RIAA to Radio: $100 million now, $2 billion in 10 Years

Mitch Bainwol, the Chairman and CEO of the RIAA, is out of touch with the NAB.

NAB CEO and former senator Gordon Smith is assuring the radio industry that if station owners settle their suit with the music industry now instead of fighting to keep radio free of additional royalty taxes, that the radio industry will only have to pay $100 million – only.

That the $100 million would be safely protected in a legislative statute and that the Brooklyn Bridge is also for sale.

However, Bainwol isn’t making it easier for Smith to schmooze his new constituents.

He shot off his mouth to a Nashville audience recently and I quote:

“Ten years from now we will have $2 billion in revenue from [radio] listening.”

To borrow a phrase from Agatha Christie's super sleuth Hercule Poirot, "Please to reread the last line".

Who do you want to believe?

Smith, who is disingenuous at best when he allows the labels to pick your pocket for $100 million a year.

Or Bainwol, who arrogantly and accurately knows exactly what he is talking about.

Recently, I wrote a piece about how Italian radio stations were bamboozled into going for the 1% royalty tax solution. Their initial deal expired with the labels who now want – you guessed it, 2% in new radio taxes.

That was fast!

There are many issues on the table, but the important ones are:

1. Record labels should pay radio for exposing their music for free.

2. In the alternative, radio stations should charge labels to play their music if a tax is imposed by the NAB and RIAA announcing the legal phrase that pays – “Paid for by Universal Music” after every song. When labels get airplay for free, they think the airtime is not worth anything. This will change all of that.

3. Consumers want to test music – that’s what music discovery is all about on the Internet. That’s why music will be free until the labels can price it for what the market will pay. I suggest that number is 5 or 10 cents a song – the cost of a text message – and make money by volume.

4. The NAB needs a radio woman or man as CEO – someone who knows how onerous paying even $100 million a year is to most medium and small operators -- who can’t do as large consolidators can easily do -- absorb the expense as part of more debt. To consolidators, $100 million here or there is nothing – that’s why so many have been bankrupt or in financial hot water.

5. Gordon Smith is a former senator who has more compassion for his dear friend Senator Orin Hatch than he has for the industry he supposedly serves. Hatch, a musician of sort and advocate for the music industry wants a deal and look who is coming to dinner – his new favorite lobby group headed by Smith. (Remember, the beer guy who ran the NAB off course. He preceded Smith. This is not brain surgery. Get a radio person to run the radio lobby).

6. The CRB as bad as it is, is not the bogeyman that the NAB says it is. True, the CRB imposed draconian royalties on streamers. Pandora pays 50 cents of every dollar for music royalty and that’s just not right. But for years the NAB has told its members that hundreds of Congressmen are on the side of local radio operators. Even came up with some cockamamie Local Radio Patriot Act title to win support. Now, were they lying? Did they lose the support of Congress for local radio? Or does Gordon Smith unilaterally (with the help of a small group of NAB board members) decide the future for the radio industry? Either way, Smith should be fired for selling radio out the first full year he was on the job.

7. Be suspicious – very suspicious – as to why the NAB is pushing this thing now when Congress is about to change hands in November arguably electing more representatives who would be more favorable to radio's concerns. Why now just before a critical election that will likely bring more support to radio's long held position that it should not pay this new music tax? I reiterate: can you say Gordon Smith loves Orin Hatch more than he does radio.

8. Piracy is the labels' issue – I’m not feeling sorry for them. Many young performers can’t even have a shot at making it in the music industry the way the labels run things. Piracy to the labels is free promotion to artists. Ask my friend, the credible record industry analysts Steve Meyer who hit it on the head in a recent newsletter: “The only thing that will reverse the downward trend is more albums by more artists that can sell multi-platinum quantities. More Eminems, more Taylor Swifts, more Lady GaGas, more Lady Antebellums, more Susan Boyles, more Justin Biebers, etc. Imagine how much worse album sales would be down if it weren't for those artists and others who sell in big quantities. It's obvious that people still buy a lot of music in big quantities when they find value in buying an album that has more than one or two good songs. It's also obvious they have no problem BUYING hit songs in huge quantities online either. Ask the Black-Eyed Peas who have sold more than six million downloads of "I Got A Feeling (Tonight's Gonna' Be A Good Night)"”.

To word it in a way a politician like Gordon Smith might understand:

“Gordon Smith, wrong about royalties, wrong about the CRB and wrong for radio”.

And in terms the rest of us would understand, there is Rudy’s Dan Devine pumping up his Notre Dame seniors before their last home game:

“Remember no one, and I mean no one, comes into our house and pushes us around."

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