Monday, February 9, 2009

Radio: RIAA v. NAB - two wrongs don't make it right

By now you know that the record labels are demanding a bailout from the radio industry.

Their claim, which they’ve taken to Congress to resolve, is that radio has been on the receiving end of an unmerited free ride.

The Record Industry Association of America (RIAA), the lobbying arm of the recording industry, wants Congress to impose a performance tax on radio.

The National Association of Broadcasters (NAB), the lobbying arm of the radio industry, opposes it.

Radio already pays annual fees for music airplay to ASCAP, BMI, and SESAC.

There are no good guys here. Pot, meet Kettle. Glass House, meet Stones. Deflation, meet Stagnation. Wrong, meet wrong.

Both radio and record industries are wholly dysfunctional and delusional. For the past decade both have ignored their customer base. Now, they wonder why their market share has dwindled.

Radio homogenized its formats, eliminating localism, talent, and R&D. Labels churned out mostly mediocre CDs and retailed them for almost double the cost of a hit movie DVD.

Customers are as loyal to you as you are to them. Do most consumers really miss record stores? If the station you listen to – assuming you still listen to radio – went off the air, would you really miss it?

The labels only cared about getting the adds and spins. Now, they’re claiming that radio, imbalanced with mundane voice-tracking and jockless jukebox formats like Jack, Bob, and Radio, no longer sells their music because song identification is an option.

Both industries resisted and rebuffed new media.

The labels may have invented payola but radio bought in and listeners were deceived by hearing new music restricted to those that could afford to pay for play. Like drugs, radio couldn’t just say no.

The consequence? The public has no empathy for either.

They’ve migrated to the Internet for music – both to hear it and to download it – legally and illegally.

Now each side is out to make the other look bad.

The labels claim this new performance tax will trickle down as royalty payments to artists.

Is that before or after Universal Music pays CEO Doug Morris’ $14.5 million dollar salary?

Is that before or after Warner Music pays CEO Edgar Bronfman Jr., who bought the company so he could run it, albeit poorly, his $6 million package?

Just for the record, CBS CEO Les Moonves, whose watch includes CBS Radio, collected $33.7 million last year. In the same time period, CBS Radio purged 700 jobs.

Still, like a mastodon slowly sinking into a tar pit, the labels are thisclose to extinction. But unlike dinosaurs, they’re trying to lug radio into the pit with it.

If you want supplementary background on these organizations, just go to the “search blog” box at the top of this page and type in “NAB” and “RIAA.”

The RIAA has been seeking to squelch or control Internet radio for years through its collection arm – SoundExchange.

The RIAA has their act together under its CEO Mitch Bainwol and they’ve been snarling, snapping and barking like rabid dogs at the NAB while its CEO David “Fumbles” Rehr plays scared mouse and writes long, rambling, meaningless letters to anyone with the time to read them, which is absolutely no one on Capitol Hill.

The RIAA-backed Performance Rights Act was introduced by John Conyers (D-MI) and Howard Berman (D-CA). The NAB, known for its own hyperbole, claims it will cost the radio industry between $400 million and $7 billion. But the truth is still somewhere in-between. It’s an expenditure the radio industry cannot afford.

There is always the possibility of the law of unintended consequences. The bill passes and all music radio formats go – wackjobs unite - talk.

While Fumbles was mailing stuffed ducks with an anti-RIAA message tacked on them to members of Congress, RIAA lobbyists worked the room, shaking hands and taking names. There’s an old saying – never under estimate the value of a cash bribe and there’s a new saying – never underestimate the value of front row tickets to a U2 or Coldplay concert for one of your high-roller campaign supporters.

Fumbles is Mr. Outside, Bainwol’s Mr. Inside. They’re both recurring presences, like ants at a picnic, snakes at the garden party, or herpes.

The RIAA cites the devastating drop in both listeners and their time spent listening to radio as the reason for its loss of influence. Right now, the odds are in favor of Congress approving the tax.

