2-20-2013
The New Jersey Broadcasters Association (NJBA) has been working diligently to defeat a Performance Tax.
Nowhere is the defeat of the Performance Tax more important than in New Jersey. Time and again, our local radio broadcasters have proven their unmatched dedication to the audiences they serve in times of emergency. This reality was once again best exhibited during a regional crisis where the radio industry excelled in their coverage of Superstorm Sandy and the compelling manner in which radio provided critical, life-saving information to the people of New Jersey, almost exclusively, throughout Sandy?s onslaught.
Real-Radio? should not be compromised with a Performance Tax of any kind! Any ?tax? imposed on radio broadcasters will bring a correlating service decline as broadcasters look to try to cover those expenditure outlays. It would cripple local radio coverage, decimate the EAS, and hurt our communities, denying them the only measurable, constant, and ubiquitous free source of entertainment and information, especially in times of weather emergency and disaster. We do not need to provide less service to our public but, arguably, more services. Enacting the Performance Tax will undoubtedly affect radio services and content in a negative fashion.
We all know that radio provides a vital service especially in times of crisis. As first responders and first informers, broadcast radio and TV stations up and down the state work around the clock to ensure their communities have the information they needed to prepare, endure, and survive during times of crisis. Unlike cell phone companies that have failed time and time again, radio has remained the beacon of information during these periods where people need information the most. Radio is unique and should be highly respected for its crucial role in society. Radio is a priceless necessity and it should always be free.
One of the most dangerous threats to our industry is the prospect of a Performance Tax on local radio. As you know, the NJBA has been the most vocal opponent to such a measure and we are very grateful that our Congressional delegation in Washington has protected their constituencies and supported our local broadcasters. who serve them. This is a wrong-headed measure which is being forced upon them by the greedy foreign-owned record labels. In that regard, the NJBA is very pleased to see that U.S. Representatives Michael Conaway (R-Texas) and Gene Green (D-Texas) have reintroduced the Local Radio Freedom Act (H. Con. Res. 16), which would oppose any new fees, taxes, or royalties for music played on local radio stations. The resolution already has 71 additional original co-sponsors.
Conaway said, ?Communities rely on their local radio stations for news, weather alerts, and other emergency broadcasts, and the suggested Performance Tax could jeopardize the future of many of these struggling stations. I?m pleased so many of my House colleagues have joined with me in supporting local radio stations and listeners while pushing back against punitive fees.?
Notwithstanding all of the foregoing, one can argue the merits or the pitfalls of any proposed legislation. While we as broadcasters are trying to provide background on why the music industry is trying to push for the enactment of the Performance Tax, there are many other reasons that that this tax is unjust. Such as:
1. RADIO IS THE MARKETING AND PROMOTIONS ARM FOR THE MUSIC INDUSTRY - The music industry has clearly understood that free-over-the-air radio provides free marketing and promotional services for their artists and for the music industry. Without that free service, artists and the music industry would arguably fail to exist or, conversely, be faced with millions of dollars in marketing and promotional expenses trying to promote the artists they are developing. Similarly, the radio industry has enjoyed a source of programming through the music that is provided to them free of charge. The music industry invests in artists in the hope that these artists can provide a return on investment (ROI). Radio promotes the music and thus is provided a programming element in return. The ROI for the music industry is aided, if not completely developed, by the free marketing and promotion that radio provides to the music industry. This symbiosis evinces the inescapable conclusion that both sides are benefiting. Why do you think local stations across the country are bombarded with sample CDs and demos by emerging artists (and seasoned veteran artists) begging station managers to play their new tune? It?s because broadcasters and artists genuinely ?get it.? It?s how they sell records, (yes, vinyl records are making a comeback) CDs, downloads, and videos.
2. SYMBIOTIC RELATIONSHIP - Heretofore, the music industry has not paid any royalties for the decades of airtime afforded artists by the radio industry and likewise, the radio industry has not been required to pay any royalties for the artists developed by the music industry. To date, neither party has sought any ?share of the profits? that the other party earns from this symbiotic relationship. Moreover, the payola laws expressly prohibit radio from accepting any payments from the music industry for ?pay-for-play.? This law clearly recognizes the relevance and importance that radio provides to artists. Left unchecked, the music industry would willingly pay radio to play their artists music and thus promote their artists and radio would thereby charge for the airtime afforded artists. If Congress should decide to support legislation to enact the Performance Tax, then radio should likewise be permitted to charge the music industry to have music played on the airwaves. This would level the playing field on both sides of this argument.
