P.R. as in Performance Royalty. All of the major radio executives in the United States are meeting today at the NAB to discuss whether to cut a deal with the record labels on the so-called “Performance Tax”.
Today, “over the air” radio stations do not pay performers for playing their music (they do pay the composers and lyric writers). This exemption from copyright law could be repealed during a December “Lame Duck” Congress if many members of Congress get voted out and no longer have to worry about the consequences to their political contribution funds and the effect on the public of broadcast opinions. (None dare call them bribes)
The new head of the NAB is a former Republican Senator – Gordon Smith of Oregon – who took over the job in September 2009 after the prior NAB head left with no advance notice after wanting to discuss negotiating a settlement on this issue.
Gordon Smith called the meeting today to explain to the the Radio Business the political facts of life – it isn’t 1928, the Internet is taking away your audience, nobody is watching over the air TV anymore, you no longer have much clout in Washington DC and the new FCC head wants to take away your bandwidth. The FCC would ultimately like to replace over-the-air radio and TV with more broadband internet services.
The NAB has tried to paint the Performance royalty as an “anti-foreigner” issue – “we shouldn’t be sending local money overseas”, while the same radio executives are paying interest on 10s of billions of loans made from banks in Europe and shoveling the interest payment money to London and Frankfurt (and probably China).
If the NAB goes for “all or nothing” (quite likely), they risk a devastating blow to their finances – almost all of the groups have credit facilities that state “free cash flow” ratios they have to maintain to stay in compliance. Many of those covenants would immediately go into default if a new fee was suddenly imposed on their revenue streams.
The NAB might also negotiate something more clever – like reciprocal payments – we pay for the music, you pay for the airplay (in a legal way) or at least phase in the payments or make them only apply to certain types of music..
Today is as important to the Radio business as Fort Sumter was to the South. Don’t start a war you aren’t prepared to lose. Think carefully before you lob in your best cannonballs.