Been to Capitol Hill lately? Check the demos. You’ll see a whole lot of people working on the Hill who were listening to the radio when deregulation and Clear Channelization kicked in and kicked them out.

Look it up. Early last year I suggested that Internet radio only owners and the NAB should join forces since the heavy-handed tactics they were receiving from the RIAA would eventually close in on terrestrial radio, too. *

Let the record show that Fumbles ended up taking the opposite tack. He tried to pull a fast one, and got outed for a clandestine maneuver in Congress to block passage of the Webcaster Settlement Act of 2008, which allowed negotiations to continue between the RIAA’s SoundExchange and Internet radio over Internet radio royalty payments.

The NAB will never criticize what it doesn’t understand – it’ll just try to kill it.

Can’t we get Fumbles to quit due to ill health? We’re sick of him.

I fear that when it comes time for the face-off between the RIAA and the NAB, Fumbles will be prepared for a Punch and Judy show while Bainwol will be ready for nuclear war.



Anonymous said...

Just a thought that should this pass, maybe music is finished on terrestrial radio. That fits with the concept that older people still listen to terrestrial radio, and older people or more inclined to listen to talk shows.

Anonymous said...

No older people I know listen to terrestrial radio except public radio. In fact, almost nobody I know of any age listens to radio. They're as fed up with the quality, nastiness and homogenity of viewpoint in talk radio as they are with music radio. The right-wing talkers have pretty much spewed their entire bag of tricks and have nowhere to go but down. I don't think the people currently running radio have any ideas about what to put on their stations. I did hear a promotion today on a dance-Top 40 station urging you to get an HD radio to listen to their special, exciting, 24-hour dance-party station where you could hear exactly the same overplayed dance records you hear on the regular stations, only without ads. Whoop-dee-doo. That is SO brilliant.

Anonymous said...

John said... "There’s an old saying – never under estimate the value of a cash bribe..."

"FCC Investigation by House Subcommittee"

"The Federal Communications Commission is being investigated by the House Energy & Commerce Subcommittee on Oversight and Investigations prompted by criticisms of the FCC's processes and what Rep. John Dingell (D-Mich.) described as a breakdown in proper procedure."

"Political Campaign $$$ Contributors By iBiquity Digital Corporation"

Jury $750 06/05/2008 CEA
Jury $500 01/25/2007 CEA
Struble $1,000 02/25/2008 NAB
Struble $1,000 03/09/2007 NAB
Struble $5,000 01/29/2008 CEA
Struble $2,000 03/07/2007 CEA
Struble $2,000 06/24/2008 JOHN D. DINGELL FOR CONGRESS

Bob "The Scammer Boobles" knows payola very well - he made a deposit to Rep. Dingell during his investigation into the FCC's "breakdown in proper procedure", which includes the FCC's authorization of Booble's jamming machine. Also, Struble and Jury made deposits to the CEA, which voted in favor of the 10db power increase for FM-HD (Boobles sits on CEA's board, too). How's that for conflict of interests!

Anonymous said...

I think that before any decision is made on a performance tax there should be a clear cut and independently audited system that is agreed upon by all parties. Watch the labels back down on that one. John, I believe it was you who said a few years back that almost every act that could afford to audit their labels found improprieties and that included the major acts like the Beatles and Led Zeppelin. You can imagine what labels do to novice acts. Radio, for certain, is also a corrupt business and even more so following deregulation and activities by Clear Channel, CBS Radio, Citadel, etc. but no one tops the labels for all out sleaze.

Anonymous said...

Both losing industries are trying to kick each other down now that their wells have dried up.

You got it absolutely right. Both industries fell into mediocrity and tried to pass off an inferior product to its "customers".

You also got it right about neither side investing in new media. You are right that radio made a colossal mistake when it had the money and didn't invest in My Space and Face Book. The same is true when the record companies ignored peer-to-peer and internet radio and when they did they tried to destroy it.

I read that book you recommended "Appetite for Self Destruction". I think every radio station executive should read it and every record executive should read your book and Alex Foege's "Right of the Dial". They explain the way it worked and the way it does not work now.

small market owner said...

