Prepared remarks of Gary Shapiro, president/CEO of the Consumer
Electronics Association, to the House Committee on Energy and Commerce Subcommittee
on Communications and Technology, on “The Future of Audio,” June 6, 2012.
the preeminent trade association representing over 2000 U.S. consumer
electronics companies. Every one of our members directly or indirectly has
products or services relying on or conveying sound. At our industry’s annual
trade show, the International CES, over 156,000 attendees admired more than
20,000 new products, including numerous innovations in audio.
We welcome this hearing as it is gratifying for Congress to
focus on something we cherish but rarely discuss in Washington: the spoken
word, music and sound. We appreciate this unprecedented opportunity to share
some little known facts and views.
First, I’m proud to
share that many of our members make loudspeakers and other audio products here
in the United States and export worldwide. Audiophiles around the globe
recognize and appreciate the phenomenal quality of these U.S. products
including Altec Lansing, Atlantic Technology, Audioengine, Bose,
Conrad-Johnson, Definitive Tech, Eminence,Harman International, HUMAN Speakers,
Infinitiy, JBL, Klipsch, Koss Headphones, Legacy Audio, Leon Speakers, Inc.,
Martin Logan, McIntosh Laboratory Inc., Misco Loudspeakers, Mitek, Orb Audio,
Polk Audio, Rayco Sound Industries, Inc., Rockford Fosgate, Specialty Technologies,
Thiel Audio Products, Triad, Voxx International, Westone Laboratories, Wilson
Audio Specialties and Z Box.
Other members, such as
Microsoft, Apple and Livio Radio give listeners extraordinary and previously
unimagined ways to enjoy music when and where they wish.
Still others, like Pandora, Google and Grooveshark open up a vast new
universe of choices and content to music fans.
Internet radio is booming. Recent research by TargetSpot found 42 percent of
U.S. households with broadband Internet listen to Internet radio. Similarly,
research from the NPD Group found 43 percent of the Internet population
listened to digital radio broadcasts in 2011 – up from 29 percent in 2009. The
Consumer Electronics Association recently found 39 percent of the Internet
population listened to online streaming audio content in the last 12 months and
42 percent listed to MP3 files.
Second, our creativity
and innovation is reflected by tens of thousands of independent musicians and
by the big company members of the RIAA. The more I travel around the world the
more I appreciate how we export our culture through the Internet, our movies
and our music. The result is that so many in the world want to be like us and
also learn or want to learn English. This is an American influence force
multiplier and should not be taken for granted.
the popularity of American culture and products abroad ties in directly in with
innovation, including innovation in audio, both music and word, as our national
brand. CEA believes our long term national strategy must be based on our
strength in innovation. If we can continue to innovate, our economy will
continue to grow and mitigate our tax and spending dilemma. Of course the
challenge of innovation, including innovation in technology and music and news
distribution, is that innovation always threatens incumbents and they too often
come to Washington to protect their legacy business models.
Third, the world of reproduced audio is parallel to the world of energy in
that we had only a few choices or sources in the 1960s: radio, the phonograph,
the telephone and television. And as with energy, we have rapidly shifted to a
growing set of choices with a phenomenal array of devices, products, sources
and services. It’s not just music and news over tablets and telephones, its HD
Radio providing choices and music over standard radio spectrum, its Sirius-XM
satellite radio appreciated by over 22 million subscribers, its Pandora, and
Spotify. It’s Gracenote cataloguing the world’s music and offering music based
on emotion or by lyrics. It’s Livio Radio offering direct Internet access. It’s
independent musicians raising literally millions of dollars on internet
platforms like KickStarter. It’s the plethora of Internet choices including
YouTube and sharing over Facebook. It’s the websites of artists and fan clubs.
It's audio books expanding rapidly in scope and service to children, the
elderly and the disabled. It’s storage devices beginning with the Walkman which
morphed several times into the groundbreaking iPod. It's webcasts and podcasts
Consumers who wish to get their audio
news and entertainment in a variety of ways have an incredible amount of
choices and the marketplace has responded with all its glory expanding quickly
the diversity of business models, offerings and content created. Paralleling
with video, we have entered a golden age of content creation and while some of
the big distribution companies may see their markets shrink, entrepreneurs and
new creators rapidly jump in and create new services, products and
And just like with energy, we
suggest an “all of the above” policy, which means no one source should be given
preferential treatment over all others. For this reason alone, we do not agree
that Congress should take any action favoring broadcast radio over any other
source of audio. Currently, Internet, satellite and cable broadcasters pay
significant royalties to performers when their songs are broadcast. By
contrast, over their air radio broadcasters are not required to pay performers.
