Senate Judiciary Committee to take up issue in Aug.
When the Senate Judiciary Committee convenes Aug. 4, it will take up an issue that has emotions running high, where lobbying has sunk into innuendo, personal attacks and racial politics, and where the economic future of giant industries is at stake.
No, it’s not about healthcare reform.
The dispute centers on a bill that would require radio stations to pay artists when songs are played over the airwaves.
Hundreds of millions of dollars each year could be at play, so the debate over details of the bill has been fierce. But those battles pale in comparison to the PR methods used to fight for or against it.
Adding a sense of urgency to the war is the fact that the two combatants — diskeries and radio stations — are megabucks operations suffering from plummeting returns.
The bill has long been a dream of singers, musicians and record labels, but long opposed by broadcasters.
Proponents have pulled out the big guns, including the nearly deified music vet Tony Bennett.
Bennett performed on the Hill, proclaiming that radio stations “don’t want to give up one penny.” He’s just one of the many stars to appear at press conferences and rallies on behalf of MusicFIRST, the coalition of musicians and performers’ orgs, record labels and unions.
The NAACP passed a resolution at its annual convention on July 14 that characterized the bill as the “civil rights for musicians act,” while praising the bill’s chief sponsor in the House, Rep. John Conyers (D-Mich.), and chiding his critics.
The org said the bill is about “ending the exploitation of African-American musicians and paying them a fair wage for their work.”
The bill’s supporters characterize it as correcting an inequity that has long existed: Radio stations pay songwriters, but not performers, when their music is played.
While artists and record labels are grappling with declining retail sales of CDs and other physical products — by almost 25% in 2008 — the broadcast radio business is hurting too, as it faces a dramatic decline in ad revenue. Spending on ads on radio fell by 10.3% in 2008, according to TNS Media Intelligence. The decline in the first quarter of 2009 was 26.2%.
The bill “couldn’t come at a worse time in the radio business,” says John Gallagher, market manager for Greater Media’s three Detroit stations.
He characterizes the bill as an effort by record labels — which in many cases will split the royalty with the artist — to make up for lost revenue as listeners have shifted to digital downloads.
And, Gallagher warns, if the bill becomes law, “I would have to take a hard look at how much music we play and which artists we play.”
He says his stations each pay about a $500,000 per year to BMI and ASCAP for royalties to songwriters, and believes the new royalty would cost a similar amount.
Dennis Wharton, spokesman for the National Assn. of Broadcasters, says many stations would be forced to switch to all-talk formats if the bill’s provisions are enacted. He then pulls out a big gun in the broadcasters’ arsenal, invoking a dire scenario guaranteed to terrify many in the Democratic-controlled Congress: “More stations could potentially switch to Rush Limbaugh.”
Broadcasters have also raised the issue of race, specifically the impact that the bill would have on minority-owned media. Cathy Hughes, founder of Radio One, the country’s largest African-American radio broadcaster, said in on-air commentary that the bill would “murder black-owned radio.”
She and Radio One targeted five members of the Congressional Black Caucus who are among the sponsors of the bill. But the battle grew more personal when she aimed much of her fire at Conyers, linking him to his wife’s ethical troubles.
Monica Conyers recently pleaded guilty to conspiracy to commit bribery in a waste-hauling scandal; a federal investigator said “the evidence offered no suggestion” that the congressman “had any knowledge or role” in his wife’s conduct.
In a July 9 hearing on minority-owned radio, Conyers shot back by playing up the fact that Hughes and her son, Radio One executive Alfred Liggins, were invited to testify but did not show up.
Liggins was also under fire from MusicFIRST.
Before the July 9 hearing , the org, repped by PR giant Edelman, put out a release declaring “Radio One CEO gets $10 million bonus, $0.00 for artists and musicians.” (According to the company’s report for 2008, Liggins received $846,271 in salary from Radio One, and his bonus was $6,420,000.)
Proponents say a performance royalty makes sense with changes in listening habits and in the way that some artists make money. As CD sales decline, an increasing share of their returns come from concerts and other live appearances.
No one knows how much broadcasters would pay. Based on the ratio that satellite radio pays to performers vs. the songwriters, one estimate is that broadcasters would pay $500 million to $1 billion per year. Stations collectively spend about $450 million annually to pay composers and songwriters.
