The Politics Of Appeasement

The NAB Radio Board Is Selling Fear And Must Be Stopped
 

On September 27, 1938, Neville Chamberlain, then Prime Minister, spoke to the people of England, saying, "After my talks with Herr Hitler ... we cannot in all circumstances undertake to involve the whole British Empire in war simply on her account. If I were convinced that any nation had made up its mind to dominate the world by fear of its force, I should feel that it must be resisted."

Neville Chamberlain did a deal with the devil in the interest of unity and peace. He wasn't willing to step up and face evil, which ultimately came anyway.

Gordon Smith's NAB is about to sell out the radio industry, and our industry is buying his reasoning in the interest of avoiding something worse. Smith is telling you the deal on the table now is the best deal possible, and that we will face retribution from Congress and larger fees in the future under the unpredictable Copyright Royalty Board. He is telling you all the good reasons we should go forward and all the good things that will come from giving in to MusicFirst.

But other reasonable alternatives exist, and slowing the process now won't necessarily result in the other awful alternatives.

Selling Fear

Radio and the NAB are made up of good people, and Washington is made up of professional politicians who are masters of their trade. Senator Smith has talked reasonable people into buying his solution and has them believing that if we don't take this deal, we are doomed. He understands the depths of politics, but should we trust the NAB's recommendations? Smith is selling fear, and the importance of acting immediately to avoid tragic consequences.

Last year Congress told us we could save the country by signing a stimulus bill. They sold fear to facilitate speed. These are the ways of politics.

To be clear: I'm not questioning Senator Smith's integrity, or his belief in what he is promoting. But I don't think we should just accept his solution as the only answer and trust blindly in his experience in a political world we don't claim to understand. We have too much at stake.

Selling Unity

It appears that anyone who doesn't agree with the NAB's plan is a victim of "conspiracy theories" or is not working in the interests of "unity." These are terms we're accustomed to hearing from politicians who like to reposition points of view other than their own.

Unity is valuable and important. But on this, there is no real unity. And there won't be until a proper process has been followed to engage the entire industry.

Selling Benefits

It's the game of politics. "Support me on this, and I'll give you what you want." The NAB is selling us on the benefits we will receive if we negotiate with the labels: items like reduced streaming fees and, of course, the famous radio-on-every-cellphone.

Yet there is no guarantee these things will be built into the law. Even if they are, I still don't believe it's a win worth the fees as they stand. Though some allude to a study that said radio could reap $300 million in additional revenue by doubling TSL through cellphone use, that's just another spreadsheet myth.

Almost all cellphone listening takes place with headphones -- the tiny speakers on most phones can barely be heard. PPM won't record this listening, nor are panelists likely to plug their headphones into a PPM bridge device. So even if we do get more listening, it will be difficult to monetize.

Remember, we were promised PPM would significantly increase radio revenues. Looked good on paper, but has it come true?

Who Does NAB Really Represent?

The National Association of Broadcasters represents roughly 4,000 radio stations, or about one-third of commercial stations. The Radio Board of about 30 people has been in negotiations intended to lead to legislation, which, under the proposed plan, will saddle radio with taxes that can be changed at the whim of any future Congress.

My fear is that the point of entry, "under 1 percent," will grow over time. Increases will surely be aggressively sought by record labels that desperately need revenues and want revenge for radio's highly researched playlists, lack of new-music airplay, and refusal to back-sell over all these years.

Why Now?

This is one of those rare moments when the NAB must not be allowed to negotiate on behalf of the entire radio industry. I know they are using the terrible Performance Rights Act as a scare tactic, saying it could be quietly slipped into a bill on Christmas Eve. But it takes only two senators to put a hold on a bill, and opponents to this NAB effort tell me at least two senators are willing to hold the PRA. What's the hurry? Why the rush? If the balance of power in Congress changes today, in a direction that would supposedly favor radio, why now?

