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Listener: Musicians Vs. Radio in Big Money Fight

George W. Bush got perhaps his biggest laugh of the summer when he responded to a question from a voter in Nashville seeking the president's thoughts about forcing radio stations to pay royalties to performing artists:

"Maybe you've never had a president say this," Bush replied. "I have, like, no earthly idea what you're talking about. I'm totally out of my lane. I like listening to country music, if that helps."

That's probably not going to do the trick, but Congress can use all the help it can get as it tries to arbitrate the latest conflict to emerge from the digital revolution's body blow to the music industry.

Artists such as Judy Collins, Don Henley, Tony Bennett and Sam Moore (of the R&B duo Sam & Dave) argue that radio stations ought to pay for the music they play on the air -- but station owners counter that for all the promotion they do for the record industry, it's the labels that should be paying them. Lawmakers can be forgiven for feeling as if they've landed inside a fraternal brawl.

They have. This summer's lobbying effort by a new recording industry-sponsored group, MusicFirst, has breathed new life into the drive to make radio pay artists -- and not just writers and publishers -- for playing their songs, but the issue is as old as Top 40. What's different now is that the music industry, in deep trouble, is casting around for ways to make up for the steep decline in revenue that hit the recording business after digital downloading changed the business's basic structure.

"The issue here is simply, it's about fairness," folk singer Collins told a congressional panel in August. "Radio is a multi-billion-dollar business built on our creativity, our passion and our soul." Collins and other artists who rose to fame singing other people's songs say they must tour well into their golden years in good part because they never got paid for all the radio play their music received.

Besides, they argue, with Internet and satellite radio stations now paying royalties to performers, why shouldn't broadcast AM and FM stations have to do the same?

Because as much as the record business is hurting, so is radio, says Dennis Wharton, executive vice president of the National Association of Broadcasters, who notes that radio revenue has been flat for several years and says his industry is in no position to carve out a new entitlement for artists.

Rep. Howard Berman, the California Democrat who chairs the House subcommittee on intellectual property, is expected to introduce a bill this month that would grant royalties from radio stations to performers -- the latest salvo in a battle that has been fought about once a decade since the 1940s.

The original fight over royalties pitted performers against both radio and the record companies. Back then, artists saw the two businesses as connected pieces of a larger system that made megabucks on the backs of the artists who provided their content.

But the record and radio industries in the '40s successfully drove a wedge between composers and songwriters on one side and performers on the other, creating an anomaly that persists to this day. Radio station owners continue to pay about two percent of their revenues, a total of $450 million last year, to the people who write and publish the songs played on the air, but leave it to the record companies to pay performers through their contracts for new albums.

There's no special reason to make that distinction. "It's just always been that way," says Wharton of the NAB, which has a deep interest in keeping it that way.

Broadcasters argue that performers shouldn't be paid by radio stations because radio is primarily a promotional device for new music: Airplay gets listeners interested in a song or artist and drives them to go buy the music, providing revenue to the record companies, which therefore should be the ones paying the artists.

The problem is that the business model that has supported the music industry for the past half century is collapsing, thanks to online music sharing, the demise of the CD album, the rise of the iPod and the diminishing roles that both radio and record companies are playing in the economics of music. Sales of music CDs dropped by 13 percent last year, according to the recording industry's trade association.

In the radio business, this drive by artists and record companies to squeeze money out of radio stations is seen as a desperate move by an industry that completely blew the digital revolution. Record companies failed to cultivate new talent, resisted new technologies and alienated an entire generation of potential customers by suing grandmothers and teenagers rather than embracing a new economic model, radio executives argue.

Alfred Liggins, the outspoken chief of Radio One, the nation's largest owner of black-oriented stations, says it's the record industry that should pay radio for promoting their product, not the other way around (though there is a slight legal problem with that scenario, since that kind of financial relationship runs the risk of triggering payola prosecutions.)

The new debate over performance rights is a battle of words and influence waged by two mammoth industries, a confrontation between deep-pocketed lobbyists with everyone involved claiming to be economically stressed and on the side of what's right and good.

But history reminds us that at almost every step up technology's ladder, the music industry has resisted change, arguing that giving listeners free access to recorded music would wipe out the market for selling those recordings. When radio moved from live orchestras and bands to spinning records in the late 1940s, the musicians union predicted the loss of thousands of jobs and the record industry hurled lawyers at radio companies.

It turned out that the more radio played records, the more listeners wanted to go out and buy those songs.

Again, in the 1970s, when cassette tapes made it easy for listeners to record music off the radio, the record industry howled in protest, only to find that while some people did create their own bootleg mix tapes, far more happily spent their dollars on prerecorded cassettes.

This time, downloading and file sharing are choking off the record industry's revenue stream, while Web and satellite radio eat away at AM and FM radio's audience.

"The record business is in a world of hurt right now," Wharton says. "And obviously our guys are apoplectic about what they would regard as a money grab by the foreign-owned record companies." (Four of the top five record companies are based in Europe or Japan.)

