Repeal the Music Tax Exemption for Repeater Radio

The Clear Channel firings are over and what we're hearing is that another 500 or so positions will be eliminated as the private equity firms of Lee Capital Partners and Bain Media have their way with the radio industry.

Tuesday was a tough day for anyone who loves radio and its people. I received hundreds of emails -- many of them touching -- about the disrespectful way the dynamic duo of Lee & Bain and Mark Mays has handled the firings.

Reports that even loyal respected veterans were given the bad word the way everyone else got it and told not to return to their desks.

I mean, was that really necessary?

Is that the way to discharge a dedicated worker?

These Clear Channel people have a way of making bad worse because they are uncaring and unqualified to be running the largest radio group in the world.

I mention all of this -- not to cause more pain -- but to emphasize that the justifiable anger we are all feeling right now is not going to save the radio industry.

In fact, nothing can save the radio industry -- from itself.

I still plan to call out and expose the hypocrisy of these third-rate operators where warranted -- they seem to provide no shortage of opportunities. But my goal is also to offer ways in which radio people can comeback again and suggest strategies to save what's left of the industry.

Because of the founders of consolidation radio is not the future. New media is. But there is no reason to gut an industry that has more resources than all of new media put together for providing content and managing marketing in the digital world.

The personal game plan will follow -- as promised -- within a couple of days. Ways individuals can get a leg up on securing their next media job.

But today, I'd like to float a strategy for responding to the bad decisions being made by consolidators.

One excellent opportunity is to use the fight between the record industry and radio to act as a deterrent to radio consolidators to continue to ravage local radio.

Congress is the focus -- and there is increasing support for the record labels on this issue. The NAB has its hands full trying to fend off the music industry on this issue. It's only a matter of time.

I used to think that the labels had no business asking for repeal of the radio performance tax exemption. After all, radio made the hits that made all the money for record labels.

Radio owes records nothing.

If anything, it's the other way around.

But not so if consolidators are going to try to have their cake and eat it too. The nationalization of radio by Clear Channel will not help prevent repeal of the music tax.

If Clear Channel and its partners want to redefine broadcasting from local in nature to Repeater Radio, then I am proposing a way to use the exemption tax battle to hit Clear Channel and other national consolidators where they live.

And this plan is good for smaller, local operators. That would win a lot of support in Congress.

Basically, Clear Channel should be careful what they wish for -- especially making local radio a national repeater of syndicated programs on a larger scale than ever imagined.

With that in mind let me outline the basis of a proposed agreement with the record industry on repeal of the radio performance tax.

Only Large Groups Pay the Tax

Look, the weakness in radio's argument to avoid the levy is that radio has become so corporate, so big, so profit driven.

It's no longer about the little group of stations broadcasting locally and choosing music that appeals to local listeners. Of course, radio stopped allowing local program directors to pick the music after consolidation began.

Remember the scam that consolidators tried to pull on the labels where the labels would pay millions to find out which records were added to station's playlists each week -- an insignificant few hours before the music trades reported it for free? For this, consolidators gave the labels access to the consolidators program directors.

I don't think exempting radio from the performance tax was designed for Clear Channel's large number of stations or for that matter to help any of the other major consolidators save on expenses.

Now that Clear Channel is leading the trend away from locally operated stations, there is no need to give them the performance tax break.

After all, Ryan Seacrest can play only about 30 hits over and over again. The titles won't vary by local market because Seacrest's show will be beamed by satellite to Clear Channel stations in an effort to save money.

Keep in mind that Clear Channel will build other national shows for local distribution around baby Ryan Seacrest's for every format.

Why does Clear Channel, then, need an exemption from the music tax?

This is the best way to let Clear Channel feel what will be great pain going forward for abandoning the local radio model that has worked so well for decades. But it's more than just revenge which gets you nothing. It's shrewd politicking.

Tie in local with a tax break -- that's All American.

In essence, end the performance tax exemption for consolidators who own large numbers of stations.


Retain the Music Tax Exemption for Local Operators

Radio can work to the advantage of the record labels and music industry if its playlists reflect local popularity and musical diversity. That train left the station a long time ago in radio -- much to its detriment.

But a compelling case can be made to legislators who might be willing to vote for repeal of radio's exemption if local stations use playlists comprising 90% of its music chosen by local program directors and certified by local management.

Additionally, any radio station that employs local talent 90% of the listening week would be exempt.

Again, consolidators would not be eligible because they have moved toward nationalization of radio. Decisions are being made for their satellite delivered programs by one person and no local djs will play the music.

Consolidators do not deserve the music tax break.

Smaller groups of locally operated and staffed stations need the break.

This is an argument that could resonate loudly with Congress.

Tie Music Tax Exemption Into Re-regulation

Radio has the best chance of seeing some re-regulation in the Obama administration. This is not a slam dunk by any means and may not happen at all. But, on January 20th the potential for revisiting big behemoths monopolizing local radio stations is at least up for discussion.

So, I would propose that owners who operate 28 FM stations or fewer should not be charged the tax in the event that re-regulation is enacted.

You can make an argument for helping smaller stations save money if they are committed to local communities.

It's a harder sell to reward Clear Channel and other consolidators who are not local and plan to have less local input into programming.

Include a Provision for Internet Radio

Since terrestrial radio has an ever decreasing viability as a growth medium, protecting radio broadcasters who want to start Internet streams should be examined.

It makes sense to encourage broadcasters to grow their music brands on the Internet and for those who do so -- with local sites -- the exemption would apply to that endeavor as well.

I believe by the end of, say, eight years of an Obama administration, radio will be non-existent as a viable medium. Now is the time to help local broadcasters or national groups of locally operated and staffed stations start making the transition to the digital future.

This is fair.

Smart business.

And important.

In the past, I've never approved of the copyright rates that are charged Internet broadcasters. They are grossly unfair. They discourage entrepreneurs from helping to grow the digital music space. And, they are a blatant attempt by the record labels to stifle a medium that they desperately need to be strong.

I'd consider some relief to Internet broadcasters who do not own radio stations as they are also the future of what we formerly called music radio.

It's going to be important from now on to fight the premature decline of radio and the extermination of thousands of careers by outsmarting the PE-backed money partners.

One way is to make every move that destroys local radio have a significant consequence.

While Clear Channel and the others believe the system exists to help them turn one dollar into many dollars, federal regulations do not have to support such lunacy.

In fact, targeting the music industry's initiative to get Congress to repeal the performance tax exemption for radio is an excellent place to start.

If Clear Channel does not want to be locally operated...

If they don't want to have local PDs pick the music and local djs play it...

If they are going to beam national shows to save money rendering the intent of the music tax exemption useless in the era of consolidation...

Then, they should pay the price with higher costs for what little diversity in music they feature.

It's Clear Channel's monopoly board and for a long time they have been allowed to do what they want.

But it doesn't mean that the federal government has to play their game.

Support innovation and entrepreneurship.

Discourage nationalization of radio.

Repeal radio's music tax exemption for Repeater Radio.

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