Warning: I Was Wrong
New Information Has Changed My Opinion About The NAB's Royalty Settlement Proposal
An important message from Radio Ink Publisher Eric Rhoads
As you know, I'll carry the flag for the radio industry to the ends of the earth and will try to lead our soldiers to win every battle on behalf of radio. I'm willing to stand in the face of opposition to do what is best on behalf of this industry.
But any good military strategist will tell you that there is a time to stand down and not lead troops into slaughter. There are times when wars must end, and the parties must come together. Now is that time.
New Information Has Changed My Opinion About The NAB's Royalty Settlement Proposal
An important message from Radio Ink Publisher Eric Rhoads
For those in opposition to the NAB royalty term sheet, I encourage you to read this in full and then make up your mind.
As you know, I'll carry the flag for the radio industry to the ends of the earth and will try to lead our soldiers to win every battle on behalf of radio. I'm willing to stand in the face of opposition to do what is best on behalf of this industry. But any good military strategist will tell you that there is a time to stand down and not lead troops into slaughter. There are times when wars must end, and the parties must come together. Now is that time.
The Changing Battlefield
A good general will change his battle plan based on new information about opposing troop locations, weather conditions, and increased or decreased armaments to be faced. Intelligence operations play a key role in not walking into an ambush. Wars are lost when leaders stick to their opinions even when additional information sheds new light on how they should proceed.
A good general will change his battle plan based on new information about opposing troop locations, weather conditions, and increased or decreased armaments to be faced. Intelligence operations play a key role in not walking into an ambush. Wars are lost when leaders stick to their opinions even when additional information sheds new light on how they should proceed.
Radio is at war, and our war over royalties must not be lost. That is why I'm changing my opinion.
It's Not About Being Right
My intelligence reports have shed new light on the conditions of radio's battle over performance royalties. I am not interested in proving myself right by sticking to my past opinions.
My intelligence reports have shed new light on the conditions of radio's battle over performance royalties. I am not interested in proving myself right by sticking to my past opinions.
I now believe I was wrong in my assertions against the NAB.
Listening To Intuition
I recently wrote two very strong editorials in opposition to the NAB legislative term sheet that proposed a settlement with the music industry over performance royalties. Yet, in spite of countless hours of research, something did not sit right with me. My instincts were telling me I'd missed something.
I recently wrote two very strong editorials in opposition to the NAB legislative term sheet that proposed a settlement with the music industry over performance royalties. Yet, in spite of countless hours of research, something did not sit right with me. My instincts were telling me I'd missed something.
After all, the NAB Radio Board is made up of very smart and capable people who have a great deal to lose. Why, then, would they be leading this industry off a cliff? Was it possible they could all be so wrong?
Starting From Scratch
I couldn't get that out of my head. Though I had read the term sheet, the NAB press releases, and their responses to my editorials, and though I had spoken to a number of people, I still felt uncomfortable with my own conclusions, even after publishing them.
I couldn't get that out of my head. Though I had read the term sheet, the NAB press releases, and their responses to my editorials, and though I had spoken to a number of people, I still felt uncomfortable with my own conclusions, even after publishing them.
I could have left it alone and said nothing more, in the interest of standing my ground. But my only interest is in a positive outcome for the radio industry.
I started my research again from scratch. I re-read all the comments on my blog, read through my notes, and went over the conversations I had had with dozens of broadcasters. I revisited all my assumptions, and the facts stated in the NAB term sheet.
I then spent almost two hours on a call with NAB Joint Board Chair Steve Newberry. I fired off some very tough and pointed questions, and he openly addressed them. I then took part in a second call, with the negotiating team and NAB and Radio Board representatives including Newberry, Charles Warfield, Bruce Reese, John David, and NAB EVP/Communications Dennis Wharton.
Off-The-Record Comments
Those of us who have been the die-hard opposition to this term sheet could not fathom the NAB Radio Board's willingness to go along with it. The term sheet appeared to give up too much, and I believed the starting point of under 1 percent of revenues would end with a much higher rate. I felt there were better options that would have limited radio's exposure and kept radio's fees from rising.
Those of us who have been the die-hard opposition to this term sheet could not fathom the NAB Radio Board's willingness to go along with it. The term sheet appeared to give up too much, and I believed the starting point of under 1 percent of revenues would end with a much higher rate. I felt there were better options that would have limited radio's exposure and kept radio's fees from rising.
So I asked the board members to share, off the record, the complexities of their negotiations and meetings so I could understand the story behind the proposed deal. To their credit, they trusted I wouldn't ambush them by publishing their comments, and they were forthcoming about every detail. They talked openly about the state of their relationship with Congress, about things they were told privately that could have changed the direction of the deal, and about the feedback they'd gotten about the opposition to the term sheet.
I now believe I was wrong in my assertion that the NAB is selling fear. What insiders understand about the complexities of negotiations cannot be fully revealed, in light of the ongoing negotiations. The NAB Radio Board cannot fully articulate in public all the behind-the-scenes conditions -- and that need for discretion, of course, is a good part of what prompted the backlash.