3. RADIO ?FREE? - Unlike satellite, Pandora, and cable, ?free-over-the-air radio? has no other sources of revenue other than advertising. Radio is not afforded the same luxuries of imposing fees such as the ever-increasing ?subscription revenues? charged by these other music outlets. The music industry, and the consumer, are not well served with this model, which is becoming a prohibitive luxury for many in this challenging economy.
4. ARTIST ENDORSED ? Ask any artist or listen to any artist when they accept their Grammy or other music awards. The first person cited is always radio for playing their music and promoting their songs. When have you heard an artist thank their label? They don?t because these same labels are already unjustly enriched and the artists loathe the financial arrangements that they are forced to take.
Well, the argument against the Performance Tax seems fairly straight forward, right? Well what changed? And why is the music industry now pushing for the Performance Rights Act and thus looking for radio to provide a royalty for artist services and music? Why the hard sell for the Performance Tax?
The answer is quite simple. The music industry is looking for a Performance Tax to remedy the problem that the music industry brought upon itself when they developed the partnership with iTunes that allowed iTunes to sell artists' songs for $.99 each. The result was that the day of CD album sales all but disappeared. This short-sighted business decision, that the music industry executed as it sought to increase sales through the Internet and the digital download business, was simply an ill-conceived plan and did NOT provide the windfall profits for their industry as they had hoped. The financial adage that discounts (or losses) can be overcome by volume has clearly not worked. Because of this, the music industry has been confronted with trying to earn back lost profits because of iTunes from other sources.
Radio is not the only entity confronted with this issue. Ask ANY artist what has happened to their songwriting or music deals. Big label and music industry contracts have evolved from a simple profit-sharing arrangement with artists, to now being deals that artists loathe called ?360 deals.? These 360 deals are contracts whereby big labels and the music industry virtually tap into every source of revenue that an artist develops over their career. Now as we move into 2013, artists are seeing that the one source of revenues that heretofore was something that they solely had access to is now something that the music industry is tapping into, namely, touring/concert revenues and merchandise sales.
In fact, in a surreal report released a few weeks after Michael Jackson?s death, it was revealed that the King of Pop told interviewers that it was ?Time for artists to take a stand against record labels.? In a video interview filmed by director Brett Ratner, Jackson lashed out at record labels. Asked about his greatest lesson learned, Jackson replied: ?Not to trust everybody in the industry. There are a lot of sharks and record companies steal. They cheat. I have to audit them. And it's time for artists to take a stand against them.?
Clearly the push is on by the music industry to earn back the ?lost profits? resulting from the iTunes business decision that they decided to embark upon. As a consequence, big record labels are pushing for government policies that could hurt their biggest promotional ally ? local radio. What's on the line? A lot. But from the record labels' standpoint, the ability of local radio stations to bring you the music.
The unavoidable result of the Performance Tax?s passage is much more than merely reeking economic havoc on local radio stations. The passage of the bill would force the closing of a many local radio stations in New Jersey and across the country. To be sure, the prospect of enhanced opportunities for localism and outreach would be stifled immediately. Station groups and networks would be hurt, as well. Localism would be out the window and thousands in New Jersey would lose their jobs.
Equally disturbing is the disingenuous comparison of broadcast radio to Internet providers and pay/subscription audio entertainment programming and fees paid by satellite radio. The proponents of this legislation want us all to be alike ? just because cable, satellite and Internet services pay these royalties. We are not alike: free over-the-air radio and television are the only exclusively local media that exist. We are licensed separately and differently. And we have a very different mission; mainly to operate in the public interest from the EAS for local emergency notification such as NJ Amber Alerts and community-wide emergencies such as forest fires, hurricanes, blizzards, other extreme weather hazards, flash flooding, and local or national emergencies, to local news of community events and happenings in entertainment from our great and diverse variety of formats.
On behalf of the NJBA and the broadcasting community, we appreciate your attention to this very serious piece of legislation and how it affects our industry. And, more importantly, the inherent unfairness of the legislation in light of the radio-music industry relationship.
Paul Rotella is the President/CEO of the New Jersey Broadcasters Association. He can be reached at (201) 914-0495 or protella@njba.com
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