The Politics Of Appeasement
The NAB Radio Board Is Selling Fear And Must Be Stopped
A message from Radio Ink Publisher Eric Rhoads
The NAB Radio Board Is Selling Fear And Must Be Stopped
A message from Radio Ink Publisher Eric Rhoads
On September 27, 1938, Neville Chamberlain, then Prime Minister, spoke to the people of England, saying, "After my talks with Herr Hitler ... we cannot in all circumstances undertake to involve the whole British Empire in war simply on her account. If I were convinced that any nation had made up its mind to dominate the world by fear of its force, I should feel that it must be resisted."
Neville Chamberlain did a deal with the devil in the interest of unity and peace. He wasn't willing to step up and face evil, which ultimately came anyway.
Gordon Smith's NAB is about to sell out the radio industry, and our industry is buying his reasoning in the interest of avoiding something worse. Smith is telling you the deal on the table now is the best deal possible, and that we will face retribution from Congress and larger fees in the future under the unpredictable Copyright Royalty Board. He is telling you all the good reasons we should go forward and all the good things that will come from giving in to MusicFirst.
But other reasonable alternatives exist, and slowing the process now won't necessarily result in the other awful alternatives.
Selling Fear
Radio and the NAB are made up of good people, and Washington is made up of professional politicians who are masters of their trade. Senator Smith has talked reasonable people into buying his solution and has them believing that if we don't take this deal, we are doomed. He understands the depths of politics, but should we trust the NAB's recommendations? Smith is selling fear, and the importance of acting immediately to avoid tragic consequences.
Last year Congress told us we could save the country by signing a stimulus bill. They sold fear to facilitate speed. These are the ways of politics.
To be clear: I'm not questioning Senator Smith's integrity, or his belief in what he is promoting. But I don't think we should just accept his solution as the only answer and trust blindly in his experience in a political world we don't claim to understand. We have too much at stake.
Selling Unity
It appears that anyone who doesn't agree with the NAB's plan is a victim of "conspiracy theories" or is not working in the interests of "unity." These are terms we're accustomed to hearing from politicians who like to reposition points of view other than their own.
Unity is valuable and important. But on this, there is no real unity. And there won't be until a proper process has been followed to engage the entire industry.
Selling Benefits
It's the game of politics. "Support me on this, and I'll give you what you want." The NAB is selling us on the benefits we will receive if we negotiate with the labels: items like reduced streaming fees and, of course, the famous radio-on-every-cellphone.
Yet there is no guarantee these things will be built into the law. Even if they are, I still don't believe it's a win worth the fees as they stand. Though some allude to a study that said radio could reap $300 million in additional revenue by doubling TSL through cellphone use, that's just another spreadsheet myth.
Almost all cellphone listening takes place with headphones -- the tiny speakers on most phones can barely be heard. PPM won't record this listening, nor are panelists likely to plug their headphones into a PPM bridge device. So even if we do get more listening, it will be difficult to monetize.
Remember, we were promised PPM would significantly increase radio revenues. Looked good on paper, but has it come true?
Who Does NAB Really Represent?
The National Association of Broadcasters represents roughly 4,000 radio stations, or about one-third of commercial stations. The Radio Board of about 30 people has been in negotiations intended to lead to legislation, which, under the proposed plan, will saddle radio with taxes that can be changed at the whim of any future Congress.
My fear is that the point of entry, "under 1 percent," will grow over time. Increases will surely be aggressively sought by record labels that desperately need revenues and want revenge for radio's highly researched playlists, lack of new-music airplay, and refusal to back-sell over all these years.
Why Now?
This is one of those rare moments when the NAB must not be allowed to negotiate on behalf of the entire radio industry. I know they are using the terrible Performance Rights Act as a scare tactic, saying it could be quietly slipped into a bill on Christmas Eve. But it takes only two senators to put a hold on a bill, and opponents to this NAB effort tell me at least two senators are willing to hold the PRA. What's the hurry? Why the rush? If the balance of power in Congress changes today, in a direction that would supposedly favor radio, why now?
Though the NAB has offered talking points about the dangers of being an "industry of no" or "hell, no" to a performance tax, and though many have accused me of dividing the industry, I refuse to acquiesce in the interest of the appearance of unity.
"Unity" in this case means roll over and play dead. Packaging opposing voices as "destroying unity" is divisive. Thousands of radio stations whom the NAB does not represent (and many it does) think this proposal is a bad idea, and will be labeled as destroyers of unity. We don't have to be an "industry of no" to get a creative solution.