Though the NAB has offered talking points about the dangers of being an "industry of no" or "hell, no" to a performance tax, and though many have accused me of dividing the industry, I refuse to acquiesce in the interest of the appearance of unity.

"Unity" in this case means roll over and play dead. Packaging opposing voices as "destroying unity" is divisive. Thousands of radio stations whom the NAB does not represent (and many it does) think this proposal is a bad idea, and will be labeled as destroyers of unity. We don't have to be an "industry of no" to get a creative solution.

Do you realize that a 1 percent royalty will cut into your profits by about 5 or 6 percent? Furthermore, for the last 50 years, the NAB has stated it has no basis in rate determination. What has changed, and why is it involved in determining the rate now? Is it NAB that is dividing the industry?

Everything Will Be OK

The other concern is that the specifics of a deal -- in the sense of exact legislative language -- are not on the table. Some have told me, "Don't worry, Eric, the NAB is going to work in radio's best interest, and the definitions and specifics can be worked out later."

Sounds like the health care bill: "We have to pass the bill so you can see what's in it." Sorry, if you are in politics today, I don't trust you. Give me the exact specifics before you ask me to agree. I don't want the government making decisions about royalty rates.

Are We Repeating History?

MusicFirst represents the four major record labels (three non-U.S.), negotiating on behalf of themselves and, they claim, recording artists. As copyright holders, the labels will keep at least half of any money collected, and artists will divide the rest. And for labels trying to recoup lost revenues, 1 percent is just a foot in the door.

There is a better way.

Frankly, we never should have gotten into this position, and suggesting anything other than a hard line was a strategic error. NAB insists we should be talking because that's what people in Washington do. Now the cat is out of the bag, and perhaps fighting royalties is indeed a no-win battle, and the "hell, no" approach can no longer work.

In fact, let's assume negotiation is the only option. If we must negotiate, we should insist on a system that is in the best possible interest of both radio and artists, as well as the labels. The current proposal benefits only the labels; it can't benefit radio, because it is too easily subject to change.

Here is what I propose:

1) Demand a vote.

If the NAB is so confident that this is in the best interest of the radio industry, then they should agree to putting it to a vote by the full radio membership. An industrywide vote would obviously be even better, if it were possible to orchestrate, but an NAB member vote is a great start.

This is the biggest, most important issue to hit the radio industry since the Telecom Act of 1996.

Too big to rely on the wisdom of the NAB Radio Board alone. Frankly, it’s a good idea to take these board members off the hook if they are wrong.

Some may suggest we just don't understand how things are done in Washington, but it simply doesn't matter. The NAB, its Executive Committee, and the Radio Board members are acting on behalf of thousands of radio stations who are not members, and stations who are members in opposition.

NAB radio members should DEMAND a vote on the specifics of this deal, conducted and audited by an independent third-party accounting firm. This is sea-change legislation.

2) Base a proposal on a proven working model: a consent decree.

Royalties may indeed be inevitable. But rather than rushing into this proposed NAB agreement, let's start over and get the right kind of deal done, using the model that has worked for the writers who use ASCAP and BMI.

We don't want Congress setting our rates. Therefore we need to involve the courts and call for a consent decree that can be negotiated in the courts and that cannot be changed at the whim of Congress.

Let's set up an independent industry body like the Music Licensing Committee, whose members deeply understand music-licensing issues and represent the industry as a whole. The MLC is currently fighting to reduce fees through the court system, fighting over a mere million extra dollars, and yet with this proposed term sheet we're about to get saddled with $120 million more in estimated fees (and that's just the beginning). We need a group like the MRC working on radio's behalf and fighting over every million.

3) Recast the negotiations.
MusicFirst is funded by and represents the record labels, and I don't believe it is working in the best interest of artists. It wouldn't be easy, but if there is real concern for artists, radio can become the hero by insisting that an independent third party be appointed to truly represent artists' interests, separately from the labels. As it is, artists are under pressure from their labels, and many are afraid to speak freely.

