Radio's Last Critical Decision

To quote that great American philosopher Rick James -- "It's such a very freaky scene".

Friday, the NAB was outed for behind the scenes jockeying in Congress as the House took up a bill that would simply allow Internet streamers to continue negotiating with the record label's representative, SoundExchange, in an effort to try and resolve the dispute over royalty payments.

The bill introduced late Thursday was necessary because Congress is headed for recess and law requires this enabling legislation while Congress is away from Washington because the parties are seeking a statutory license.

It doesn't guarantee a thing -- just the ability for the two sides to talk to each other. It's not like the labels are negotiating with Mahmoud Ahmadinejad.

I'm sure you get that the bill was simply permission to keep talking.

Here's what the NAB tried to sell everybody:

"NAB has concerns related to Congress attempting to fast-track a bill introduced less than 24 hours ago that could have serious implications for broadcasters, Webcasters, and consumers of music. NAB spent more than a year trying to work out an equitable agreement on webcasting rates, only to be stonewalled by SoundExchange and the record labels. We will continue to work with policymakers on a solution that is fair to all parties."

Of course there was nothing in the enabling bill -- you know, the one that lets both sides try to resolve their differences -- that would prevent traditional broadcasters from reaching their own fair rate agreement if that became necessary. Satellite radio already has an agreement in place with SoundExchange -- a pretty lousy one at that.

The NAB's actions did not sit well with those interested in getting past the labels' insistence that Internet streamers -- the ones with the smallest audiences and fewest resources -- pay the highest fees.

Luckily, the bill passed the House by a narrow margin and went on to the Senate where it was also expected to pass.

In the world of lobbying, the NAB will back down, shut its mouth and work behind the scenes because NAB is supposed to have enough sway with Congress to prevent a repeal of the performance exemption that the labels are seeking separately. It sure didn't look like the NAB had too much influence over the House Friday. It's not good for them to look like a loser in the House.

Allowing, encouraging and enabling Internet streamers to compete on a fair basis with radio is absolutely in the radio industry's best interest. Let me tell you why.

Radio is dying with its older listeners.

The next generation has checked out and become addicted to the Internet and mobile access while radio let them get away. It's too late now to bring them back. It's like scattering the ashes of a departed friend all over the Rocky Mountains and then trying to get the ashes back into the urn later. Impossible.

The NAB is by and large a men's social club.

That worked okay before consolidation because there were so many different people who came together in the interest of broadcasters. But since consolidation, don't think the NAB president doesn't know who he serves -- the handful of consolidators with all the stations, power and money.

It's getting ugly out there -- to borrow a phrase from CNN's Jack Cafferty. The handful of robber barons who are running the radio industry into the ground are afraid of the Internet. That's how ill-informed they are.

Don't believe me?

Name one consolidator -- just one -- that spends more than 5% on Internet broadcasting and mobile content. And as I have said many times even 5% is not enough at this late date.

Radio has called it wrong on a number of critical strategic moves.

1. Consolidation -- a land grab for the few who then wound up proving to everyone that they didn't know how to run a public company even with a near monopoly. NAB was instrumental in getting consolidation tacked on the 1996 Telecommunications Act behind the scenes at the last minute.

2. HD Radio -- a technology that you and I heard at many NAB conventions in experimental stages ages ago. If the arguing stopped over which system and who would eventually prevail, it might have been an option back then. Before consolidation, maybe the owners who could only have 30 or so stations would have seen HD sub channels as an idea to invest in. Turned out to all fluff and PR and the biggest detractors turned out to be the very consolidated groups who to this day fail to invest any more than chump change in programming HD channels. NAB sat on its hands on this issue.

3. More Accurate Audience Measurement -- Missing in action as broadcasters had a food fight with Arbitron because some of them didn't like Arbitron. This embarrassing episode setting radio back to the days of Fred Flintstone has left the industry with the antiquated diary system, politically motivated lawsuits pandering to minority interests and an advertising community that is both spooked and willing to regurgitate every last negative word in future radio negotiations. NAB? MIA.

Let's not be too hard on the NAB. They are what they are -- the voice of the powerful radio interests and as one of my readers put it "The NAB has a history of trying to kill what it doesn't understand".

Understand this.

Terrestrial radio is being replaced by the Internet and mobile devices every day as new listeners come of age. Terrestrial radio is beginning to decline because it has no growth potential -- no next generation.

So you don't fight the Internet. You get into the Internet.

That's what they don't get -- radio companies are going down hard now if $1 share prices are any indicator (and that's their main barometer).

Radio execs can't be faulted for not wanting to hand the competition their revenues and audiences on a silver platter.

The paradox is that Internet radio is not -- I repeat not -- the competition. Just as radio got it all wrong for the past 12 years thinking satellite radio was their competition.

Internet radio is the future -- their future.

Get your lobby group working on that or else you'll miss the last train to Profitsville.

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