I know you have a link to Fumbles Rehr's letter but I would like to cut and paste it for anyone who may have missed it. If any radio groups support this mouse they better get used to paying this performance tax because Fumbles has no influence on Capitol Hill.
Wake up, radio. This will cost me dearly and it will to you, too. We need to change your NAB leadership NOW. Here is the letter:

February 4, 2009
The Honorable Nancy Pelosi
United States House of Representatives
235 Cannon House Office Building
Washington DC, 20515
Dear Speaker Pelosi:
Today, on behalf of the big, internationally owned record labels, legislation was
introduced in the House that will mandate local radio stations pay a new
"performance fee" to the recording industry for the music they air for free on the
On behalf of the 14,000 local radio stations nationwide, I am writing to
express strong opposition to H.R. 848 and respectfully request that you
refrain from cosponsoring this legislation.
Local radio broadcasters consider this fee a "performance tax" that will not only
harm your local radio stations, but will threaten new artists trying to break into the
business as well as your constituents who rely on local radio. Although the
proponents of H.R. 848 claim this bill is about compensating artists, in actuality at
least half of this fee will go directly into the pockets of the big record labels,
funneling billions of dollars to companies based overseas.
For more than 80 years, a symbiotic relationship has existed between local radio
stations and the recording industry. Record labels and performers thrive
financially from free radio airplay and local radio benefits from advertising dollars
generated from playing the music. This free airplay touches 235 million listeners
a week, and provides the big record labels and their artists increased popularity,
visibility and record sales. A recent economic study concluded that the promotion
from radio airplay is directly responsible for $1.5-2.4 billion worth of music sales
for the big record labels – and that figure doesn't even include the additional
billions in promotion for concert tickets and merchandise sales.
In fact, 85 percent of listeners of all audio services identify radio as the place they
first heard music that they purchased. The recording industry relies on the
exposure that only local radio stations can provide, as stated by a record label
"It is clearly the number one way that we're getting our music exposed.
Nothing else affects retail sales the way terrestrial radio does." --Tom Biery,
Senior Vice President for Promotion, Warner Bros. Records, 2005.
Congress has long recognized the inherent value of free radio promotion to
record labels and artists. For that reason, Congress has repeatedly declined to
impose a performance tax on local radio. In fact, every time Congress has looked
at this issue, it has rejected calls to impose such a tax on broadcasters. In 1971
and 1976, Congress considered and refused to grant a performance tax. In 1995,
Congress again opted not to impose a performance tax on broadcasters so as
not to jeopardize what Congress called "the mutually beneficial economic
relationship between the recording and traditional broadcasting industries."
House Report 104-274 (1995)
Last Congress, more than a majority of the House of Representatives sided with
their local radio stations in opposing a performance tax. H. Con. Res. 244, the
"Local Radio Freedom Act," introduced by Reps. Gene Green (TX-29) and Mike
Conaway (TX-11), collected 226 bipartisan cosponsors. Reps. Green and
Conaway are planning to reintroduce their resolution in the 111th Congress and I
hope you will agree to cosponsor this important effort.
The system in place today fairly compensates everyone. The free promotion that
record labels and artists receive from radio airplay drives album and concert
sales, which ultimately results in compensation for the record labels and artists.
Although the big record labels have seen their revenues decline over the last
decade, local radio broadcasters are not the reason the recording industry is
losing money, and it should not be the industry to fix it.
The existing system actually provides the epitome of fairness for all parties: free
music for free promotion. For these reasons, I urge you to refrain from
cosponsoring H.R. 848 and oppose the imposition of any new performance
tax on local radio broadcasters for the benefit of the big, internationallyowned
record labels.
Should you have any questions, please feel free to contact me or the NAB
Government Relations Department at 202-429-7150.
David K. Rehr

Anonymous said...

Gorman, take your blog and shove it. You were in radio? Could of fooled me the way you trash it. There is nothing wrong with radio. It's the economy, stupid. When it recovers radio will too. Then what will you write about? How bad things are that they are good?