If royalties come to pass, they would almost inevitably be collected and distributed by SoundExchange, which handles performance royalties for other audio media. But unlike ASCAP and BMI, which are nonprofit organizations with published and fixed operational fees (SESAC is for-profit and operates under a different model), SoundExchange can decide what expenses to charge and how to distribute the money, with no oversight. Labels will receive 50 percent or more of the fees collected, and artists will have no choice but to rely on SoundExchange for their share.

When ASCAP became too large and demanding, BMI was created to give songwriters a choice. All negotiations should DEMAND that there be TWO nonprofit entities created to administer performance royalties, so both artists and independent labels will have a genuine choice.

Don't Give In Because It's Unpopular

There are moments in one's life when once must not be a Neville Chamberlain, when one must follow one's heart to do the right thing.

There are some whom I know are going along with things they don't believe in because they don't want to make waves, or because they can live with this plan as long as it doesn't go further, or because they are leaving their company in a year and have made their money, or because "Gordon says it's a good plan."

As a broadcaster, you will look back on this moment in time, wishing you had taken a stand, been willing to make unpopular decisions, and become more involved in this battle. When you're writing those monthly checks, when you see the percentages rise over the years, when you see the labels getting rich and the artists not receiving their fair share, when you see the onerous restrictions and requirements placed on your airplay, you will wish you had personally taken a stand.

I cannot change a thing. You can.

Not Clouded By Self-Interest

It's been claimed that I have no skin in the game, or that I simply don't understand because I haven't owned radio stations since the 1980s. It's true: I have nothing to lose by opposing these negotiations. Be thankful my opinion is not being clouded by the rhetoric of fear. I have no ax to grind.

In fact, I am standing in opposition to many women and men whom I highly respect for their love and passion for the industry. I respect their judgment and intellect, and I don't cherish the thought of looking them in the eye over this issue.

I know they are voting yes because they deeply believe Gordon Smith is offering them the right answer. I'm risking my own credibility in the eyes of these industry leaders because I'm taking a stand in opposition. I could quietly disappear into the background, which would be the politically expedient thing to do. But this does not smell right to me, and the NAB is pushing too much, too fast in the name of keeping this out of the hands of the CRB.

I'm not buying it, and I have to speak my mind.

Become Skeptical

By the end, the terms won't end up anywhere close to the 1 percent now on the table, nor will the electronics industry stand for legislation to put radios on all phones. The seductive benefits we've been sold won't materialize, and the proposed percentages will grow to get the deal done. Even now, MusicFirst continues to bloviate about how NAB already agreed to something else.

It's time to become a skeptic and seek alternatives to the flawed NAB term sheet.

I am not anti-NAB, but I strongly disagree with them this time. My only interest is in making sure you see both sides of the story before you sign your future away. Long after Gordon Smith has moved on, you'll be living with the outcome of these negotiations.

It pains me when I see stations resigning over this issue, and the reality is that NAB could survive without radio's membership dues because of its massive spring convention revenues. We need them more than they need us, and their service to our industry is ordinary invaluable.

But this isn't one of those times, and you need to find your own personal way to make your voice heard, whether or not you are an NAB member.

Today it is expected that the people will take back a government that many feel wasn't working in their best interest. Ultimately, the people have a voice. The NAB needs to listen to the voice of the radio industry.

Your voice.

Demand a vote.

Eric Rhoads
Publisher of Radio Ink

 

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The Debate Continues at Forecast
I've never seen stronger feelings than those expressed both for and against this issue of negotiation on music royalties. Dialogue and discussion is healthy to create proper resolution. I have given Gordon Smith time to share his feelings at Forecast, and each of the group heads will be allowed to share their feelings as well. This could be one of the most lively discussions in many years at the Harvard Club, and you should attend and make your voice heard. We limit attendance to 200 people. To register, call 561-655-8778 or go to www.radioink.com/forecastsummit.