Neville Chamberlain did a deal with the devil in the interest of unity and peace. He wasn't willing to step up and face evil, which ultimately came anyway.
Gordon Smith's NAB is about to sell out the radio industry, and our industry is buying his reasoning in the interest of avoiding something worse. Smith is telling you the deal on the table now is the best deal possible, and that we will face retribution from Congress and larger fees in the future under the unpredictable Copyright Royalty Board. He is telling you all the good reasons we should go forward and all the good things that will come from giving in to MusicFirst.
But other reasonable alternatives exist, and slowing the process now won't necessarily result in the other awful alternatives.
Selling Fear
Radio and the NAB are made up of good people, and Washington is made up of professional politicians who are masters of their trade. Senator Smith has talked reasonable people into buying his solution and has them believing that if we don't take this deal, we are doomed. He understands the depths of politics, but should we trust the NAB's recommendations? Smith is selling fear, and the importance of acting immediately to avoid tragic consequences.
Last year Congress told us we could save the country by signing a stimulus bill. They sold fear to facilitate speed. These are the ways of politics.
To be clear: I'm not questioning Senator Smith's integrity, or his belief in what he is promoting. But I don't think we should just accept his solution as the only answer and trust blindly in his experience in a political world we don't claim to understand. We have too much at stake.
Selling Unity
It appears that anyone who doesn't agree with the NAB's plan is a victim of "conspiracy theories" or is not working in the interests of "unity." These are terms we're accustomed to hearing from politicians who like to reposition points of view other than their own.
Unity is valuable and important. But on this, there is no real unity. And there won't be until a proper process has been followed to engage the entire industry.
Selling Benefits
It's the game of politics. "Support me on this, and I'll give you what you want." The NAB is selling us on the benefits we will receive if we negotiate with the labels: items like reduced streaming fees and, of course, the famous radio-on-every-cellphone.
Yet there is no guarantee these things will be built into the law. Even if they are, I still don't believe it's a win worth the fees as they stand. Though some allude to a study that said radio could reap $300 million in additional revenue by doubling TSL through cellphone use, that's just another spreadsheet myth.
Almost all cellphone listening takes place with headphones -- the tiny speakers on most phones can barely be heard. PPM won't record this listening, nor are panelists likely to plug their headphones into a PPM bridge device. So even if we do get more listening, it will be difficult to monetize.
Remember, we were promised PPM would significantly increase radio revenues. Looked good on paper, but has it come true?
Who Does NAB Really Represent?
The National Association of Broadcasters represents roughly 4,000 radio stations, or about one-third of commercial stations. The Radio Board of about 30 people has been in negotiations intended to lead to legislation, which, under the proposed plan, will saddle radio with taxes that can be changed at the whim of any future Congress.
My fear is that the point of entry, "under 1 percent," will grow over time. Increases will surely be aggressively sought by record labels that desperately need revenues and want revenge for radio's highly researched playlists, lack of new-music airplay, and refusal to back-sell over all these years.
Why Now?
This is one of those rare moments when the NAB must not be allowed to negotiate on behalf of the entire radio industry. I know they are using the terrible Performance Rights Act as a scare tactic, saying it could be quietly slipped into a bill on Christmas Eve. But it takes only two senators to put a hold on a bill, and opponents to this NAB effort tell me at least two senators are willing to hold the PRA. What's the hurry? Why the rush? If the balance of power in Congress changes today, in a direction that would supposedly favor radio, why now?
Though the NAB has offered talking points about the dangers of being an "industry of no" or "hell, no" to a performance tax, and though many have accused me of dividing the industry, I refuse to acquiesce in the interest of the appearance of unity.
"Unity" in this case means roll over and play dead. Packaging opposing voices as "destroying unity" is divisive. Thousands of radio stations whom the NAB does not represent (and many it does) think this proposal is a bad idea, and will be labeled as destroyers of unity. We don't have to be an "industry of no" to get a creative solution.
Do you realize that a 1 percent royalty will cut into your profits by about 5 or 6 percent? Furthermore, for the last 50 years, the NAB has stated it has no basis in rate determination. What has changed, and why is it involved in determining the rate now? Is it NAB that is dividing the industry?
Everything Will Be OK
The other concern is that the specifics of a deal -- in the sense of exact legislative language -- are not on the table. Some have told me, "Don't worry, Eric, the NAB is going to work in radio's best interest, and the definitions and specifics can be worked out later."
Sounds like the health care bill: "We have to pass the bill so you can see what's in it." Sorry, if you are in politics today, I don't trust you. Give me the exact specifics before you ask me to agree. I don't want the government making decisions about royalty rates.
