Two Strategies, One Future

A lot has been said and written in recent days concerning the NAB Radio Board’s vote supporting a multi-tiered proposal that could ultimately result in stations paying a limited performance fee for playing music. Ridiculous conspiracy theories have been proffered. Apocalyptic analogies have been suggested. The motives of NAB and its leadership have been questioned.

It’s time to set the record straight. 

No doubt, smart and well-intentioned radio veterans can find themselves on opposite sides of this debate. But what everyone must recognize are the consequences we will face if we are perceived — rightly or wrongly — as obstructionists by Congressional leaders who have demonstratively shown sympathy for the record label position.

And those consequences are potentially very grave.

There is no doubt that free airplay on local radio is an unparalleled promotional tool enjoyed by artists and record labels alike. With that undisputed fact in our arsenal, radio has for decades rightly and successfully opposed any attempt to impose a performance right, royalty, fee, or tax on local stations for the mere privilege of promoting an artist’s music and making that artist rich and famous.

Moreover, the NAB has proven exceedingly effective in its advocacy efforts during the current session of Congress. More than 260 House members and 27 U.S. Senators stand firmly against a performance fee, even though legislation has proceeded further in this Congress than ever before. Both the House and Senate Judiciary Committees have given the recording industry a thumbs-up.

The Performance Rights Act, still vigorously opposed by NAB, awaits only a floor vote in each Congressional chamber — action that could come as part of larger, unaffiliated legislation passed after this week’s midterm elections by a ‘lame duck’ Congress. That legislation, as Marci Ryvicker, a well-known and reputable financial analyst from Wachovia-Wells Fargo, has estimated, could cost radio between $2 billion-$7 billion annually.

We are fortunate to have the leadership of Gordon Smith, a former two-term U.S. Senator who is respected by both Democrats and Republicans. It’s true that Senator Smith is not a radio broadcaster like Eddie Fritts once was. He is, nonetheless, a true gentleman and sincerely committed to the issues of radio and has proven exceedingly skillful in dealing with difficult terrain that we are facing inside the Beltway. His hiring gave NAB renewed credibility and instant clout last year. And, to put it bluntly, his hiring may be the only reason the Performance Rights Act has not become law in the current session of Congress. But beyond the specific issue of a performance fee, NAB and radio at large finds itself navigating a political minefield in Washington, where “just say no” is not a strategy for long-term success.

Indeed, as long as we appear unwilling to rationally discuss an issue of importance to key members of Congress, radio’s Washington ‘wish list’ remains dead on arrival. Any attempt to pass future legislation that would benefit radio will be immediately greeted with a performance fee amendment.

Checkmate?

Of greater concern, however, is the likelihood for amplified collateral damage — in the form of legislative attempts to saddle radio with onerous regulatory hurdles, spectrum taxes, localism mandates, or diminished interference protections.

And so we find ourselves at a crossroads.

Option A is one of familiarity. We continue to say not only “No,” but “Hell, no” to a performance “tax.” It’s worked before, and it might work again — perhaps long enough to get many of us to retirement. But make no mistake: Option A has an expiration date. Maybe not this Congress or the next — but at some point in the not-so-distant future, legislation will likely be passed, and the future of radio may include a performance fee set by a three-judge panel of bureaucrats known as the Copyright Royalty Board.

Option B is new and less familiar. We leverage our position of strength — the decades of legislative success demonstrated by NAB, the nearly 300 lawmakers who stand opposed to the Performance Rights Act, and a future Congress that will likely be less regulatory than the current — and we craft a deal on our terms and in the best long-term interest of radio. That is precisely what the NAB Radio Board has voted overwhelmingly to do.

No broadcaster wants to pay a performance fee; that’s a given. But consider what we might get in return:

— a strengthened foothold in mobile phone devices, putting us in a position to effectively compete on a device carried in nearly every American’s pocket;

— decreased streaming rates and the ability to simulcast our signal — commercials and all — on our respective websites, increasing radio’s ability to grow our online revenue;

— removal of the Copyright Royalty Board from rate setting of over-the-air and online rates, forever;

— and recognition from both Congress and the music industry — written into statute — that the promotional value of radio is unparalleled in comparison to any other audio platform in existence. Those words, signed by the President and written into law, will be what radio points to should the music industry ever have the audacity to ask for more.

In exchange, radio would agree to pay a limited performance fee that amounts to less than one percent of net revenues. The initial fee could be even less — as low as 0.25%, if the recording industry chooses not to support a legislative mandate for radio-enabled mobile devices.

Option B is not without its risks. But if successful, radio wins hands down.

Representing the diverse nature of radio, our stations span from the largest markets to the smallest towns, from major station groups to small regional clusters — publicly held companies, privately held stations. And yet despite these differences we share a mutual commonality: a truly sincere commitment to securing a vibrant future for radio.

We ask that everyone in radio study carefully the Term Sheet adopted by the NAB Board last week, and we ask for your support.

Members of the NAB Radio Board Executive Committee

NAB Radio Board Chair
Caroline Beasley
Executive Vice President and CFO
Beasley Broadcast Group
Naples, Fla.

Lew Dickey
Chairman, CEO and President
Cumulus Media
Atlanta, Ga.

Rick Cummings
President — Programming
Emmis Communications
Burbank, Cal.

Randy Gravley
President and CEO
Tri State Communications
Jasper, Ga.

Editor’s note: This column was original published in response to commentary by Radio Ink publisher Eric Rhoads. Rhoad’s distributed the above response to his readership on November 2, 2010.