 

 

 

 

Comments

[NealKelly23]

When you are in not good state and have got no money to move out from that point, you will require to receive the credit loans. Just because it will help you emphatically. I get commercial loan every year and feel myself OK just because of it.

[Jay Meyers]

This response is directed at Dennis Wharton's response accusing Eric of character assassination.

Dennis, you miss the point. Eric was not attacking Senator Smith or the NAB with the 1938 analogy (one which I used in a feature article in another publication just prior to the recent NAB in September - http://www.allaccess.com/power-player/archive/7877/jay-meyers )

The key point as I mentioned, and which Eric was making is this one:

THOSE WHO DO NOT STUDY HISTORY ARE DOOMED TO REPEAT IT.

A political solution to a fundamental turf war never works. History shows us that time and again.

Answer me this? Why wouldn't the NAB put this to a vote among its membership? I just voted on Tuesday and there were a dozen issues on the ballot asking me whether I'd accept certain new taxes? Whereas my State's government reserves the right to levy a tax, they ask me the voter if I'd like to accept it in return for the benefit.

How about if the NAB steps up and asks its membership if it will accept a tax in return for the benefit (although since we already pay significant money to license music through ASCAP, BMI and SESAC you'll have to really get out and sell me about a benefit).

Lets play some old fashioned politics instead. Get all the parties in a room, radio, performers, AND composers, and our position would be "OK folks, here's the pile of money we pay every year for music usage. The two of you figure out how you want to split it up and tell us where to send the checks."

And finally, back to some recent history of what can happen when the leader doesn't pay attention to his constituents

The President took responsibility for not doing enough to alter the ways of the capital, from hyper-partisanship to back-room dealing. "We were in such a hurry to get things done that we didn't change how things were done."

Leadership that is hell bent on going in a direction that from recent non-scientific polls indicates is against the desire of upwards of 75% of its membership is against will, in the end, fail.

Anyone who thinks this is coming out of the back room at 1% and staying there for all time, there is this beautiful old bridge in Brooklyn I'd like to discuss with you.

Stand up and fight. And, have the courage to take a vote.

[Jim Lambley]

Eric,

I appreciate your honesty. I am a firm believer in "let your yes be yes and your no be no". Everything else on the topic is smoke and mirrors designed to make money for someone other than the broadcaster who worked, sacrificed and risked for it. I personally am tired of someone else wanting to live off my labor. My answer is No. I did like the "hell no" concept too.

Respectfully,

Jim Lambley
Owner / Manager
KSDZ Radio

[AL GRAHAM, SO. GA. AM/FM]

HAVE READ STRATEGIES/FUTURE ARTICLE AS YOUR'S..I AGREE THAT BROADCASTERS SHOULD DEMAND A VOTE, INDUSTRY WIDE. THE VALUE OF AIR PLAY OF ARTIST HAS BEEN GROSSLY UNDERVALUED. RECORD SALES/CONCERTS AND THE LIKE WOULD BE NOTHING WITHOUT AIRPLAY OFFERED BY RADIO. WE DON'T NEED ANY KIND OF AGREEMENT THAT PUTS US AT RISK FOR HIGHER FEE'S DOWN THE LINE AS PER ASCAP, BMI, & SESAC. THE PERSONALITY/CAREER OF LEADERSHIP OF NAB HAS NOTHING TO DO WITH IT. RADIO AND ITS VALUE IS THE BEST THING WE HAVE GOING FOR US. SMALL MARKET STATIONS THAT NOT MEMBERS OF NAB, AND CAN'T AFFORD TO BE, GET LEFT IN THE DUST...GIVE US A VOTE ON SOMETHING OF THIS MAGNITUDE THAT HAS SUCH AN IMPACT ON OUR SURVIVAL..SMALL TOWN AM/FM WONDERING. ARTIST & RECORD CO.'S ARE CALLING DAILY TO SEE IF WE ARE PLAYING THEIR PRODUCT..NEW ARTISTS ARE COMING BY FOR LIVE INTERVIEWS FOR HELP TO MAKE'EM HIT. BEEN TAKEN FOR GRANTED TOO LONG. THEY NEED US/WE NEED THEM..SEEMS LIKE A FAIR GAME TO ME. LABELS ARE THE ONES WRONGING THEIR ARTIST'S, NOT RADIO. ALL YOU HAVE TO DO IS LOOK AT THE LIFE STYLES OF THOSE WE'VE MADE RICH AND FAMOUS..GIVE US A VOTE, A WAY WE CAN BE HEARD IN THIS DEAL. POWERS THAT BE, DON'T REPRESENT US NOT KNOWING HOW WE AS AN INDUSTRY FEEL..THERE'S NO RUSH IN THIS..TAKE THE TIME TO DO IT RIGHT OR DON'T DO IT AT ALL.