This situation is a creature of historical accident, and it is simply
unjustifiable. Congress should ensure that over-the -air broadcasters do the
right thing, and fairly compensate musicians.
the phenomenal growth in digital video, the resulting flattening of TV screens
and the high quality of the displays have created huge opportunities in and
demand for quality audio. Americans buy over 30 million flat panel displays
every year. To ensure the optimal viewing experience, consumers are
increasingly looking for quality audio products to ensure that the sound
matches the stunning HDTV pictures.
Fifth, recent advancements
in the science of sound reproduction are changing the world of audio. In the
early 1980s when we leapt from analog to digital and the compact disc and
digital radio, some complained that music delivered with this new digital
technology lacked “warmth”. We rarely hear those complaints today. Instead, we
only see enhancements. Listeners can hear, in their own personal environment,
audio that is identical to what was captured in the mixing room, the sound
stage or concert hall. Surround sound provides a more immersive experience that
makes one a participant more than a casual observer and communicates the
emotion of the moment.
Dolby True HD is now part of a
download music service. More the traditional packaged media business is being
complemented by electronic delivery. Vudu, CinemaNow, HBOGo, Netflix, Apple TV
and Amazon are streaming television and motion picture content to the home
accompanied by multi-channel (up to 7.1) surround sound. Meanwhile, Americans
are using a variety of devices to access their digital music. According to CEA
market research, over the last year 70% of Americans listened to music on a
desktop or laptop computer, and 60% on an MP3 player.
although music is the only area where millions still spend hours enjoying
creativity from hundreds of years ago, the fact is that our best times are
still ahead of us. Social networking allows collaborative music creation and
sharing. Imagine how our kids’ creativity will be unleashed as they learn music
and collaborate with bands on line. Given the high correlation with music
education and math development this is a good thing culturally and
scientifically for innovation.
More, at the other side
of the spectrum, with an aging population, audio solutions that provide
amplification and sound clarity will emerge through devices such as phones and
headsets. In fact, CEA has initiated a standards project to enable people with
hearing impairments to adjust audio presentation for their specific needs. We
will rely in audio delivered electronically for health maintenance,
socialization and service to remote, aging and other populations at need.
The tremendous recent growth in interest in high quality
headphones likely presages further business opportunities for higher quality
content, media and delivery methods. This headphone-driven interest in
high-quality audio may help give legitimate content providers a critical
marketplace edge over low-quality, unauthorized internet downloads. More, the
growth in surround sound also is being followed by surround streaming.
Companies like Olive, Sonos, Sooloos, Sonore and others are manufacturing
servers that include surround sound music playback.
if there is one area of concern it is what we can do collectively, to educate
Americans about the importance of protecting their hearing. Many in my
generation attended – and may still attend – concerts where their passion for
the music put them too close to loud speakers. We also know that playing music
too loud can affect hearing and for this reason since 1981 most reputable
headphone makers have added warnings with their headphones about playing music
too loud. And CEA has joined with the RIAA, the American
Speech-Language-Hearing Association (ASHA) and others in a national campaign
aimed at ensuring children and parents learn early to value hearing as a
precious sense that must be protected. We don’t seek Congressional action other
than the “bully pulpit” that concerned public officials can utilize on this
Clearly, the audio marketplace for
music and information is incredibly vibrant. Remarkable innovations are
entering the market at a rapid pace, and thriving new business models are being
created. The winners are US consumers, who have unparelled access to news and
information from a multiplicity of sources. With all of these advances in audio
distribution and consumption, I am sad to report that we are still fighting
efforts to mandate the incorporation of old technologies in new products –
namely, radio broadcasters’ demands that Congress forcibly intervene in the
marketplace and require analog radio receivers be installed in a host of
The fact is that at least two dozen
phones equipped with FM tuners are already on the marketplace for consumers who
desire that feature, although surveys indicate that it is not widely used.
Faced with the fact that analog radio in digital phones is not
popular with consumers, broadcasters are trying a new argument. They now claim
that FM tuners are somehow necessary so that Americans can be alerted in the
event of a tornado. This argument defies logic for a number of reasons.
