Performance Tax Debate: Discussion with Executive Vice President of Media Relations for the National Association of Broadcaster

Discussion with Dennis Wharton, Executive Vice President of Media Relations for the National Association of Broadcasters regarding "performance tax" legislation, a piece of legislation that has passed through the House Judiciary Committee and the Senate Judiciary Committee which would require radio stations who play music on free and local radio stations across the country to start paying a new fee or tax. 

Announcer:  Welcome to Copyright Law Radio sponsored by Traverse Copyright Law, internet lawyers specializing in copyright infringement, copyright licensing and copyright registration.  Now, here’s your host, Damien Allen.
 
Damien Allen:  Good morning, and welcome to Copyright Law Radio.  My name is Damien Allen and joining me today on the telephone is Dennis Wharton the Executive Vice President of Media Relations for The National Association of Broadcasters in Washington, DC.  Good morning and welcome to the program, Dennis.

Dennis Wharton:  Well, thanks for having me, Damien, it’s a pleasure. 
 
Damien Allen:  And it’s a pleasure to have you on the show today, sir. Today we’re going to be discussing, well, I don’t know how to say this, but somebody wants to put a tax on performance on the radio, they’re calling it the performance tax.  Dennis, could you tell us please, what is the performance tax and what is driving it?
 
Dennis Wharton:  Well, it’s a piece of legislation that has passed out of the House Judiciary Committee and the Senate Judiciary Committee which for the first time ever would require radio stations who play music on free and local radio stations across the country to start paying a new fee, or tax as we call it, to accommodate the record labels and presumably the performing artist.  The fee would amount…it’s unclear exactly how much the fee would be but it’s certainly going to be in the $100 millions of dollars and potentially in the $ billions of dollars, and it’s something that we think could really decimate radio stations in the United States.  The main beneficiaries of this would be record labels three-four which are based outside the United States, so, it would kill jobs on the radio in the United States and transfer money to companies based in Japan, France, and the UK, and we’re fighting it very aggressively on Capitol Hill.
 
Damien Allen:  Now, historically, terrestrial radio is a platform for musicians and artists to get their music heard so that people would know it exists.  This has been going on since the 50’s, the 40’s when commercial radio became available, you know, popular music became available. 
 
Dennis Wharton:   And there’s no promotional values for us in terms…you’re right, we are the number one platform for exposing new music and the record labels don’t pay us anything to essentially give them free advertising for their music and I don’t have to tell you but radio stations are deceived by record labels and artists to “please play my music, play my music”. Why is that?  Because they know that’s what helps launches careers, that’s what helps sell records and it’s been a beautiful symbiotic relationship all these years back to the 30’s and 40’s like you mention. So, why are they proposing this tax now? Well, it’s because the business model of the record labels is bankrupt essentially because the internet killed it.  It killed it because people are now downloading individual songs for .99 cents and paying that fee instead of $15.00 or $20.00 for a CD ten years ago where they would get 15 songs 14 or 13 of which they didn’t really want.  So, we understand and appreciate that the business model of the record labels is failing but it’s certainly not the fault of radio stations.  Radio continues to this day to be by far the number one platform for exposing music; 236 million listeners each week tune in and get music by listening to over the air radio.  So, essentially what’s happening now is the record labels are biting the radio hand that feeds it and the good news is that most the members of the House of Representatives are opposed to this new bill or this legislation, 256 members, in fact, and 27 senators are opposed to this legislation, but we have to be vigilant because it has passed out two key committees and there is some support on Capitol Hill for it and we’re going to be trying to do everything we can to solve it.
 
Damien Allen:  Do terrestrial radio stations already pay a fee for playing music on the open airwaves?
 
Dennis Wharton:   Absolutely, we pay songwriters $100 Millions of dollars and music publishers $100 millions of dollars, and we think that’s fair because songwriters…nobody comes to a concert hall to see a songwriter sitting in a desk writing a song.  They do come to concert halls and watch musicians perform and musicians make money from those performances in concerts, musicians make money through the sale of t-shirts and other merchandizing.  So, there’s a way to monetize your work if you are a musician beyond just singing a song or being played on the radio and because of radio’s promotion, people of music, people go and watch these artists at concerts.  Often radio stations promote and hold concerts with the record label and the artist.  So, like I said earlier, this symbiotic relationship between free radio airplay promoting music has historical and we think it’s to the benefit of not only the record labels, not only the artists, not only radio stations, but more importantly, for the consuming public.
 
