A Record Label Against Performance Royalties

One of my former USC music industry students, Meredith Jung, sent me a quick note the other night to tell me that a Nashville start-up music label has come out squarely on the side of the radio industry in its fight against paying a music tax.

I thought you would appreciate the logic and clear thinking of this entrepreneur and hope that it will get everyone including the over anxious NAB to stand back and take a much needed time out.

The NAB for years has been selling soft soap about how the radio industry has nothing to worry about in the music industry's attempt to tax the very radio stations that give them free airplay and exposure for their new acts.

Then, all of a sudden with the hiring of a former United States senator (Gordon Smith) as NAB head and pressure from a handful of lawmakers on radio (not the labels), the NAB appears to be turning tail and running from this fight.

The NAB now says, in my view, never mind what we’ve been feeding you, we had better make a deal with the evil record labels before they send us to the big bad wolf (the CRB) and we lose control of what we’ll actually be paying.

While imposed rates are a possibility, I must tell you that I cannot find one person close to this situation who thinks radio needs to settle right now this minute. The NAB says all it is doing is floating a trial balloon, but even The New York Daily News a few days ago was making it sound like a deal is near.

This is curious because what gives the NAB the power to negotiate for an entire industry and then impose the new tax? It represents only 50% of all radio stations.

Second, the 1% additional that stations are supposed to be giving up to the greedy labels can easily be 5 or 10% of profits (that’s profits not revenue) at a time when profit is hard to come by.

One more quick point before I tell you about the record label that is on the side of radio broadcasters in this fight.

The record industry should pay radio – and I’m going to offer my plan for your inspection next week.

The Savannah Music Group is against its own trade association, the RIAA, the way radio should be against its own trade association on this matter, the NAB, arguing the proposed additional royalty tax that would force radio stations to pay performers and record labels would have unintended consequences for struggling artists – namely less chance of getting radio airplay.

Now, that record label is talking the way radio stations should be talking.

That’s what the NAB should be selling the RIAA in negotiations instead of treating the royalty tax like a health care compromise.

Independent and new artists could suffer from this tax thus making the benefits of a quick radio tax outweigh the risk of making it harder to break new acts.

Radio hasn’t been an easy place to get airplay over the past decades. The labels and program directors have kept the playlists tight. However, some stations may wind up augmenting their lists with non-licensed music and other measures that would make the labels rue the day they hit their brethren with this levy.

RIAA is anxious to get a deal done. Its constituents are in short pants. RIAA is leaning on Congress where it is fair to say it has done a better job than radio’s NAB rallying support. If I am wrong, then why is this sellout even being considered?

Especially now as fall elections will likely change the mix of lawmakers to perhaps a more favorable radio core of supporters.

Look at this quote in The Nashville Business Journal:

“It’s tough enough now to get songs on the radio as it is,” Savannah President Dave Gibson said. “We’re trying to get this company off the ground, and the smaller the playlists and the more stations that switch formats, makes it harder.”

Gibson wants an “opt-out” provision.

For record labels!

“Should a performance royalty be mandated by Congress, artists and labels must have the opportunity to opt out. If not, the major record labels win, and the songwriters and artists lose."

How about Dave Gibson for CEO of the NAB!

This guy makes sense and if this label exec can so effectively articulate yet another reason to give radio a break on royalties, why isn’t the NAB embracing him? March him up to testify before Congress. Think he may open a few eyes?

Instead, the fix is on to do a deal that radio will never live down.

The Internet didn’t kill radio.

Neither did Steve Jobs.

The NAB has done more to cause the mess that radio is in today than anyone else.

Consolidation – it helped tack it on the Telecommunications Act of 1996. Most radio executives never saw it coming.

And now, the gift that keeps on giving radio’s profits to greedy labels.

Lew Dickey can write this tax off as something else to finance and so can the other selfish radio groups among us.

But if the radio industry is smart – better rise up against your own trade association like Gibson is doing – the one selling you out while smart people everywhere from music industry students to independent label execs know that the music royalty tax for radio doesn’t just hurt radio but hurts everyone who isn’t a big four label.

If you want more of what consolidation brings you, sit and wait for a deal to be made.

If you want to take the decision away from Farid, Hogan, Dickey and the NAB, it’s time to not just sit there -- do something!

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