'Trust Me' Makes Me Nervous
Following their vote to accept the term sheet, the NAB Radio Board asked us to trust their judgment. But my instincts are to distrust anything that doesn't reveal the full story, and I tend to think of back-room dealings as underhanded. But, in this case, I now agree that the NAB is dealing with a political world where back channels are critical.
To fully understand the facts of this matter, one must probe every issue, every discussion, every rumor and conspiracy theory, and every part of the negotiations leading up to the Radio Board's announcement.
Following their vote to accept the term sheet, the NAB Radio Board asked us to trust their judgment. But my instincts are to distrust anything that doesn't reveal the full story, and I tend to think of back-room dealings as underhanded. But, in this case, I now agree that the NAB is dealing with a political world where back channels are critical.
To fully understand the facts of this matter, one must probe every issue, every discussion, every rumor and conspiracy theory, and every part of the negotiations leading up to the Radio Board's announcement.
That's what I have now done, step by step, with hours invested. Once one learns of the strategy behind the decisions, everything becomes clear. Like others, I had the "a-ha moment," when it all made sense.
Unfortunately, I cannot share what I've learned. So now you'll have to decide if you can trust my judgment.
Unfortunately, I cannot share what I've learned. So now you'll have to decide if you can trust my judgment.
Avoiding The CRB
The focus everyone has been taking, myself included, is on the royalty rate, which of course is critical. But there are other critical issues this term sheet resolves. The biggest, of course, is avoiding the risk of having rates set by the Copyright Royalty Board. The CRB has a history of unreasonable rates and erratic behavior. Having the CRB involved could have disadvantaged either radio or the music industry. It's in the interest of both to keep them at bay.
The focus everyone has been taking, myself included, is on the royalty rate, which of course is critical. But there are other critical issues this term sheet resolves. The biggest, of course, is avoiding the risk of having rates set by the Copyright Royalty Board. The CRB has a history of unreasonable rates and erratic behavior. Having the CRB involved could have disadvantaged either radio or the music industry. It's in the interest of both to keep them at bay.
Though in my previous editorials I did agree that avoiding the CRB is a must, I felt there were other options to structure a deal, such as a consent decree. But I now know that those options have all been quietly played out and would devolve against the rate on the table.
Lowering Streaming Fees
Another issue is the rate radio will have to pay for streaming -- which many believe is the future of distribution beyond transmitters. (There are still limitations on the number of simultaneous streams in any market; today it caps out at about 80,000.) This term sheet lowers overall streaming fees by at least 10 percent, with more specific criteria for smaller stations and religious broadcasters.
Another issue is the rate radio will have to pay for streaming -- which many believe is the future of distribution beyond transmitters. (There are still limitations on the number of simultaneous streams in any market; today it caps out at about 80,000.) This term sheet lowers overall streaming fees by at least 10 percent, with more specific criteria for smaller stations and religious broadcasters.
Also, the AFTRA portion of the agreement will allow radio to play spots created by AFTRA talent in streams, no substitution required.
Both these provisions will be good for radio, especially as streaming increases.
A Cellphone Mandate?
Of course, another much talked-about issue is the proposal that FM chips be mandated on all cellphones. As I have previously stated, I'm not a big fan of mandates by our government, and I believe a mandate to require cellphones to have activated FM chips will not be passed due to the strong lobby from the CEA and the wireless industry.
Of course, another much talked-about issue is the proposal that FM chips be mandated on all cellphones. As I have previously stated, I'm not a big fan of mandates by our government, and I believe a mandate to require cellphones to have activated FM chips will not be passed due to the strong lobby from the CEA and the wireless industry.
I have never been opposed to the idea of pursuing an FM chip for radio. My biggest concern is that it wasn't worth paying onerous fees in exchange for it. But that was based on being incorrectly informed about how the royalty percentage would be subject to growth.
The NAB has since shown me why it would be almost impossible for MusicFirst to come back to the table to increase the royalty rate down the road. The foundation for that is a written agreement that both parties must agree to any rate increases.
What About Promotional Value?
Radio, of course, has been in opposition to paying performance royalties because of all the promotional value we have brought to the labels over the years. In this deal, the labels are not only acknowledging radio's promotional value (which is why the rate they are willing to accept is not higher), but they want to become partners with our industry, to grow together.
Radio, of course, has been in opposition to paying performance royalties because of all the promotional value we have brought to the labels over the years. In this deal, the labels are not only acknowledging radio's promotional value (which is why the rate they are willing to accept is not higher), but they want to become partners with our industry, to grow together.
As Steve Newberry put it, "Wouldn't it be a nice change that instead of the president of the Grammys slamming radio on national TV, he speaks of the importance of radio's role in the success of artists?" I couldn't agree more. The industries have always had a mutually beneficial relationship, and it's time to end the friction.
Surprisingly, the labels seem to be getting beyond their vitriol toward radio since we finally came to the table to negotiate. This term sheet could end the battle and start a world of cooperation. And it doesn't restrict radio airplay, which was a major concern of mine.
Will The Artists See Any Money?
