Phil Spector, who knew?
The labels are in the process of trying to eliminate radio's royalty exemption which could exceed $1 billion -- 0r 5% of radio's revenues according to Deutsche Bank's Drew Marcus.
This would be tantamount to murder for radio stations.
The royalty tax would help cripple a declining radio industry at exactly the wrong moment in time.
By pushing for this money the record labels would also be committing suicide because radio has options to cripple them if it has the guts and because holding your best ally hostage makes no sense.
If radio tries to mitigate any new tax on music by seeking to lower the fees it pays BMI, ASCAP and SESAC, that hurts the artists.
But if radio operators swallowed hard and made the transition toward music that was not digitally protected and not aggregated by the big four labels, it would be the final bullet in the "brains" of the record industry.
Let the record show the wound would be self-inflicted.
Let's be clear.
The radio industry probably doesn't have the guts to stand up the the labels. So you can expect them to go crying to Congress. That will get them nowhere. Radio is not the power it once was. Playing nice will not work.
It's time for civil disobedience.
I can assure the radio industry that the next generation would not think any less of you if you didn't play the same 25 records over and over again -- as if it were possible for them to think less of the radio industry at this point.
The labels are in trouble and their response to all their problems has been to hunker down and fight.
The radio industry's strategy has been to run away from the fight -- pissing and moaning all the way.
This is the big showdown at the Not-Okay Corral.
While the record industry sues its customers and stages a stickup of its best friend (radio), young consumers continue to go elsewhere.
When I first arrived at USC a good number of years ago, I was shocked by all the pirating to which students openly admitted. Today, stealing music seems to have grown worse. Young people have many different ways to access music for free. From Russia with love -- at ten cents or less per tune. From bit torrent sites originating in countries like the U.K. and without digital rights management (DRM). Very appealing.
Then there's file swapping -- file sharing, burning CDs and, as a last resort, buying songs for 99 cents from Apple iTunes store.
Now Amazon is offering non-DRM protected music for 89 to 99 cents a download -- or as we say in the industry, Universal and EMI's way to get back at Steve Jobs for establishing 99 cents as the price point of legally downloaded music. They represent only two of the big four labels making songs available on Amazon. (As an aside you may remember that these labels fought Jobs to win variable pricing so some tunes could cost less and presumably newer hits more, but Jobs wouldn't have it. Now it's interesting that their Amazon experiment has no price higher than 99 cents a download. Lucky for them because young consumers think 99 cents is getting to be too much for a download).
The record labels' strategy is both masochistic and sadistic.
It's insane and it's going to backfire.
Call me names. Tell me I'm spending too much time with college kids or just plain go into denial.
But here's how it is all likely to unfold.
1. Music piracy will continue to increase. Sue all you like, they'll steal more.
2. If the labels can't make money on 99 cent downloads now, they're in for big trouble later because the 99 cent price point is headed down and, ironically, EMI and Universal are leading the way with their Amazon experiment.
3. Labels should be careful what they wish for because if they impose more royalty taxes on radio, it just might be enough for spineless radio executives to grow a -- well, a spine. (Unfortunately, you can steal a radio company's best people without too much outrage but when you start eying 5% of their revenues to pay a royalty tax, look out!).
No matter what transpires radio stations and record labels will continue to have less sales power going forward -- precisely why the current desperate strategy of the music industry is nothing more than murder-suicide.
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