The vast majority of radio stations operate in unattended
mode, meaning without people present to manually control the programming. Some
stations do have people present during specific periods of time, such as
morning drive time, but operate unattended during other periods. When it comes
to informing their audiences about time sensitive information unattended
stations typically either don’t do it at all, or are very slow to get the
information out. This is because to operate in unattended mode the programming
has to be planned out and recorded well in advance.
unattended operation is a natural result of technological progress. Many other
industries have also embraced unattended operation, such as banks, which have
for years allowed us to get money from ATM machines when there is nobody
present at the bank. Also, gas stations allow us to fill up our tanks without
Unattended operation is great for
consumers because it provides all of us with easy access to services whenever
we need them. However, if we need urgent, timely service in a crisis an
unattended business is usually not much help. If your car breaks down in the
middle of the night it will be easy to find working gas pumps at an unattended
gas station, but very hard to find a mechanic. And if there is a local
emergency in your community it will be easy to find pre-recorded programming on
unattended radio stations, but hard to find up-to-date information about the
Also, in the event of an emergency, people
increasing use their mobile phones to access the Internet or platforms such as
Facebook and Twitter. The services provide specific and localized information
that is often more helpful than a generalized radio update.
Finally, and most important, wireless carriers and the federal government
are already rolling out a system to provide geographically targeted emergency
alerts. The Wireless Emergency Alert (WEA) system, deployed this past April,
will transmit emergency alerts for severe weather, as well as AMBER alerts for
missing children and Presidential Alerts for national emergencies. The text
based messages are vastly more effective than FM transmissions because they
will instantly be displayed on the phone. A warning sent by analog radio is
useless unless you happen to be listening to the radio at the exact moment the
radio is transmitted.
CEA opposes not only a mandate
for FM chips in cell phones, but also opposes the broadcasters’ current effort
to require a government study of this issue. The marketplace has shown that
Americans are perfectly capable of deciding for themselves what functions and
features they want in their smart phones. Wasting taxpayer funds for something
as absurd an unnecessary mandate on innovation is the kind of special
interest-driven expenditure that frustrates average Americans.
Clearly, broadcasters have lost their historic monopoly on
music transmission, and now exist in a more competitive environment. Indeed,
research TargetSpot research found nearly half of those surveyed (47 percent)
spend less time listening to broadcast radio than they did a year ago. Not
surprisingly, the steepest decline in broadcast radio listenership was among
“digital natives” - young adults age 18 to 24.
correct answer for broadcasters, however, is not to beg Congress to protect
their historic business model. Instead, broadcasters must do what other
industries do when faced with new market entrants – learn to compete smarter
Indeed, if the broadcasters wish to compete
effectively, redoubling their commitment to HD Radio would be a good first
step. Delivered over the AM/FM analog spectrum, HD Radio allows over-the-air
broadcasters to offer the same digital sound quality and wide array of
programming now offered by their digital competitors.
applaud Ranking Member Eshoo and Congressman Issa for introducing House
Continuing Resolution 42 , the “Creativity and Innovation” declaring, among
others, that new Government mandate forcing mobile device manufacturers and
wireless carriers to include terrestrial broadcast radio tuners in new mobile
devices will stifle innovation, competition, and consumer choice. We hope other
members of this subcommittee will join in support of the resolution.
Rather than imposing mandates that would restrict choice and
impose costs on consumers, Congress should act to make sure that the vital
music marketplace continues to thrive.
Today, a growing
amount of music is enjoyed on spectrum-dependent mobile technologies. We
applaud Congress’ efforts to promote the voluntary auctions of underused
television broadcast spectrum, and we call on you to ensure that these auctions
take place as expeditiously as possible. The result will be more investments,
more startups, and more high-skill, high-wage jobs.
as an intellectual property (IP) industry, we call on Congress to promote smart
IP policies that protect creators while maintaining the dynamism of the
Internet economy. While we had disagreed with some in the content industry over
the approach taken in the Stop Online Piracy Act (SOPA), we continue to believe
that we can reach a consensus on strategic and targeted ways to cut off funding
to overseas “rogue” web sites. We also encourage content owners to aggressively
offer licenses to legitimate music services that will compete effectively with
Finally, to compete effectively,
American audio companies need access to the best, brightest and most innovative
workers in the world. We urge Congress to enact strategic immigration reform,
removing barriers to highly-skilled workers and entrepreneurs, and ensure that
immigrants receiving advanced degrees in US universities can stay in America to
Innovation is driving our economy, and
nowhere is this truer than the audio industry. Hardware manufacturers, online
innovators, and artists are all taking advantage of extraordinary new business
opportunities. As always during times of disruptive innovation, incumbent
industries come to Congress and request special protections. We urge Congress
to ignore these self-interested pleas, and continue to promote a vibrant and
dynamic free-market economy that creates investment and jobs. We look forward
to working with you in those efforts.