In the end, new revenue sources are likely to emerge in the reshaped media economy. Already, concerts and direct sales by artists are playing a larger role in the income mix for some performers, and online social communities are becoming essential to the economic model that some bands are cobbling together. But in the history of media, the big players don't always show the flexibility they need to adapt to new technologies. On occasion, they resort to eating their own.

By Marc Fisher |  September 1, 2007; 8:45 AM ET
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Comments

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" Already, concerts and direct sales by artists are playing a larger role in the income mix for some performers"

Some? That's pretty much the only way any band has ever made money throughout the history of recorded music. Record companies certainly don't eveer pay them and often take a chunck of that touring money to. I'd be all for making the radio companies pay the artists the same as every one else, but only if it actually goes to the artists and not to their label.

"Free promotion". Hah. I listen to radio, mostly because it's what I got that works for me, but way too many stations are stuck to promoting what the labels want them to promote. Come one Clear Chanel/CBS Radio/Radio One/etc/. Grow a pair and play whoever you dang well want to play.

Posted by: EricS | September 1, 2007 12:04 PM

I wonder if paying artists directly will lead to even less variety on the air? I can imagine some poor accountant spending hours trying to track the payment addresses of dozens of small, perhaps out of business indie labels to pay. Or, alternatively, management deciding that they can automate the process by only playing artists on these 2 or 3 big labels in set increments and writing out appropriate checks.

Also; I was under the impression that radio stations paid a set amount to the various publishing companies - ASCAP, BMI, SESAC, etc. - and those companies redistributed the earnings to their artists based on a sampling? I think making that system more efficient makes more sense than having radio stations track contact info for everyone they may play in a given quarter (especially since the publishing companies already do that!).

Posted by: mrmr0to | September 1, 2007 1:13 PM

one of the best commentaries on the loss pf money in music sales is at Jon Fine's column at:
http://www.businessweek.com/innovate/FineOnMedia/archives/2007/08/more_obscure_mu.html

Posted by: Don | September 1, 2007 3:42 PM

I wonder if paying artists directly will lead to even less variety on the air? I can imagine some poor accountant spending hours trying to track the payment addresses of dozens of small, perhaps out of business indie labels to pay. Or, alternatively, management deciding that they can automate the process by only playing artists on these 2 or 3 big labels in set increments and writing out appropriate checks.

Also; I was under the impression that radio stations paid a set amount to the various publishing companies - ASCAP, BMI, SESAC, etc. - and those companies redistributed the earnings to their artists based on a sampling? I think making that system more efficient makes more sense than having radio stations track contact info for everyone they may play in a given quarter (especially since the publishing companies already do that!).
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Who is to say the "sampling" is at all accurate? The issue is that is usually is not accurate.

Companies that already track all the legal addresses of these businesses include SoundExchange and the Harry Fox Agency.

Posted by: Anonymous | September 1, 2007 3:44 PM

"This time, downloading and file sharing are choking off the record industry's revenue stream"

Nah, that's completely and totally wrong. The recording industry need only look in the mirror to see who choked off their revenue stream. They didn't grab the Internet/download bull by the horns when they had a chance and now that same bull is slowly goring them to death. Good riddance to those who can't see past their own noses. Despite all of their previous protestations, the recording industry has never been good about paying money owed to the artists they claim to represent. As noted in the article, most bands make their real money by touring and selling merchandise... as long as they can keep the industry's greedy little hands away. And when you consider that the industry, not being content to bilk only their artists, but their customers as well ('cuz, really, what else are all these dubious lawsuits for other than a blatant cash grab with some fearmongering thrown in or good measure), it seems like they may be in their death throes. Artists and customers alike can only hope that it's so.

Posted by: J.P. | September 1, 2007 4:00 PM

Some? That's pretty much the only way any band has ever made money throughout the history of recorded music. Record companies certainly don't eveer pay them and often take a chunck of that touring money to

-------------

That's not correct. That's sort of an urban myth. Most bands I know made most of their money free and clear from songwriting royalties, the second largest amount of money from record deals and the third from touring. Touring gives a high gross payoff, but not a high net profit- bus rental is expensive, crew must be paid, etc.

Posted by: Anonymous | September 1, 2007 5:42 PM

BMI, ASCAP etc are for the songwriters, not the performers. Not always the same people.

Posted by: Jessica | September 1, 2007 5:55 PM

...and don't forget those of us who don't buy CDs anymore since the Sony rootkit trashed their customer's computers...

P.S. Did you see that Sony has a new rootkit out? This one is being distributed on a fingerprint id tool, but it isn't yet known what it does for Sony. It does, however, leave a hole in your system for crackers to take advantage of.

