NAB’s Phone-y FM Chip Diversion

Before this piece is over I will try to offer you some rational and strategic conclusions about the current National Association of Broadcasters plan to needlessly expose radio stations to $1 billion in added music royalties annually to settle with the RIAA.

I’m going to name names.

Delve into possible motivations for you to consider and then offer a prognosis for what is likely to happen.

First, an update.

Any legislative action on this issue is dead while Congress returns home to campaign for reelection.

What’s ironic is that what the radio industry is likely to observe after election day is a Congress more sympathetic to the interests of the radio industry. Of course you know that, right now, Congress is about split evenly between defending the interests of local radio and standing up for the music industry.

Here’s what is likely to unfold:

You see NAB CEO Gordon Smith stand up before the NAB Radio Show and champion FM chips for all cell phones. Now that’s a popular issue with radio execs. FM chips are already in many cell phones and would have to be unlocked.

But the Consumer Electronics Association is bandying around a new study that shows “most” consumers surveyed are not interested in having FM tuners in phones and 80% do not support a government mandate to force manufacturers to put these chips into mobile devices.

I’d say the CEA got their money’s worth out of their own study. However, I’d prefer to use mine.

Look around.

See which young (or increasingly older) mobile device user is craving an FM chip in their mobile phone. Where some carriers offer it, it is not making a big splash. Where Apple features it on the Nano – the earth has not moved.

Can it hurt radio to have an FM chip on mobile devices?

Probably not.

Will it make even a small difference in radio listening?

Not likely – for all the reasons we discuss in this space not the least of which consumers use their phones differently than a Walkman and have different attention spans than portable radio carriers of the past.

And I’m not even mentioning the tremendous tide of repeater radio, syndicated and voiced tracked non-local programming. I guess I just did.

But the NAB under one of the most dangerous CEOs it has ever had – former Senator Gordon Smith – has retreated from his public insistence that radio had better make a deal with the record industry before the evil CRB gets involved.

That went over like a lead balloon with radio people – the vast majority of whom are against the extra royalty tax even if they can’t find one leader with the balls to stand up for them and lead the fight.

The NAB knows this.

Sly Smith is going to deliver a favor to his old buddy, Senator Orrin Hatch, because in my opinion Smith has more loyalty to Hatch than he has to a radio industry he hardly knows and certainly doesn’t understand.

Sly Smith is an able opponent.

That in and of itself says a lot. Your NAB CEO is radio’s opponent.

What’s up with that?

Thus, the talk you are hearing and reading about to divert attention away from this unpopular maneuver to settle with the music industry on radio’s dime by waving the FM digital chip flag.

Radio broadcasters are desperate for help to get into new media. They erroneously think streaming music on a cell phone is the way. The NAB is fueling that desperation. This guy Smith is good – at politics.

Gordon Smith is playing the FM chip card to divert attention to what he and the NAB are really going to do.

Here are my predictions – and they are in print and available until the end of time over the Internet. I’ll stand up. Hold me accountable. So let’s see if I am reading the politics and strategy right.

1. The FM chip issue will get nowhere in spite of the rah-rah talk by Smith and the NAB at their convention.

2. The move will be on to make a deal even as Congress leans more in the direction of radio’s interests after the November election.

3. No radio leader will step up to rally the industry’s interests – they are all weak. Advantage: Interloper Smith.

4. The NAB will cloak a vote on this issue with their executive board as being democratic by asking their "duly" elected representatives to poll their constituents. The NAB will never allow a direct vote by all radio owners using a third party accounting firm (NAB represents only 50% of America's radio stations) because the issue of more royalty taxes will overwhelmingly lose with radio people.

5. Cumulus, Clear Channel, Citadel and the other not too helpful owners will suck it up and support their man Smith. These highly leveraged companies can simply throw it on top of the other expenses that they routinely take on such as Farid Suleman’s new digs in a high-end Miami office building – even as he is squeezing the last penny out of employees and firing talented people.

6. The NAB will purport that the people’s will shall be done and that the radio industry wants to make peace with the record labels and then you can start looking to pay your share of the $1 billion. Did I say $1 billion? Read on.

7. $1 billion will go up to $2 billion and beyond once the cat is out of the bag. Bank on it.

The NAB has turned on its own before – successfully.

At the last minute, they helped attach a provision of the Telecommunications Act of 1996 which was aimed primarily to regulate the phone business. That add-on that even very aware radio people didn't see coming was the legislation to make radio consolidation happen. You see where that got us.

So, I call out the NAB for being the Benedict Arnold's that they are even if they like to hold warm and fuzzy radio conventions and rally the troops around patriotism, motherhood and FM chips in phones.

And I say this sadly but with all due respect – I really do – the radio industry has only itself to blame for allowing the NAB to hijack their future (again) without even a whimper of opposition from any radio executive resembling a leader.


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