[Bruce Reese]

Notwithstanding the inappropriate and very personal WWII analogies -- I'm disappointed that Vidkun Quisling didn't make the list of insults-- as part of the term of apparent idiots/traitors who helped fashion the term sheet over a 10-month period, I'm still having trouble feeling bad about what we did, how the Board voted -- overwhelmingly in favor of the term sheet, according to reports -- or where we are now. And, it is horribly inaccurate (and disingenuous) to lay this evil at the feet of Gordon Smith. We are fortunate to have him for his immense respect and for his tactical sense, but the substance of this solution came from radio broadcasters large and small, private and public.

Thanks, I feel better already.

[Countryboy]

All I can tell you is this: The music industry is united in getting their royalty. NARAS President Neil Portnow said it on the Grammy telecast earlier this year. "Never before has the music industry been united around one issue." He's right. Even people who aren't completely in favor of the details of the RIAA legislation are keeping their mouths shut. Like the songwriters. You don't see the Songwriters Guild complaining about this. You dont see the MPAA complaining. They're sitting back and letting the RIAA take the lead on this. Even though it will likely hurt them. And the artists ARE united on this. Especially those who control their own destinies and run their own labels.

Know your adversary. A divided house will not stand. If you're going to oppose the NAB, do it in private, where the other side can't get information. Because they are watching very carefully. If they see weakness, they will exploit it. All these ideas proposed are fine ideas. But squabbling internally now isn't going to help.

[Eric Rhoads]

I'm not trying to win, Dennis. This dialogue is designed to keep the discussion alive and is not about me being right. You can claim victory in the argument if you wish, it matters not. What matters is that we don't destroy this industry at the hands of potentially poor judgment.

Though I know I chose a powerful or even distasteful analogy, it's only an analogy -- and it's also the most famous example of a failed policy of appeasement in recent history. The "evil" is entirely on the side being appeased; in this case, MusicFirst and the labels it represents.

I'm not sure what you read as "character assassination" -- I stated specifically that I am not questioning Sen. Smith's motives or integrity, and I have not accused him, or any member of the Executive Committee or Radio Board, of acting in bad faith. But I do believe that Gordon Smith's approach is that of a successful politician, accustomed to dialogue and to compromise. And that approach may lead him to recommend a course of action that I believe strongly is not in radio's best interest. I'm very concerned that the Radio Board, in deferring to his expertise, may be making a serious mistake.

[GS]

@Dennis: Any response to my comment about the NAB trying to get HD Radio mandated onto cell phones? I suspected for years that your Board was in the hooch with Struble.

