Broadcasters Say Performance Tax Is Unfair to Small Stations

Real culprit is bad record deals, they argue.
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Real culprit is bad record deals, they argue.

A bill to require broadcasters to pay a performance royalty for airplay on terrestrial stations is not fair, broadcasters told members of Congress this week.

Steve Newberry, newly-elected as Radio Board chair of the National Association of Broadcasters, and Charles Warfield, president and COO of ICBC Broadcast Holdings, testified this week in a hearing before the House Subcommittee on Courts, the Internet and Intellectual Property on behalf of the NAB.

Newberry, whose full-time job is president/CEO of Commonwealth Broadcasting, said all broadcasters — urban, rural, religious, public, community, ethnic, large and small — oppose H.R. 4789, sponsored by IP Subcommittee Chairman Rep. Howard Berman, a Democrat from California.

“Radio is free, radio is pervasive and no one is harming record label sales by stealing music from over-the-air radio,” Newberry said, according to a transcript provided by NAB.

The measure has the support of the major record labels; they say radio is not paying its fair share of music royalties compared to satellite radio and radio in other countries.

“On the international front, it’s simplistic to argue that, because other countries pay a performance royalty, the United States should as well,” Newberry said. “First, comparing the U.S. to totalitarian countries like Iran or North Korea is just plain silly when you consider the artistic freedom of expression we have here in the U.S. But it is also like comparing apples to oranges.”

He continued: “Most of these other countries created performance royalties when the broadcasting systems were either government owned and operated, or at least substantially subsidized by tax dollars. Often it was the government who was paying the royalty. The U.S. broadcasting system, however, is predominantly privately-owned and operated and does not receive tax subsidizes.”

NAB calls the performance royalty a tax and notes that broadcasters already pay fees to ASCAP, BMI and SESAC.

Both Newberry and Warfield said the measure would hurt small broadcasters, who have suffered from flat revenues for several years.

Warfield, who used to work for a record label and whose broadcast group services primarily African-American communities, questioned whether it’s fair that record labels would take 50% of any new performance royalty under H.R. 4789. He said the bill targets local radio stations “when the real culprit for the lack of artist compensation is the result of inequitable, one-sided contracts that artists find themselves entangled in for years after they’ve signed with a label.”