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Friday, July 26, 2013
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Fallacy of the Radio Performance "Tax"

Anything worth changing takes time. With that in mind, let's again turn attention towards the latest news of Rep. Mel Watt's intent to introduce (prior to Congress' annual August break) the radio industry's most dreaded modern hurdle: a performance royalty leveled against broadcast radio.
"Only a few radio companies have signed deals with a meager grouping of small record labels."

Of course, if you only read radio industry trade publications then the term "royalty" is seldom seen. Its much preferred alternative word "tax" is in nearly every story.

"Tax" is especially prevalent within NAB spokesperson Dennis Wharton's comments, quoted for a Radio Ink story. They go like this: "NAB strongly opposes a new performance tax that would kill jobs at America's hometown radio stations while diverting millions of dollars to offshore record labels. We continue to support private, company-by-company negotiations that are driven by the free market, as is reflected by recent deals between broadcast radio stations and independent music labels."

And here is where the crux of radio's problems appear, relative to payment of a "performance royalty." Claims with no substance ring loud. An attempt at parity with other music-based businesses on payment of these fees is ignored. And misinformation concerning job cuts with "company-by-company negotiations" (meaning labels and radio groups) is mouthed as if this approach is rampant.

Let's clear that last statement out of the way before getting to the greater picture. Only a few radio companies have signed deals with a meager grouping of small record labels.

From a Clear Channel press release dated 7/25/13, the groups it has signed are "...Big Machine Label Group, Glassnote Entertainment Group, eOne, Dualtone, DashGo, rpm Entertainment, Robbins Entertainment, Naxos, Wind-up Records, Fearless Records, and Zojak World Wide." Also mentioned is a Fleetwood Mac deal involving only its current release, not its song library.

Entercom and Beasley Broadcasting are two other groups signing Big Machine. Entercom also has a deal with Glassnote Entertainment Group. And that, ladies and gentlemen, constitutes the entire " negotiations that are driven by the free market, as is reflected by recent deals between broadcast radio stations and independent music labels" (as noted by NAB's Mr. Wharton).

The word "tax" being substituted for "royalty" is offensive to every music-based business already forced to pay, yet it's repeated ad nauseum in radio industry trades - to appease. In its weakest sense, when using "tax," the reporting publications should be required to add the words "free ride" in mentioning how the U.S. broadcasters are joined by only 4 other countries in NOT paying: Iran, North Korea, China and Rwanda.

At issue, as Congressman Watt points out, is the reciprocity payments not being payed to American artists when their songs are played in all countries that require this performance fee.

On November 28, 2012, a "HEARING BEFORE THE SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES" was held. It was a broadcaster's nightmare. Congressman Watt sat on this panel and spoke these words: "But an even longer standing inequity exists in the U.S. copyright law in that U.S. copyright law fails to recognize a performance right for vocalists and musicians when their work is played over terrestrial AM and FM radio." (Transcript is Here/page 42 - The Video is Here.) I wrote about it then, and my feelings have not changed.

This issue will not go away until parity is reached among all platforms using music as their basis for business.

Dennis Wharton's claim that "...154 members of Congress have signed on to the Local Radio Freedom Act..." holds a number with no punch. They signed a non-binding resolution, which requires at least 218 signatures of Congress members to carry any weight.

I find it troublesome that the recent "Voting Rights Act" defeat in the U.S. Supreme Court is hailed as a just verdict - using the argument of how "times have changed since its signing in the 1960s." Yet we do not see that times have changed since radio first began its free ride with performance royalties in the 1930s.

We are in a different era. Most important are these words appearing in the 2005 "DETERMINATION OF RATES AND TERMS," as mandated by the "UNITED STATES COPYRIGHT ROYALTY JUDGES" (page 19).

It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient.

Dennis Wharton's claim of job cuts resulting from implementation of the above performance royalty for AM/FM airplay does not mention that broadcasters can cut no more at a station and still sustain a viable business model. The threat is empty. What will happen is a continuation of radio stations going silent. This is a natural culling of the herd, though; one that's already happening as we see radio industry groups donating stations for tax write-offs.

What's prevented passing of the performance royalty issue so far has been more urgent needs in Congress, like the economy and continual fights between political parties. But this performance rights act will eventually be made into law.

It's time to quit fighting the parity issue and embrace new methods of revenue generation - just as members of all other music-based business models have been forced to do.

One item that will help is to drop the insane claim that radio groups are signing deals with record labels in numbers that matter. Only three groups have signed 12 small record labels so far. (If this is incorrect, please let me know.) That leaves thousands of companies on both sides of this argument doing nothing of the sort, which is reason enough for Mr. Watt to get his bill passed and move on.

It is 2013. The time for this fight was back in 1998 when broadcasters were first asked to assist internet radio against these high royalty fees.

As far back as May 4, 2007, I wrote "SoundExchange already announced its intentions of pursuing broadcast radio for the same performance fees." But the radio industry sat silently on the sidelines then, plus the other 5 times it was called on for help.

Now radio is about to find out the cost of doing nothing.

Today's indie artist introduction is to...
R&B artist Adero Neely
sample song
My Lovely Breakup Note

Download Song


We listen for songs that evoke emotion; fast, slow, female, male, group, it doesn't matter. When an artist has the power to please, they should be given a chance to be heard.

Give Adero Neely's "My Lovely Breakup Note" a listen.

Add it to your playlist, free! Such is the new world of music distribution.

It's time internet radio programmers reach into a huge pile of untapped talent.
It is here where new hit songs will increasingly be found.

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