BY DANIEL MCSWAIN
Recording artists and a member of the U.S. Copyright office were among witnesses who argued today in a Congressional hearing that the promotional value of broadcast radio insufficiently compensates artists for their work, and asked Congress to impose a new performance royalty on broadcast radio.

Much of the testimony heard today by the Committee for the Courts, the Internet, and Intellectual Property, a subcommittee of the House Committee on the Judiciary, challenged the broadcast industry's longstanding exemption from paying a performance royalty [background in RAIN here].

Sam Moore (pictured right), part of the best-selling Stax recording act Sam & Dave and founding member of pro-performance royalty coalition musicFIRST, argued in his testimony that, "without a huge promotional budget and massive marketing support, radio does absolutely nothing to promote sales of my records."

Digital driving down promo power?
Marybeth Peters, Register of Copyrights in the U.S. Copyright office, argued in her prepared statement that digital competition to broadcast radio has substantially decreased the medium's ability to promote artists.

"Today", Ms. Peters said, "listeners are not limited to what they hear on traditional radio to inform their choices. Consequently, whatever promotional value that may have existed in 1995 has been diluted by the increase in alternative media."

In discussing payment for the use of a property right, Ms. Peters argued that "the right and the amount and terms of the payment are set by negotiations between a willing buyer and a willing seller." She also advocated for expanding the 114 statuatory license to all non-interactive broadcasts, claiming that the restrictions laid out in the license would not pose problems to the current broadcast business model.

Ms. Peters also pointed to the decline in record sales seen in recent years, and argued that P2P file-trading and streamripping have eroded AM/FM's promotional capabilities.

Representing the NAB, President and COO of ICBC Broadcast Holdings Inc. Charles Warfield Jr. delivered testimony that reinforced broadcast radio's historically exempt position, noting that, "Radio stations... provide tens of millions of dollars in free publicity and promotions to the producers and performers of sound recordings in the form of air play, interviews with performers, concert promotions and publicity that promotes the sale of sound recordings and concert tickets. Through the years, Congress had found these promotional benefits appropriate and valuable compensation."

Mr. Warfield later noted that on "Music Day" at one of the stations operated by his company, a large number of promoters, record label representatives, and recording artists regularly attend and lobby for their work to be considered for airplay.

...	x The NAB sat on its hands back in 1995 and 1998 when Congress passed a performance royalty for satellite and Internet radio — probably thinking, "Well, this has nothing to do with us" — and now it's coming back to bite them big-time, since the strongest argument being used by the record industry today is "If satellite and Internet radio are paying a royalty, equity and fairness demands that broadcast radio pay, too." As I've noted before, this is analgous to the child who murders his parents and then asks leniency from the court because he's an orphan. Unfortunately, nobody in the Congressional hearing today made that point. It was also disheartening to hear Marybeth Peters, the Registrar of Copyright (CHEC), argue in favor of the "willing buyer / willing seller" standard and blithely tell Congressmen that it was easy to administer: No one in the room noted that if the CRB decision stands, it will probably shut down the entire industry of Internet radio, and that a similar CRB decision for broadcast radio could theoretically bankrupt and shut down all of AM/FM radio. x
	x Another frustration: Sam & Dave sold millions of dollars' worth of records and concert tickets during the heydays of their career. (As did Judy Collins, for that matter, who told Congress that she had had "dozens" of platinum records.) If those artists don't have enough money for a reasonably comfortable retirement, that's probably due to the deals they had with their labels and concert promoters during that era, exacerbated (or not) by their financial planning skills and discipline during their peak earning years. The truth is, this is an attempted money-grab by SonyBMG, Warner Music, Universal Music Group, and EMI, using beloved senior-citizen recording artists as their frontspeople. If it's successful (assuming a royalty rate similar to songwriters' and adjusting for the % of radio airplay that each artist garners), each of those big-four music labels hopes to see a new income stream of about $50 million a year while Sam and Judy might, if they're lucky, each see an annual check for about $26,000. * It's funny how the debate in Congress was framed around the $26,000 and not the $50,000,000. x
	x Finally, let's imagine what would happen if broadcast radio quit playing all Judy Collins songs (as a performer, not necessarily as a songwriter). Do you think her record sales would go up, since her fans would have to acquire her tracks if the wanted to hear her again? I'd guess not... although it might be an interesting real-world experiment to conduct in one randomly-selected city or region. In the same experiment, perhaps broadcast radio in a given city or region could play five times as many Joni Mitchell and/or Melanie songs as they do now. Do you think their CD sales in that city or region would go down? That's their argument. Let's find out! -- KH x
	x * What's my math? Let's say sound recordings got a performance royalty of 3% of radio's $20 billion in revenues, split 50/50 between artists and labels. On the label side, the big-four labels probably get about 67% of all radio airplay; then split that take four ways. ($20 billion x 3% x 50% x 67% x 25% = $50 million.) On the artist side, oldies stations comprise about 2.5% of all radio stations, Sam & Dave probably get played about twice a day on the typical oldies station (or about once every 144 songs), and Sam would get half of the Sam & Dave money. ($20 billion x 3% x 50% x 2.5% x (1/144) * 50% = $26,000.) (And I'm guessing that Judy Collins, the performer, gets about half as much U.S. radio airplay as Sam & Dave.) x

From FMQB.com: "The musicFIRST Coalition has released a study, looking at radio ad revenue projections and how rising revenue can help the organization's case for a new performance royalty for artists.

"The analysis, conducted by Barry Massarsky of Massarsky Consulting, shows that radio ad revenue has grown from approximately $15 billion in 1998 to almost $20 billion in 2007. It is projected to hit $23 billion by 2011.

"Additionally, the study found that almost 80% of corporate radio ad revenue comes from music formats...

"'All we are asking for is simple fairness,' said Mark Kadesh, Executive Director of the musicFIRST Coalition... 'Compensating performers is the right thing to do regardless of any economic analysis, but this data should nonetheless put to rest any broadcasters’ cries of poverty.'"

Read FMQB's entire article online here.

...

... I wasn't able to locate Massarsky's study itself (his company's website is "Coming Soon") to learn, but I'm interested in how he came upon his "$23 billion by 2011" projection (15% growth). News today is that CBS Radio revenue is down 11% (see FMQB's coverage here). In fact, radio revenues have been virtually flat in recent years, in contrast to the first few years after the government relaxed ownership rules and companies like Clear Channel became giants. To project revenue growth based on the early years of deregulation (again, if this is in fact what Massarsky is doing) ignores both the current economy and the explosion of media options which now compete with radio for listeners/viewers as well as advertisers. -- PM ...

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