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AG News: Thursday - 3/12/2009

Performance Royalty - Starting a Protest Late

The answer to a Performance Royalty Fee (or tax if you prefer) lies in what was told to the panels by the Subcommittee: "Go forth and find an answer on your own" - or something of that ilk. If you receive "negotiate" as an answer then there's not much room to maneuver, except in deciding "how much." The truth is that neither the House nor the Senate wants to spend time on radio industry problems. Regardless of your view, this is a bigger problem for the radio industry than the labels.

Why it's suddenly an issue is a question I'd like to hear someone or some publication address. This bulldog called performance royalties has been walking the halls of Congress for over a decade. Multiple voices have been crying out that if the internet radio industry is subjected to these sky-high rates, the next bone to be chewed belongs to broadcasters.

So, we had a meeting on Tuesday at which the radio industry - via spokesman Commonwealth's Steve Newberry - told the Judiciary Committee that radio won't negotiate. Perfect timing for the record industry to demonstrate what a difficult task it is to get the radio industry to the table.

We don't need to go over the arguments...ah, but why not? It's the arguments that aren't making any sense to the people who just a short while ago said to the internet radio industry "go negotiate on your own." The path is well-worn. High royalty rates still prevail for radio stations online.

The time for negotiating, for protesting, for justifying the same course of five decades has long passed. The radio industry will find no solace in its ability to promote artists because artists can/will/do find promotional opportunity at every turn today. The radio industry will find no positive response to a plea for fiscal leniency due to the original Copyright Royalty Board's declaration in 2002 that it is not in the position of finding a business model that works for the contesting party; it's CRB's mission to uncover an equitable rate that artists should be paid for the use of their work.

Yet radio won't step to the table and talk. How do you suppose the people in the House and Senate are responding? (And don't use there's 140+ members of Congress who have signed a non-binding declaration backing the Local Radio Freedom Act"--H. Con. Res. 49.) This is only one small step in the process, and the Act needs 218 members to become... what? A non-binding resolution with no power to be enforced?

We've seen a couple instances of radio execs trying to make impact. The consultant who thinks sending pictures of gold records is meaningful is one example, only those gold records are from yesterday. It's today's rules and proliferation of media that the Representatives are dealing with. Gratuitous actions by a record industry at a time of limited media cannot be held as an example of how that same industry needs to practice business in a changed economic climate.

Send in the pictures of gold records if it makes you feel better. But the only person who's come up with a possible solution is Robert Conrad, President of WCLV Radio in Cleveland, Ohio. He's pitching his listeners, which is a wonderful idea. In a phone conversation this morning, Robert stated: "All stations, not just large but small and tiny, would be effected by this and need to get on their horse and do something. The next thing to do is go to the audience."

My response was, "But Robert, this concept has been tried before." (I am proud of being able to call him a friend for nearly three decades.)

As internet radio began its run to avoid ulta-high royalty payments, a call to the public brought attention but no sympathy. It failed for a different reason than it will fail today. Back then, internet radio couldn't get assistance from silent broadcasters. Today the broadcasters are turning to communities that they started to abandon through consolidation over a decade ago. They will find the same lack of adequate response for swaying politicians.

Robert Conrad is able to make this work, getting listeners involved, because of WCLV's close ties and credible activity within the Cleveland community. Says he, "If we have a fixed expense that doesn't add anything, it will diminish what we can do for the community." And it's true.

The typical major and medium market broadcast outlets, though, long ago abandoned their communities' need for localism in service, information and music. Paybacks are not pretty, and the radio industry is about to find out how turning their backs on community responsibility years ago is going to bite them now.

Here's Bob's response to that position: "Consolidation certainly has changed the face of the station in the community." Won't this be an irony? Radio stations that abandoned delivering community information now asking the community for help. How many P1s will respond?

This was headlined here not too many weeks ago: "Prediction: Performance Fees Moving to Radio Industry." It's not that I want to see broadcasters pay. Personally, my belief is that artists contract out; they get paid for their recording session, and any further payment should come from the record labels.

The reality is that we've been down this road before with internet radio. The broadcast radio industry sat silent hoping the perfomance royalties would break a new competitor's will to go on. It hasn't.

Like before, the two sides have been told to "go forth and iron this out yourselves" - but radio says no!

Do you honestly think that a few thousand pictures of gold records, or calls from a small percentage of your local community that still honors a station's dwindled local commitment, will have profound impact?

No. Radio will eventually end up paying. It's called parity now, because rates are already being paid by cable, satellite radio, and the internet radio industries. Today's fight is to make all pay the same. That's much more palatable for politicians, and easier to understand for the masses.

For too long broadcast radio sat on the sidelines. Now it is in the line of fire and will be very lucky to remain unscathed.

This protest was started much too late, and the argument is for the wrong reason.

From: David F.

The good news about this fight is that Internet radio wins either way. Either the NAB succeeds, giving Internet radio an argument against the current fee structure, or the RIAA wins, creating a level playing field.

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