What If Radio Taxes the Music Industry?

Next week I am appearing on a panel in Santa Monica (The Copyright Office Comes to California) devoted to repealing the performance tax exemption from radio. The NAB will have Suzanne Head, a representative, on the panel. I guarantee you we'll both be in agreement that any attempt to tax radio for helping the music industry make money for free is wrongheaded.

But, as we say in New Jersey, "who don't know that?"

You know why the labels are desperate to raise money. They are losing control. Their arch enemy, Apple CEO Steve Jobs, has trumped them again. Apple's online iTunes music store is now the number-two music retailer in the U.S. behind Wal-Mart by unit volume according to NPD Group.

CD sales continue to tank. Online sales still cannot make up the difference. It makes sense to them to turn to their old friend -- the radio industry -- and make up the difference.

Their argument is that radio gets free music from the labels (in spite of the ASCAP, BMI fees stations have always paid). Interesting that the labels didn't move to repeal the radio tax exemption until recently. Before that I guess radio was not getting a free ride or perhaps the labels were not as desperate.

Unable to make their businesses grow and left to their own devices, the labels have to look elsewhere. This week the NAB and RIAA have rival forces descending on the Capitol to lobby lawmakers to see it their way.

But I've been thinking.

We're looking at the issue of lifting the radio tax exemption the wrong way.

Radio should be considering taxing the music industry for playing their music.

I know the labels say radio can't live without the record business, but as Inside Radio reported recently:

(Nashville) Mayor Karl Dean has inadvertently given radio some ammunition in its fight against the move to end radio's royalty exemption by proclaiming next week "Country Radio Week" in Music City. The proclamation says "Country radio is the primary medium for exposure of country music, an endeavor that employs many Nashvillians as artists, writers and producers."

So let's fight fire with fire. Here's the plan to tax the record business for radio airplay.

1. If your music gets any airplay at all on a radio station, a charge is to be levied for taking up valuable time from, let's say, Rush Limbaugh, news or any other type of programming.

2. If your music gets played on any station, radio gets a percentage of the sales from that station's city of license market area and a blanket percentage (perhaps one or two points) for online purchases.

3. If your music makes any station's top ten, make it four points of profit.

4. If radio stations are forced to play a stiff or do a favor for a local promotion person who needs your help saving their job -- you pay the low, low price of only 5% of the sales of your highest ranked record on my playlist.

5. If you need my station to help break a new artist, an automatic "finders fee" of ten percent of the national gross sales will be distributed to every station playing the record. Hey, we never considered the risk factor to us until you made us think about it with your move to repeal our performance tax exemption. Thank you, labels.

6. If any of my employees take payola, you owe us nothing because making the acknowledgement that radio is so important that you have to bribe me to play your music is -- priceless.

7. If the artist my station played goes on tour, add an extra 5 points of profit to the nations stations that made the group popular enough to fill all these venues. You can forget giving me the usual free tickets, backstage pass, introducing me to groupies in lingerie or CDs to give away on the air.

8. If station airplay led to your artist winning a Grammy, I get an extra 1 point just for the hell of it. After all, try doing that without radio airplay.

So you see, we're looking at this thing too defensively. We have the NAB fighting the good fight but playing defense.

Maybe it's time to go on the offensive and let the labels that have enjoyed free exposure and lots of repetition to sell their products feel our pain.

The record labels are telling the radio industry the free ride is over.

I'm telling the record industry to be careful what you wish for because your royalty tax exemption could be radio's new Disloyalty Tax.

Before the cock crows twice, one of you will betray us -- and radio should devise some ways to rise from the dead and fairly tax the music industry that is truly benefiting from free radio airplay.

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