You say you are against the Performance Tax yet you give the record companies all the ammunition they need to fight radio. Whose side are you on?

Anonymous said...

Poor pitiful Sam Moore says he has to perform 300 nights a year to make a living because radio plays his music without paying him,

If radio hadn't been playing Soul Man around the clock for 40 years, I wonder if anyone would go to see him at all.

And by the way Sam, where are the record company royalties you earned when you were selling records. Oh yeah, Atlantic kept them and spent them long ago. Just as they will charge off your radio performance royalties to tour support from 1968 that you still owe them. And the returns on that 1970 album that didn't sell. No wonder you have to work. You still owe Atlantic Records millions.

I own a small market AM. Music is the least important thing I do on my station. If this royalty bill passes, I will go to talk radio overnight. And one less station will be playing Sam & Dave records to help you sell tickets.

Anonymous said...

i remember going into record stores that were the product of their owner or manager. they turned you on to new music or helped you find a song you heard on the radio. then it changed with end caps and record cos. buying up space and having the stores play pre-selected cds. featuring tracks from albums being pushed.

on radio it went from being able to call up a dj to ask about a song to prerecored automated voice tracking and no local flavor whatsoever.

even morning shows became generic. if it was not piped in from out of town they became audio versions of entertainment tonight.

radio and records deserve their failures. they brought it on to themseleves. viva la internet!

Anonymous said...

This is spooky. Its funny that you should mention U2 and Coldplay. I work for a company that has close ties and contributes to a certain congressional leader. The other day I placed a call to his office. My boss wanted the best U2 tickets he could get for their next concert here. He already had the dates. This is not the first time he has called this congressman to get tickets either. The last time he asked for tickets and got them he called the same congressman. The group was Coldplay. How do you know these things? I would swear you were writing about my boss.

Anonymous said...

"Gorman, take your blog and shove it. You were in radio? Could of fooled me the way you trash it. There is nothing wrong with radio. It's the economy, stupid. When it recovers radio will too. Then what will you write about? How bad things are that they are good?"

LMFAO! Little boy fuck running scared - radio was headed for the crapper long before the economy crapped. Your indstry will eventually be a shell of what it is today. Guess what, Gen Y doesn't give a shit about radio, or you!

Anonymous said...

"There is always the possibility of the law of unintended consequences. The bill passes and all music radio formats go – wackjobs unite - talk."

Sweet! This would definately kill HD Radio! Can't wait!

Anonymous said...

>> Poor pitiful Sam Moore says he has to perform 300 nights a year to make a living because radio plays his music without paying him, <<

I agree that someone should be paying Sam Moore, either the radio stations that play his music and profit commercially via an audience or else the record companies who profit by the sales of his downloads or CDs.

Anonymous said...

Both industries will die if this goes through. Radio cannot afford it, the result being fewer music stations. Fewer music stations means even less exposure. The labels should take whatever they can get since the product they have been releasing over the past few years has been, with few exceptions, quite mediocre. Radio may not have the influence it once did but can you name an alternative media that has greater influence?

Anonymous said...

The RIAA represents the labels not the artists. The labels are the ones that denied the artists royalties. Sam Moore and Mary Wilson of the Supremes complain that they never got paid their royalties due. So why don't they go after Berry Gordy or Universal or whoever is making money from their recordings these days? The RIAA is shifting blame to radio. Radio does not owe the artists royalties, the record labels do. Radio is far from perfect and everything said about not ID'ing the songs and pay for play is absolutely right. Radio has its own sins but not paying artists royalties is not one of them. That is squarely the responsiblity of the record companies. The RIAA is really passing the buck on this one. I am hoping that the Obama administration will crack down on the RIAA and its illegal privacy invasion on the internet as well.

Anonymous said...

Artists get paid royalties by labels. At least they are supposed to. I read through this blog on how nearly every artist that audits their labels learns they were getting cheated out of royalties. Radio pays ASCAP, BMI and SESAC and that money goes to composers. Radio is not perfect with payola and restrictive playlists but it does not owe the artists. If anything the artists should look at radio, TV, the internet and any other medium that provides them exposure as opportunity. These artists need to deal with the labels that are cheating them and not take it out on radio's hide.