Are We Repeating History?
MusicFirst represents the four major record labels (three non-U.S.), negotiating on behalf of themselves and, they claim, recording artists. As copyright holders, the labels will keep at least half of any money collected, and artists will divide the rest. And for labels trying to recoup lost revenues, 1 percent is just a foot in the door.
There is a better way.
Frankly, we never should have gotten into this position, and suggesting anything other than a hard line was a strategic error. NAB insists we should be talking because that's what people in Washington do. Now the cat is out of the bag, and perhaps fighting royalties is indeed a no-win battle, and the "hell, no" approach can no longer work.
In fact, let's assume negotiation is the only option. If we must negotiate, we should insist on a system that is in the best possible interest of both radio and artists, as well as the labels. The current proposal benefits only the labels; it can't benefit radio, because it is too easily subject to change.
Here is what I propose:
1) Demand a vote.
If the NAB is so confident that this is in the best interest of the radio industry, then they should agree to putting it to a vote by the full radio membership. An industrywide vote would obviously be even better, if it were possible to orchestrate, but an NAB member vote is a great start.
This is the biggest, most important issue to hit the radio industry since the Telecom Act of 1996.
Too big to rely on the wisdom of the NAB Radio Board alone. Frankly, it's a good idea to take these board members off the hook if they are wrong.
Some may suggest we just don't understand how things are done in Washington, but it simply doesn't matter. The NAB, its Executive Committee, and the Radio Board members are acting on behalf of thousands of radio stations who are not members, and stations who are members in opposition.
NAB radio members should DEMAND a vote on the specifics of this deal, conducted and audited by an independent third-party accounting firm. This is sea-change legislation.
2) Base a proposal on a proven working model: a consent decree.
Royalties may indeed be inevitable. But rather than rushing into this proposed NAB agreement, let's start over and get the right kind of deal done, using the model that has worked for the writers who use ASCAP and BMI.
We don't want Congress setting our rates. Therefore we need to involve the courts and call for a consent decree that can be negotiated in the courts and that cannot be changed at the whim of Congress.
Let's set up an independent industry body like the Music Licensing Committee, whose members deeply understand music-licensing issues and represent the industry as a whole. The MLC is currently fighting to reduce fees through the court system, fighting over a mere million extra dollars, and yet with this proposed term sheet we're about to get saddled with $120 million more in estimated fees (and that's just the beginning). We need a group like the MRC working on radio's behalf and fighting over every million.
3) Recast the negotiations.
MusicFirst is funded by and represents the record labels, and I don't believe it is working in the best interest of artists. It wouldn't be easy, but if there is real concern for artists, radio can become the hero by insisting that an independent third party be appointed to truly represent artists' interests, separately from the labels. As it is, artists are under pressure from their labels, and many are afraid to speak freely.
If royalties come to pass, they would almost inevitably be collected and distributed by SoundExchange, which handles performance royalties for other audio media. But unlike ASCAP and BMI, which are nonprofit organizations with published and fixed operational fees (SESAC is for-profit and operates under a different model), SoundExchange can decide what expenses to charge and how to distribute the money, with no oversight. Labels will receive 50 percent or more of the fees collected, and artists will have no choice but to rely on SoundExchange for their share.
When ASCAP became too large and demanding, BMI was created to give songwriters a choice. All negotiations should DEMAND that there be TWO nonprofit entities created to administer performance royalties, so both artists and independent labels will have a genuine choice.
Don't Give In Because It's Unpopular
There are moments in one's life when once must not be a Neville Chamberlain, when one must follow one's heart to do the right thing.
There are some whom I know are going along with things they don't believe in because they don't want to make waves, or because they can live with this plan as long as it doesn't go further, or because they are leaving their company in a year and have made their money, or because "Gordon says it's a good plan."
As a broadcaster, you will look back on this moment in time, wishing you had taken a stand, been willing to make unpopular decisions, and become more involved in this battle. When you're writing those monthly checks, when you see the percentages rise over the years, when you see the labels getting rich and the artists not receiving their fair share, when you see the onerous restrictions and requirements placed on your airplay, you will wish you had personally taken a stand.
I cannot change a thing. You can.
Not Clouded By Self-Interest
It's been claimed that I have no skin in the game, or that I simply don't understand because I haven't owned radio stations since the 1980s. It's true: I have nothing to lose by opposing these negotiations. Be thankful my opinion is not being clouded by the rhetoric of fear. I have no ax to grind.
In fact, I am standing in opposition to many women and men whom I highly respect for their love and passion for the industry. I respect their judgment and intellect, and I don't cherish the thought of looking them in the eye over this issue.