[Barry Skidelsky, Attorney & Consultant, New York City]

Amen Eric. Your points are well taken, especially your proposals calling for a vote and a court supervised consent decree rather than new legilsation. Most of all, I commend you for simply calling it like you see it. Unfortunately, while I too believe that any decisions motivated by fear rarely work out in the long-term, it ain't easy to "put the toothpaste back in the tube", now that the NAB has "let the cat out of the bag", and I too am worried about the future for radio that follows letting the "camel put his nose in the tent", because "if you give a mouse a cookie, he will want a glass of milk" (I would have strung together more cliches, but I'm sure you catch my drift). The musician side of me took particular interest in your reference to the notoriously unfair shake that record labels have always given artists, and I also have no reason to believe that will ever change --- unless perhaps a new alliance could be forged between artists and radio, to boldly go forth together in today's digital world, where an increasing number of composers and performers are already end-running the status quo and innovatively taking more control of their own futures. Food for thought, no?

[Dennis Wharton]

Eric,

When you invoke Adolf Hitler and engage in character assassination to make your case, you have lost the argument and done a tremendous disservice to our great business. Members of NAB's Radio Executive Committee posted a civil response (available here: http://bit.ly/bXneRj). NAB will not be commenting further in this forum.

Dennis Wharton
NAB Executive VP, Communications

[GS]

As has been pointed out, no one will listen to over-the-air radio on their cell phones, especially since headphones are required, and there will be no way to monetize listening, anyway. Can't any see the obvious? As I have pointed out in Eric's other post, many of the NAB/NRSC Board Members are investors in iBiquity:

"Others Challenge Blanket Increase"

"Press Communications filed an Application for Review and Request for Stay, citing an unalterably biased outcome of the proceeding based on testing conducted by the parties who had a stake in the outcome, without a full technical review or independent verification. NPR had already admitted to vast amounts of new interference, wrote Press. The NAB is somewhat tainted with a majority of its Executive Board and eight to ten others on its Radio Board having invested money in the venture. Meanwhile, a member of its radio board with a heavy investment in HD equipment in its group largely conducted the tests on its own stations working directly with iBiquity."

http://www.allaccess.com/net-news/archive/story/75588/wamu-granted-hd-power-boost-others-challenge-blank?ref=sitemap

The NAB is throwing your industry under-the-bus to eventually get HD Radio mandated onto cell phones, then iBiquity can claim "mass adoption" and go IPO. The NAB will leave OUR airwaves in ruins (hash), as they comfortably retire on millions. MusicFirst has rejected these terms anyway, and radio will end up on the wrong side of the fence with the CEA and CTIA.

[Holly Hall]

How about AM radio? Particulary us small guys are ignored by the NAB. No one even mentions that AM won't be included on cell phones..so where's our benefit and why should we have to pay the extra fees, that we can ill afford?

[Toni Holm]

But what is the strategy for stations opposed to this NAB board position? We are no longer NAB members, as are many smaller stations who no longer feel the NAB in any way represents us. What options do we have?

[radiospot]

SMITH, Gordon Harold, (cousin of Thomas Udall and Mark Udall), a Senator from Oregon; born in Pendleton, Oregon, May 25, 1952; relocated with his family to Bethesda, Maryland, where he attended the public schools; served a two year church mission in New Zealand; graduated from Brigham Young University 1976; received law degree from Southwestern University School of Law, Los Angeles 1979; admitted to the New Mexico bar 1979, Arizona bar 1980; law clerk, New Mexico supreme court 1979-1980; practiced law in Arizona; president of Smith Frozen Foods; member, Oregon State senate 1992-1997, president 1995-1997; unsuccessful candidate for election to the United States Senate in January 6, 1996, special election for the remainder of the term ending January 7, 1999, left vacant by the resignation of Robert W. Packwood; elected as a Republican to the United States Senate in 1996, becoming the first individual to run for a state’s two United States Senate seats in one calendar year; reelected in 2002, and served from January 3, 1997, to January 3, 2009; chair, Special Committee on Aging (One Hundred Ninth Congress); was an unsuccessful candidate for reelection in 2008.

This is what happens when you put a failed politician in charge of a broadcasting industry organization. Why can’t we have another Eddie Fritts? At least Eddie worked in a radio station.