Anonymous said...

In the end, self-inflicted debt service will close the coffin on radio.

Anonymous said...

The NAB needs a top to bottom reallignment. Fumbles is just the mouthpiece. The board needs change. Who will lead the overhaul? Don't wait until we have the Perform Tax rammed down out throats.

Anonymous said...

Rehr is running out of letters to write. Is that the best the NAB can do up against the RIAA?

Is there any braintrust remaining in radio.

I agree. Radio is going blow this one big time.

Anonymous said...

The record industry has been second to none in blaming its customers for its woes now for literally decades! As far back as the 1970s, it was claiming that "home taping is killing music" while engaging in a contractual arms race with its biggest stars, banking everything on a few blockbusters rather than catering to a broad variety of musical tastes. I can't think of an industry that is less deserving of public sympathy than the record industry ... unless it's radio.

Anonymous said...

You are right about Fumbles being Mr. Outside and Mitch Bainwol being Mr. Inside. You are also right about Fumbles always taking the easy way out by writing letters and having others get their hands dirty for him with nothing ever getting accomplished. It is true that the NAB can only be as good as the organization it represents and those running (or is it ruining) radio for the past ten years or more are not leaders, just bullies and trust funders who cannot comprehend why Mommy and Daddy's radio business has gone to hell in a handbasket. I hope stations start going dark, into receivership and the fire sales begin. Until we rid ourselves of those running this business into the ground I am afraid we are stuck with Fumbles and his bumbles and a performance tax most cannot afford to swallow.

Anonymous said...

From On Line Spin this morning. The labels have solutions to their problems. Radio has none. Those five rules mentioned used to be what radio could help provide artists.

In case you missed it -- and you very well may have missed it, because it happened awfully quickly -- the Web has finally become a legitimate channel for the promotion and distribution of music, and the music industry is finally embracing this fact. Of course, this can be debated, since the Web also pretty much killed the record industry at the very same time.

This struck me while watching the Grammys this year. The award for Best Rap Album went to Lil Wayne. Wayne had the top-selling album of 2008, selling 2.88 million copies of "Tha Carter III," followed by Coldplay with 2.15 million. This is amazing in two distinct ways; first, because Lil Wayne built his reputation by giving away hundreds of hours of music through mix tapes and other online methods in order to establish a fan base, and followed it up with a whimsical array of beats and rhymes on a legitimate label release, netting the biggest, most ubiquitous album of the year. It's also amazing that for the very first time since tracking album sales started under the current model in 1991, the number-one album didn't clear 3 million copies.

The biggest single first week album sales record goes to 'N Sync (don't laugh), as they sold 2.4 million copies of "No Strings Attached" during its first week in 2000, but since then the numbers have fallen across the board. All that being said, way back in 2000 the music business was just plain different. When you bought an album, you were more than likely buying it for one single song -- or maybe a couple -- and the rest was filler. Nowadays, with iTunes leading the way for digital downloads, most artists are happy enough to sell singles. Artists like Smashing Pumpkins have been releasing single songs rather than albums, and in some cases they're giving them away (much like Hyundai's recent giveaway of the Smashing Pumpkins song in its TV spot during the Super Bowl).

What has finally happened is that some artists, if not their labels, are waking up to the idea that the Web can be used to hone their craft, build a fan base and promote their music. Lil Wayne gave away hours and hours of material for free, proving his own prolific status as a maniacal musician and allowing anyone who wanted to hear him to get a taste of his style. In doing so, he also perfected his craft and became a better artist by weeding through the process in public and inviting his fans to come along for the ride! By the time he was ready to put out another proper release, he'd become the self-proclaimed "best rapper alive" -- a title than can certainly be argued, but at least he makes a case for it.