Posted by: Rich | September 1, 2007 8:08 PM

It's a real problem figuring who to be least sympathetic to here. The record companies are trying to use Congress to make money for them they've forgotten how to make themselves. And they've already dealt a severe blow to the satellite and particularly the Internet radio people, who were probably doing a better job of playing, and accordingly promoting,the record companies' back-catalogue music than over the air radio (where "Oldies" now begin, with the few same old exceptions, with the 70s). And Judy Collins hasn't made enough money yet in 45 years to be able to get off the road?!? And in the other corner, we have broadcast radio-the Clear Channel stations offering homogenized pap and not lifting a finger against the record companies earlier when they were not the immediate target, even though it was obvious the record industry would go after them next, after they put it to the Internet & satellite folks. I'd say a pox on both of them except that I would rather see short-sighted greedy American companies making money rather than short-sighted greedy Japanese or European ones, so I'll hold my nose and vote for the broadcast radio folks.

Posted by: Bill | September 1, 2007 10:06 PM

I feel a little like Michael Vick in this. I don't really have a dog in this hunt, but I'd like to kill all of them.

The RIAA is a bunch of scumbags who have ripped off artists (many of them poor and semi-literate, from "hillbilly" performers to blues to early rock and roll) for close to a century.

The broadcast companies are greedy and have absolutely no sense of responsibility to their listeners (over the airwaves that we, theoretically, allow them to use).

In the words of the immortal Charlie Brown: AAAAAUUUUUUGH!!!

Posted by: Mikes | September 2, 2007 6:25 PM

The RIAA is a bunch of scumbags who have ripped off artists (many of them poor and semi-literate, from "hillbilly" performers to blues to early rock and roll) for close to a century.

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yeah, the industry association didn't pay artists... do you have any idea what you're talking about?

Does the US Cattlemen's Association put ads on TV or pay ranchers. They pay ranchers.

The RIAA has nothing to do with ripping off anyone or paying anyone.

Get a clue before you post.

Posted by: Anonymous | September 3, 2007 10:33 AM

When the record industry tried to choke Napster to death and then decided to "buy" Napster, that's when they screwed up. Napster (in it's original form) tracked where the files came from and where they went. The record companies dropped the ball when they let that get away.

They've been in denial about the internet for years now, hoping it would just "go away." There's very few radios stations I listen to any way, and with the other information (about bands, new music) I can already get from the internet, why do I have to listen to "know" what I like?

If we took a slice of all the music out there to be consumed, what is promoted to radio would maybe make a 1/4 inch slice at the top and there would be about 6-7 feet of "other" music underneath that you never hear. That's where I listen anyway, so what does radio do for me?

I listen to a very eclectic radio station called WNCW. They play music on merit of worth, not how many promo calls they have received about it. Otherwise, I'm listening to my Ipod or spending time loading more music into it.

Posted by: Anonymous | September 4, 2007 10:48 AM

There are many problems with big music biz today -- almost all of them self induced. One thing that the digital revolution has benefitted from is that so many Indie and unaffiliated artists are being discovered and so many of them are doing some outstanding and great music that I guarantee you will never hear on the radio, satellite radio or even Public Broadcasting. In every genre in the world, some of the finest soulful artists are on the Internet. Big Biz music cartels are not only trying to kill off a technology but, they don't want these artists heard either. If people are spending dollars on artists that are not on a major label, they consider this pirating and theft also. Nothing could be farther from the truth. The truth is that the music cartels are obsolete and unnecessary in today's instant communications world. Adapt or die and, it appears that the Big-5 are dying a slow death. Good riddance!

Posted by: Bob C | September 4, 2007 11:51 AM

The phrase everyone seems to lock on when criticizing the royalty proposal is that record companies already get enough money.
The payments made to BMI/ASCAP/SEASAC by the stations is money dedicated to songwriters & publishers.
It is fact that record companies have long sought to control the publishing of artists they distribute and it wasn't until the 60's that a few mega-artists succeeded in challenging that stranglehold labels held over their artists.
Radio doesn't have clean hands in the argument, especially corporate radio. Clear Channel recently had to back down from a policy that required independant artists to sign a waiver that said the station wouldn't have to pay royalties in exchange for the airplay. A reverse of the pay-to-play payola problem. Instead of accepting direct payment from artists they just wouldn't have to pay out money. Same difference.
The new proposed assesment to stations is one that would go directly to performers and copyright holders (note difference from songwriter/publisher). Where this is most important is the artist that covers other writer's songs. The songwriter has always been paid for that, the performer never so.
Every other "western" country in the world collects and pays this royalty to the performer - NOT THE US. Those countries refuse to make payments for American performers for the airplay overseas until the US pays the same to their artists.
Sound Exchange now collects that payment from XM & Sirius Satelite radio and a couple of other webcasters. They have negotiated payments with other countries in a reciprocal agreement with those other countries. Sound Exchange would also have the ability to distribute royalties from radio.
Some money is at long last heading to the performer. Terrestrial radio in America should also be part of that system. None of the entities will willingly give up a penny and need to be forced to do so.

Posted by: Wayne Kahn | September 4, 2007 11:35 PM

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