To be frank, I didn't expect to be asked to testify at the XM-Sirius hearing yesterday – Public Knowledge hasn't been much involved in media consolidation issues (unless you consider net neutrality to be one). But my indignation over the National Association of Broadcaster's hypocrisy in opposing the merger and our concern that the merger could be conditioned on some sort of audio flag or other tech mandate for digital radio probably helped to get us the nod.
My written testimony discussed these issues, but a briefing document I received just prior to the hearing calling efforts to require the industry to pay a performance right to artists and recording companies a “tax” caused me to change my oral testimony at the last minute and express my outrage at the industry's characterization of this issue and its refusal to pay artists what every other radio service pays. Remember, this is the industry that decries the proposed merger as a “government bail-out,” and said in its testimony that it “supports competition on a level playing field.” (Emphasis mine)
A little background: the Copyright Act requires all radio services to pay a fee to songwriters every time they play one of their songs. Everybody pays this – webcasters, satellite radio and over-the-air broadcasters. However, only broadcasters do not pay a similar fee to the the record companies and artists when they broadcast those same songs.
The rationale behind this exemption has always been that broadcasters “pay” by promoting records when they broadcast them. Even assuming that rationale made sense when broadcasters were the only game in town, it makes no sense in a world of 250 satellite radio channels, tens of thousands of Internet radio channels and other music streaming services, particularly when those other services pay this fee.
Here is the NAB briefing paper, which was one of a series of one-page briefing papers the NAB was passing around the Hill, including one opposing the merger:
Oppose “Performance Tax” on Local Radio Broadcasters
Some propose creating a new “performance tax” for over-the-air radio broadcasts, requiring broadcasters to pay for the use of sound recordings when they are aired on the radio. This new tax would upend the longstanding symbiotic business relationship between recording artists, composers, record labels and broadcasters that has enabled American music, recording and commercial local radio industries to thrive and grow.
Congress has long recognized the importance of the mutually beneficial relationship between radio broadcasters and the recording industry. The recording industry reaps enormous promotional benefits from radio exposure, resulting
in increased popularity, visibility and record sales. Record companies and their artists benefit from radio airplay and on-air interviews, in many cases timed to coincide with concert appearances in the radio station's service area. Radio stations often provide new and emerging artists with needed exposure and access to a listening audience.
A performance tax is not needed to create a level playing field. Congress has long acknowledged the unique role of local, over-the-air radio. In 1995 and 1998, during the most recent consideration of this issue, Congress reaffirmed that new burdens should not be imposed on FCC-licensed local radio broadcasters and drew distinctions between radio broadcasters and subscription and other non-subscription services. Among other findings, Congress noted that radio broadcasts are free, non-subscription services, relying exclusively on advertising as their sole source of revenue. These broadcasters provide a mix of entertainment and non-entertainment programming, and must fulfill public interest and other licensing obligations to serve their local communities.
Arguing that a performance tax should be adopted in the United States because it may exist in other countries ignores the fundamental differences between the American system of broadcasting and other countries, as well as differences between various countries' copyright structures. For instance, unlike the U.S., the broadcasting system in many countries has traditionally been government subsidized. Also, many countries that provide a performance tax have significant differences in copyright law, extending less generous protections than the United States.
The U.S. music licensing system already compensates composers, record companies and performing artists. Radio stations pay hundreds of millions of dollars annually to composers and publishers through fees paid to ASCAP, BMI and SESAC. Imposing a new performance tax on radio broadcasters would radically alter this balanced, fair system that has
worked well for broadcasters, artists, composers and the recording labels for many years. Broadcasters also pay record companies and artists royalties to stream their signals over the Internet.
Will you oppose a new performance tax on free, local, over-the-air broadcasts?
Referring favorably to my oral testimony, Rep. Howard Berman asked NAB President David Rehr at the hearing about how the broadcast industry can ask for a level playing field at the same time it refuses to pay performance fees to the record companies and artists. Rehr could only talk about the “symbiotic” relationship between the recording industry, artist and broadcasters. If the relationship is so “symbiotic” then why is the performance exemption public enemy number one for the industry and artists alike?
The NAB can pat itself on the back – it took their gall to put Public Knowledge on the same side as the recording industry for the first time in over five years.