Other artists focus on standard Web sites like MySpace music or their own official sites to get out their music. If you're established enough, you can do it, but it takes time and it takes effort and it takes a lot of arguing with the suits that still represent the labels. Artists like Pearl Jam (I couldn't go an entire article on music without mentioning them) are talking about emulating Radiohead and releasing their own music through their own sites. These levels of artists don't need a label anymore. The fan base is large and they have the wherewithal to get it done, so why not go this route?

This leaves the labels and the industry itself flailing a bit and testing out every new model under the sun (which is a good thing). They are testing paid downloads, subscription services, ad-supported streaming, ad-supported and ad-integrated P2P download services -- and in so doing, they're rewriting the rules for the future.

The rules for the future of the music industry are astonishingly simple:

Rule #1: Make good music and leave the filler at home.
Rule #2: Invite fans into the experience and build a stronger relationship with them.
Rule #3: Utilize multiple revenue streams; it's not only about selling albums anymore.
Rule #4: Have we mentioned make good music, and leave the filler at home?
Rule #5: Shape your artists, or let them shape themselves publicly (Pearl Jam, U2 and Coldplay are just three examples of artists that took time to develop and are now some of the biggest acts in the world).

If the industry pays attention, it will survive, albeit in a slimmer, more efficient model than the fat-cat days of the 80s and early 90s. I'm pulling for it and so, probably, are you! Now go buy a song and stimulate the economy!

Anonymous said...

"I agree that someone should be paying Sam Moore, either the radio stations that play his music and profit commercially via an audience or else the record companies who profit by the sales of his downloads or CDs."

Sam Moore is being paid. He's being paid by the people who pay money to come see him 300 nights a year. Without radio airplay no one would pay to see him. Ask the Royal Guardsmen how much people see to pay them now. How many people paying to see Daddy Dewdrop. He had a big hit 40 years ago but hasn't been played much on the radio since.

Perhaps if Sam Moore hadn't been screwed out of his record company royalties in the 60's and invested wisely, he'd be on easy street now.

Anonymous said...

1. Muzak files for Chapter 11.
2. Sirius XM prepares to file Chapter 11.

So much for the companies that gladly pay performance royalties to foreign record companies.

BTW, they say the'll give a flat rate of 5K for up to 1.2 million in revenue. That means a good FM billing 1.2 million will pay .4% of revenues. A small AM that squeaks by on 50,000 in revenue would pay 10% of revenues.
Sounds fair to me.

Anonymous said...

>> Perhaps if Sam Moore hadn't been screwed out of his record company royalties in the 60's and invested wisely, he'd be on easy street now. <<

Yes, and wise people correct their past mistakes. Maybe in the future artists will be paid by the recording manufacturers via better contracts and another wrong can be corrected: radio stations who profit by the music played by the manufacturers and the artists will be paying as well.

Anonymous said...

Radio stations should not have to supplement the labels in paying their artists royalties. The artists are afraid or can't afford to take on their labels so they go along with the RIAA which doesn't work in their best interest. Does any of that make sense? No one is defending radio though it must be said that the labels are the crooks on this issue. Do you really trust the labels to pay you your "radio royalties" if they never compensated you for your sales royalties? I agree with Gorman. The fat cats will pay themselves first and trickle down what's left if anything.

Anonymous said...

John, I love your blog, but please stop bashing talkradio. The format has done well over the years and people like Rush Limbaugh saved AM radio, if only temporarily.

The whackjobs united on Air America... and look where they are now!

Anonymous said...

It never ceases to amaze me when lobbying giants like the RIAA can waltz up to Capitol Hill with rockstars like Billy Corgan to cry "unfair" on the radio industry. Radio's deregulation has been a nightmare for musicians (one that Corgan was fortunate enough to avoid by getting in the door with the Big Boys). Your title is apropos: two wrongs DON'T make a right. And the RIAA and the NAB both have a rap sheet a mile long chronicling their "wrongs."

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Clipping Path said...

I know you have a link to Fumbles Rehr's letter but I would like to cut and paste it for anyone who may have missed it. If any radio groups support this mouse they better get used to paying this performance tax because Fumbles has no influence on Capitol Hill.

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