I know they are voting yes because they deeply believe Gordon Smith is offering them the right answer. I'm risking my own credibility in the eyes of these industry leaders because I'm taking a stand in opposition. I could quietly disappear into the background, which would be the politically expedient thing to do. But this does not smell right to me, and the NAB is pushing too much, too fast in the name of keeping this out of the hands of the CRB.
I'm not buying it, and I have to speak my mind.
Become Skeptical
By the end, the terms won't end up anywhere close to the 1 percent now on the table, nor will the electronics industry stand for legislation to put radios on all phones. The seductive benefits we've been sold won't materialize, and the proposed percentages will grow to get the deal done. Even now, MusicFirst continues to bloviate about how NAB already agreed to something else.
It's time to become a skeptic and seek alternatives to the flawed NAB term sheet.
I am not anti-NAB, but I strongly disagree with them this time. My only interest is in making sure you see both sides of the story before you sign your future away. Long after Gordon Smith has moved on, you'll be living with the outcome of these negotiations.
It pains me when I see stations resigning over this issue, and the reality is that NAB could survive without radio's membership dues because of its massive spring convention revenues. We need them more than they need us, and their service to our industry is ordinary invaluable.
But this isn't one of those times, and you need to find your own personal way to make your voice heard, whether or not you are an NAB member.
Today it is expected that the people will take back a government that many feel wasn't working in their best interest. Ultimately, the people have a voice. The NAB needs to listen to the voice of the radio industry.
Your voice.
Demand a vote.
Everything Will Be OK
The other concern is that the specifics of a deal -- in the sense of exact legislative language -- are not on the table. Some have told me, "Don't worry, Eric, the NAB is going to work in radio's best interest, and the definitions and specifics can be worked out later."
Sounds like the health care bill: "We have to pass the bill so you can see what's in it." Sorry, if you are in politics today, I don't trust you. Give me the exact specifics before you ask me to agree. I don't want the government making decisions about royalty rates.
Are We Repeating History?
MusicFirst represents the four major record labels (three non-U.S.), negotiating on behalf of themselves and, they claim, recording artists. As copyright holders, the labels will keep at least half of any money collected, and artists will divide the rest. And for labels trying to recoup lost revenues, 1 percent is just a foot in the door.
There is a better way.
Frankly, we never should have gotten into this position, and suggesting anything other than a hard line was a strategic error. NAB insists we should be talking because that's what people in Washington do. Now the cat is out of the bag, and perhaps fighting royalties is indeed a no-win battle, and the "hell, no" approach can no longer work.
In fact, let's assume negotiation is the only option. If we must negotiate, we should insist on a system that is in the best possible interest of both radio and artists, as well as the labels. The current proposal benefits only the labels; it can't benefit radio, because it is too easily subject to change.
Here is what I propose:
1) Demand a vote.
If the NAB is so confident that this is in the best interest of the radio industry, then they should agree to putting it to a vote by the full radio membership. An industrywide vote would obviously be even better, if it were possible to orchestrate, but an NAB member vote is a great start.
This is the biggest, most important issue to hit the radio industry since the Telecom Act of 1996.
Too big to rely on the wisdom of the NAB Radio Board alone. Frankly, it's a good idea to take these board members off the hook if they are wrong.
Some may suggest we just don't understand how things are done in Washington, but it simply doesn't matter. The NAB, its Executive Committee, and the Radio Board members are acting on behalf of thousands of radio stations who are not members, and stations who are members in opposition.
NAB radio members should DEMAND a vote on the specifics of this deal, conducted and audited by an independent third-party accounting firm. This is sea-change legislation.
2) Base a proposal on a proven working model: a consent decree.
Royalties may indeed be inevitable. But rather than rushing into this proposed NAB agreement, let's start over and get the right kind of deal done, using the model that has worked for the writers who use ASCAP and BMI.
We don't want Congress setting our rates. Therefore we need to involve the courts and call for a consent decree that can be negotiated in the courts and that cannot be changed at the whim of Congress.
Let's set up an independent industry body like the Music Licensing Committee, whose members deeply understand music-licensing issues and represent the industry as a whole. The MLC is currently fighting to reduce fees through the court system, fighting over a mere million extra dollars, and yet with this proposed term sheet we're about to get saddled with $120 million more in estimated fees (and that's just the beginning). We need a group like the MRC working on radio's behalf and fighting over every million.
3) Recast the negotiations.
