounts. Congress needs to recognize this camouflaged money grab for what it is and put a stop to it. CBO concluded, “Data on the amount of royalty fees currently paid by cable stations, satellite operators, Internet broadcasters, and other digital media suggest that the total cost of new performance royalties for commercial radio broadcasters affected by the bill could be substantial.”