I stand firm in my belief that since MusicFirst, the opposition, is funded and controlled by the four major record labels, having SoundExchange -- which was formerly part of the RIAA -- collect and distribute the royalties is not in the best interest of the artists or of independent labels.
This past weekend I spent time with the manager of a major recording artist, and we discussed my editorials on this topic over dinner. Though he believes radio should pay royalties, he agreed with me that the financially troubled labels might not be willing to share as much of the collected fees as they should, and he agreed with my premise that artists cannot speak out for fear of retaliation from the labels. He urged me to seek a solution where SoundExchange will not collect these fees.
I stand firm in my belief that since MusicFirst, the opposition, is funded and controlled by the four major record labels, having SoundExchange -- which was formerly part of the RIAA -- collect and distribute the royalties is not in the best interest of the artists or of independent labels.
This past weekend I spent time with the manager of a major recording artist, and we discussed my editorials on this topic over dinner. Though he believes radio should pay royalties, he agreed with me that the financially troubled labels might not be willing to share as much of the collected fees as they should, and he agreed with my premise that artists cannot speak out for fear of retaliation from the labels. He urged me to seek a solution where SoundExchange will not collect these fees.
I'd love to see Congress step in with a mandate to form an independent third-party collection firm, much like ASCAP or BMI, to make sure the artists are being well represented. But frankly, radio needs to stay out of that fight and continue to negotiate in good faith with MusicFirst. Getting involved in that aspect will only hamper negotiations.
This Could Have Gone Badly
Most of us who have taken an opposing point of view to the NAB efforts to negotiate have done so because we were not fully informed. Radio started this process with a no-negotiation stance, and it didn't look good to Congress. Had we continued on that track, we would be looking at results that make this term sheet look like manna from heaven.
Most of us who have taken an opposing point of view to the NAB efforts to negotiate have done so because we were not fully informed. Radio started this process with a no-negotiation stance, and it didn't look good to Congress. Had we continued on that track, we would be looking at results that make this term sheet look like manna from heaven.
Consumed By Passion
I now believe the NAB Radio Board has acted in good faith on behalf of this industry. Though I questioned it and became consumed with my passion to prove them wrong, I now believe I was the one who was wrong. The reason many of you still hold the hard line is because you have not been privy to the confidential conversations and back-room deals. I encourage you to pick up the phone and find out firsthand, then make up your own mind.
I now believe the NAB Radio Board has acted in good faith on behalf of this industry. Though I questioned it and became consumed with my passion to prove them wrong, I now believe I was the one who was wrong. The reason many of you still hold the hard line is because you have not been privy to the confidential conversations and back-room deals. I encourage you to pick up the phone and find out firsthand, then make up your own mind.
When the NAB press release about the term sheet hit my desk, I immediately erupted and reacted with a scathing editorial. Though I have to take responsibility for not picking up the phone to understand this deal in more detail, I think those of us who have opposed this action were in the dark, and had missed the NAB's change of attitude toward negotiations.
In spite of a town hall meeting that was highly publicized in the middle of the summer, many of us were off doing summer things and missed those communications. I don't think the NAB should assume that its press releases, its speeches, and even video town hall meetings are enough with a pressing matter like this. I encourage them to continue communication efforts inclusive of the entire industry.
Lesson Learned
My lesson from this is that if my intuition is telling me something isn't right, I should pick up the phone and dig deeper before reacting. I didn't call the right people who could have let me in on the back story. For that, I have deep regret.
My lesson from this is that if my intuition is telling me something isn't right, I should pick up the phone and dig deeper before reacting. I didn't call the right people who could have let me in on the back story. For that, I have deep regret.
The Power of Unity
Greater Media's Peter Smyth recently wrote an online column calling for industry unity as a response to my editorial. He said I was creating industry division. I responded that it was the NAB's acceptance of this term sheet that was creating division. Smyth was right, I was wrong.
Greater Media's Peter Smyth recently wrote an online column calling for industry unity as a response to my editorial. He said I was creating industry division. I responded that it was the NAB's acceptance of this term sheet that was creating division. Smyth was right, I was wrong.
I'm sure some will suggest I'm wishy-washy and say, "The NAB got to Eric." So be it. The bottom line is that I am willing to admit when I am wrong, no matter what the outcome or criticism. It is better than leading our troops to slaughter.
A child becomes an adult when he realizes that he has a right not only to be right but also to be wrong.
Thomas Szasz, The Second Sin (1973) "Childhood"
Thomas Szasz, The Second Sin (1973) "Childhood"
I encourage you to make up your own mind by viewing the NAB town hall meeting and reviewing the term sheet. But to get the rest of the story, you may need to make a phone call.
Eric Rhoads
Radio Ink
Radio Ink
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P.S.: NAB President/CEO Gordon Smith and other NAB Board members will be on hand at our Forecast meeting, on December 7 at the Harvard Club in New York, to discuss the performance royalty issue.
To learn more, go to www.radioink.com/forecastsummit. Register online or call 561-655-8778.
To learn more, go to www.radioink.com/forecastsummit. Register online or call 561-655-8778.
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