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Rotella: Radio Performance Tax Does More Harm than Good

The seemingly well-meaning tax is very dangerous

The author is president and CEO of the New Jersey Broadcasters AssociationRadio World invites industry-oriented commentaries and responses. Send to Radio World.

Here we go again!

Every Congress, a few well meaning, but misinformed legislators, appear to forget that they represent the people of their districts and not the foreign-owned record companies, and introduce in one form or another, the toxic performance royalty fee legislation commonly known as the “Performance Tax.”

It does no one any good at all, least of all the vast and diverse audiences our free-over-the-air broadcasters serve, and helps stifle the creative growth and opportunities for success of emerging artists, while destroying the best thing that ever happened to our multifaceted, shared culture: the free-over-the-air delivery of all forms of entertainment, local news, EAS warnings, AMBER Alerts and most of all — music, to everyone, for free  — no matter your social status or place of origin — radio!

Broadcast radio is enjoyed by almost everyone in America. For almost one hundred years, Americans have had a love affair with broadcast radio. And for good reason. Its bold, diverse, endearing, expandable, compact, ubiquitous, portable, lovable, affordable, and incontrovertible value as the most ubiquitous source of news, information and diverse entertainment available to everyone, and all for free.

No download charges, no subscription fees, and no license fees for the end user. It informs and binds us, it makes us laugh, it heals our wounds, it provides comfort and lifesaving information in times of crises, and oh, yeah — it’s always on!

But the wrongheaded measures pushed by some who insist on squeezing every dime out of a broadcaster’s craft that they can would tamper with this timeless recipe for universal happiness.

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But much more horrifying; these Performance Royalty Taxes would destroy radio as we know it, and indeed harm everyone; artists, composers, communities, broadcasters and most sadly, everyone who enjoys radio today — about 300 million of our friends, family, neighbors and co-workers in America alone — the very constituents that these legislators are supposed to serve.

The good news is that support for the Local Radio Freedom Act supporting local radio continues to be strong in the House and the Senate. Currently, more than 200 Members of the House are on record in opposition to a performance tax.

New Jersey Broadcasters would like to express our deep appreciation to our Congressmen for their courageous leadership in previously opposing this unfair and wrongheaded tax. These legislators are to be applauded for their early recognition and constant vigil over free-over-the-air radio’s service to the local communities they represent across the Garden State.

However, the NJBA was always convinced that a stealth attack on free over-the-air-radio was very possible, as we saw with this week’s introduction of two P-tax bills in Congress.

In New Jersey, local radio is very, very important, and the prospect of a Performance Tax is akin to a Death Tax for broadcasters.

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The P-Tax would demand exorbitant royalty fees from broadcasters to pay for the a few record labels failed business models. And these new royalty fees would be on top of the billions the radio industry already pays in royalties to artists and songwriters through ASCAP, BMI and SEASAC! In these challenging economic times (or in any economic model), can any industry afford such confiscatory increases in net operating costs?) And the public would gain no return for the fees taken. No community service, no public announcements, no lifesaving AMBER Alerts or EAS warnings. Nothing at all but making a few more millionaires and billionaires richer, and all at the public’s expense.

Nevertheless, the unavoidable result of the Performance Tax’s passage is much more than merely wreaking economic havoc on local radio stations. The passage of the bill would force the closing of a majority of local radio stations in New Jersey and across the country. To be sure, the prospect of enhanced opportunities for localism, diversity and outreach would be immediately hushed. Station groups and networks would be hurt, as well. Localism would be out the window and thousands in New Jersey would lose their jobs.

Moreover, local merchants, businesses, government officials, politicians, and community groups would be without a voice and an affordable, effective outlet to market their goods and services to their obvious customers and constituencies.

But this is all not about dollars; It is about common sense.

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Much more horrific, the closure of these vital broadcast outlets across America would also decimate our Emergency Alert Warning System capabilities and pose a genuine threat to homeland security. And for what? So a few greedy foreign owned record companies can try to line their coffers with more American dollars, taking billions out of our economy? And worse, the move would directly or indirectly, wipe out hundreds of thousands of jobs in the United States.

Moreover, a new oppressive Performance-Tax would hurt emerging artists who might not ever get their music on the air if stations have to pay a fee every time a new song is played.

Performing artists almost universally recognize the honest and incomparable value only broadcast radio air-play adds to their industry and business model. The record label’s recognition of the unparalleled promotional value of radio airplay contradicts statements made by recording industry representatives in Washington.

Our two industries have worked perfectly together for decades. Certainly, no artist would ever have an opportunity to become famous and successful absent their natural symbiotic partnership with free-over-the- air-radio! This symbiosis evinces the inescapable conclusion that both sides are benefiting. Why do you think local stations across the country are bombarded every day with sample CD’s MP3s, 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, video and merchandise.

Worse, the P-Tax’s foreseeable fractionalization of collaborative artists could hurt everyone associated with the creative process and diminish the very projects or songs they want to promote to be successful. It’s a recipe for collusion, litigation, division, unfairness, and disaster.

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So you see, a new Performance Tax imposed on radio stations by record companies would only be biting the very hand that feeds them.

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. But we are not alike!

Remember how radio stations helped warn and serve New Jerseyans crushed by SANDY? Well, New Jerseyans do. Free over-the-air radio & television are the only exclusively local media in existence! Did you ever see a pure-play or satellite station sponsor a little league team or do a food drive for a local charity?

Our cherished stewardship of the public airways is a public trust, and no industry is more publicly spirited than broadcast. We have a very different mission, mainly to operate in the public interest; from the sustaining value we provide for the EAS for local emergency notification such as NJ AMBER Alerts, and in response to community-wide emergencies like Superstorm Sandy, ice and snow storms, and other extreme weather hazards, to local news of community events and happenings in entertainment in an amazing variety of formats.

The internet and satellite applications referred to in mislabeled “equitable royalty fee” arguments (and the specious claim of pure-play “radio” designations) do not provide such essential public services, nor are they designed or equipped to do so.

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Compared to free radio’s 300 million listeners in the United States alone, satellite and subscription services reach less than 10% of radio’s ever expanding and diverse listening base. And radio’s service is free! Think about how many people in today’s tough economy can afford to pay to hear radio in the first place. (By the way, if anyone wants to see the effects of wrongheaded Performance fees, just look at the 30%+ increase in satellite’s monthly subscription fees for royalties and the “going dark” of some radio stations’ streaming audio on the net, due largely in part to the ever-increasing royalties charged to stream content.)

And to lay to rest the specious argument that the performing artists will get any money from the new Performance Tax, all you need to do is review the typical recording contract any new artist is “forced” to sign if they want to get their coveted “record deal.” It often provides for very little compensation to flow to the artist after record production and promotion costs are recouped.

More disturbingly, many artists complain about the notorious greed of the industry itself. 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, Michael 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.” Bravo, Michael.

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Finally, our great New Jersey Broadcaster Association represents much more than the radio and television industry in the Garden State. We also represent the vast and diverse audiences that our members so ably serve. We represent the people, and we stand with them. We respectfully ask all of Congress to the same. It’s the right thing to do.

So keep listening New Jersey! Let’s defeat this Performance Tax and let’s keep New Jersey radio free for all to enjoy!