A recent Congressional Budget Office report gave no estimate because the rate for larger stations would be set through negotiations by the copyright royalty judges. They did determine that the impact on publicly owned stations would be a collective $500,000 per year, and for all smaller stations (with gross revenues below $1.25 million) would be about $16 million per year.
Even though changes have been made to the bill to adjust for the dire economy, some broadcasters say the economic issues miss a larger point: Even with radio’s struggles, no other promotional platform matches its reach, be it for singles and albums or outright plugging of concert gigs.
Proponents, though, claim that such promotional value is on the wane. Will.i.am, who recently lobbied on the Hill, also brushed aside fears that new groups would be deterred as stations would only want to pay for proven performers. He told CNN, “Well, I don’t see a lot of new talent in the mix right now.”
Like Bennett, he’s one of the bevy of stars, also including Sheryl Crow and Billy Corgan, who have appeared in the Capitol.
Some broadcasters cite a mutually beneficial relationship they have had with artists. It’s a relationship that has, through the years, come under federal scrutiny for payola practices, in which labels paid radio stations to play certain artists as a way of driving popularity.
“We have a symbiotic relationship, and this is threatening that relationship,” D.C.-area radio personality Kane of 99.5 FM told lawmakers on a visit to the Hill in May. “What about the relationship to the artist? Will radio welcome Eminem, 50 Cent to the radio station? Will we give out concert tickets?”
According to MusicFIRST, there have been reprisals. The org filed a complaint with the FCC in June, alleging that one radio group dropped an artist’s record after he spoke in support of the legislation. The complaint did not identify the performer or the station group — Mitch Bainwol, CEO of the Recording Industry Assn. of America, says it’s because of fears of further reprisals — but the Associated Press speculated that the artist may be U2’s Bono, who came out in favor of the bill in April.
MusicFIRST says Clear Channel stations refused an ad last week in which Duke Fakir, the surviving member of the Four Tops, tells listeners, “Artists don’t make a penny when their music is played on radio. All we ask is fair pay for airplay.”
NAB spokesman Wharton says if there were a few isolated cases of program directors refusing to play Bono for a few days, “that wouldn’t surprise me.” But, he adds, “I can assure you that there was not some kind of companywide edict or mandate to instruct stations not to play certain artists.”
He also defends the right of stations to refuse ads that advocate a position they feel is a threat to their livelihood.
Gallagher acknowledges he has rejected spots. “We are certainly not going to take a spot that is against our business model,” the exec says.
Clear Channel’s exec VP and chie
f legal officer Andy Levin confirms they rejected the ads, and says in a statement, “Why would we air ads designed to put us out of business? This is not about the ads, it’s a publicity stunt designed to malign our business and the character of our employees.”
The two big questions now are: Will the bill pass? And, if so, when?
Broadcasters have lined up a non-binding resolution, the Local Radio Freedom Act, which declares that Congress should not impose any new performance “fee, tax royalty or other charge” on broadcasters. So far, 245 members in the House and 23 senators have signed it, according to the NAB.
But passage got a boost in May when the bill cleared the House Judiciary Committee by a 21-9 vote. Its version includes a sliding scale of payments for smaller and publicly owned stations based on revenues (see separate story). It also defers the collection of royalties for three years for stations making less than $5 million per year, and a offers one-year moratorium for those above that number.
Even as the Senate Judiciary Committee takes up the legislation this week, with Sheila E. among those scheduled to testify, there are doubts about its future in the months ahead. With the fusillade of issues facing Congress, it may not make it to the House floor this year.
“We are hopeful that it can happen this year, but whether it is this year or next, we are confident the bill will move up the chain,” says Bainwol, who dismisses the broadcasters’ free radio resolution as “unique garbage” with “no legislative force.”
The battle for the performance royalty, he says, “is an exercise that is stronger and has got more punch than at any time in the past.”
It’s uncertain whether President Obama would support the bill, should it end up on his desk. Some industry observers believe that if it ever gets that far, it most likely would be bundled with other intellectual property legislation.
Then again, with everything else that is going on, Obama would probably be forgiven if his response resembles that of his predecessor.
When asked about the issue in Nashville last year, just as the lobbying push began, then-president George W. Bush said, “I have, like, no earthly idea what you’re talking about.”