MusicFirst is funded by and represents the record labels, and I don't believe it is working in the best interest of artists. It wouldn't be easy, but if there is real concern for artists, radio can become the hero by insisting that an independent third party be appointed to truly represent artists' interests, separately from the labels. As it is, artists are under pressure from their labels, and many are afraid to speak freely.
If royalties come to pass, they would almost inevitably be collected and distributed by SoundExchange, which handles performance royalties for other audio media. But unlike ASCAP and BMI, which are nonprofit organizations with published and fixed operational fees (SESAC is for-profit and operates under a different model), SoundExchange can decide what expenses to charge and how to distribute the money, with no oversight. Labels will receive 50 percent or more of the fees collected, and artists will have no choice but to rely on SoundExchange for their share.
When ASCAP became too large and demanding, BMI was created to give songwriters a choice. All negotiations should DEMAND that there be TWO nonprofit entities created to administer performance royalties, so both artists and independent labels will have a genuine choice.
Don't Give In Because It's Unpopular
There are moments in one's life when once must not be a Neville Chamberlain, when one must follow one's heart to do the right thing.
There are some whom I know are going along with things they don't believe in because they don't want to make waves, or because they can live with this plan as long as it doesn't go further, or because they are leaving their company in a year and have made their money, or because "Gordon says it's a good plan."
As a broadcaster, you will look back on this moment in time, wishing you had taken a stand, been willing to make unpopular decisions, and become more involved in this battle. When you're writing those monthly checks, when you see the percentages rise over the years, when you see the labels getting rich and the artists not receiving their fair share, when you see the onerous restrictions and requirements placed on your airplay, you will wish you had personally taken a stand.
I cannot change a thing. You can.
Not Clouded By Self-Interest
It's been claimed that I have no skin in the game, or that I simply don't understand because I haven't owned radio stations since the 1980s. It's true: I have nothing to lose by opposing these negotiations. Be thankful my opinion is not being clouded by the rhetoric of fear. I have no ax to grind.
In fact, I am standing in opposition to many women and men whom I highly respect for their love and passion for the industry. I respect their judgment and intellect, and I don't cherish the thought of looking them in the eye over this issue.
I know they are voting yes because they deeply believe Gordon Smith is offering them the right answer. I'm risking my own credibility in the eyes of these industry leaders because I'm taking a stand in opposition. I could quietly disappear into the background, which would be the politically expedient thing to do. But this does not smell right to me, and the NAB is pushing too much, too fast in the name of keeping this out of the hands of the CRB.
I'm not buying it, and I have to speak my mind.
Become Skeptical
By the end, the terms won't end up anywhere close to the 1 percent now on the table, nor will the electronics industry stand for legislation to put radios on all phones. The seductive benefits we've been sold won't materialize, and the proposed percentages will grow to get the deal done. Even now, MusicFirst continues to bloviate about how NAB already agreed to something else.
It's time to become a skeptic and seek alternatives to the flawed NAB term sheet.
I am not anti-NAB, but I strongly disagree with them this time. My only interest is in making sure you see both sides of the story before you sign your future away. Long after Gordon Smith has moved on, you'll be living with the outcome of these negotiations.
It pains me when I see stations resigning over this issue, and the reality is that NAB could survive without radio's membership dues because of its massive spring convention revenues. We need them more than they need us, and their service to our industry is ordinary invaluable.
But this isn't one of those times, and you need to find your own personal way to make your voice heard, whether or not you are an NAB member.
Today it is expected that the people will take back a government that many feel wasn't working in their best interest. Ultimately, the people have a voice. The NAB needs to listen to the voice of the radio industry.
Your voice.
Demand a vote.
Eric Rhoads
Publisher of Radio Ink
The Debate Continues at Forecast
I've never seen stronger feelings than those expressed both for and against this issue of negotiation on music royalties. Dialogue and discussion is healthy to create proper resolution. I have given Gordon Smith time to share his feelings at Forecast, and each of the group heads will be allowed to share their feelings as well. This could be one of the most lively discussions in many years at the Harvard Club, and you should attend and make your voice heard. We limit attendance to 200 people. To register, call 561-655-8778 or go to www.radioink.com/forecastsummit.
Publisher of Radio Ink
The Debate Continues at Forecast
I've never seen stronger feelings than those expressed both for and against this issue of negotiation on music royalties. Dialogue and discussion is healthy to create proper resolution. I have given Gordon Smith time to share his feelings at Forecast, and each of the group heads will be allowed to share their feelings as well. This could be one of the most lively discussions in many years at the Harvard Club, and you should attend and make your voice heard. We limit attendance to 200 people. To register, call 561-655-8778 or go to www.radioink.com/forecastsummit.