Damien Allen:  In the 50’s there was a payola scandal that took out the career of Alan Freed in just about took out the career of Dick Clark’s.  A lot of the blogs, a lot of the people that are talking about this performance tax, the idea of reverse payola where if the companies that can actually pay out only the bigger artist are going to get money from this.  Is this is a substantial idea?  Is this something that we’re looking at in this?
 
Dennis Wharton:   Well, it’s interesting.  Well, first off, what would New Years Eve be without Dick Clark, right?  So, yeah, it’s a good thing they didn’t take out Dick Clark because we wouldn’t be able to watch New Years Eve, so we can be glad about that.  But your point about payola, I mean, that’s the irony here is, the record labels historically have asked radio station DJ’s to actually break laws to get their music played on the airwaves, and so, I think that, in and of itself, is a sort of a classic demonstration of the value of radio airplay to the labels, so, now they’re trying to sort of transfer their broken business model apparently onto radio stations and the result will be a lot of stations will simply stop playing music and switch to an all talk format to avoid paying this exorbitant fee.  There’s going to be job losses, there’s going to be a reduction in public service that radio stations perform in communities all over the country because you cannot take $100 millions of dollars out of the radio business in the United States and that’s local stations all over the country and not expect that there is going to be a consequence to that.  So, you’re going to see fewer radio employees, you’re going to see less public service and you’re going to be seeing less music played on the radio.  Now, I would ask, how does that benefit either the record label or artist if you’re number one promotional vehicle is playing fewer records?  It just does not make sense.
 
Damien Allen:  And in order to make up the money to pay the fees if this was to pass, it would become, if you were going to stay on air, you would have to have more commercial time in order to pay for it. 
 
Dennis Wharton:   That’s another point.  They claim, you know, you just raise the cost of commercials.  In this environment, in this advertising downturn that we’ve been in and we’re trying to cycle out of right now, that’s not a viable option to say, just raise your ad rates.  There might be more commercials I presume, but in this recession, it’s I don’t have to tell you that the commercial advertising business is challenged right now.  Look what’s happening to newspapers. Look what’s happening to all broadcasters who are advertising only reliant on revenue. 
 
Damien Allen:  We’ve reached the digital age.  A lot of stations are also broadcasting over the internet.  In the case of Detroit, Michigan, I know WRIF is a terrestrial station that’s been in existence as a rock station since the 70’s.  They’ve recently started RIFF 2, which is broadcast in high definition digital over the internet.  Does this tax also affect what’s being done on the internet?
 
Dennis Wharton: Well, actually the irony is that, right now, because if you are streaming a signal on the internet – music on the internet – there is a fee paid to the performer and the record label, but we would say that there’s a distinction between over the air radio airplay and streaming and satellite radio and others in that the promotional value of over the air, local radio airplay, vastly dwarfs all of those platforms combined.  If you added up all the listeners to webcasting, all the listeners to satellite radio, all the listeners to cable radio, those numbers would be minuscule compared to the 236 million people who listen to free local radio every week.
 
Damien Allen:  The recording industry is pushing this tax, we have terrestrial radio paying a fee to the songwriters, music publishers, and we have venues paying out to all three royalty agencies ASCAP, CSAC and BMI for anybody who might cover one of those songs in their clubs.  The artist and the labels are receiving monies for every download, every album sold and every time It’s played in a venue by a live band, artist are getting monies already  and the labels are getting monies from concerts and promotions and stuff like that, what can people do to get involved in this? Where do they go to find out more about the performance tax and how to take a stand against or for it?
 
Dennis Wharton:   Well, have I got a website for you, Damien.  I would direct your listeners to noperformancetax.org.  You can learn everything you need to know about this issue.  You can actually send an email from your computer right to a member of congress and ask them not to support this idea. There’s a wealth of information on this website.  I think it will be valuable information for your listeners.

Damien Allen:  Any closing thoughts before we leave you, Dennis?
 
Dennis Wharton: No, I think we’ve covered most of the issues.  This is a Donnybrook lobbying battle that we’re embarked in right now.  We’re hopeful that the cooler heads, wiser heads, will prevail and we look forward to engaging on this today because we think we have the better argument.
 
Damien Allen:  We’d like to thank you very much for joining us today, Dennis.
 
Dennis Wharton:   Damien, thanks so much, I appreciate it. 
 
Damien Allen:  You’ve been listening to Copyright Law Radio.  We’ve been speaking with Dennis Wharton; Executive Vice President of Media Relations for The National Association of Broadcasters.  You can check out all this information at noperformancetax.org.  Thank you for listening.  My name is Damien. Everybody have a great afternoon. 
 
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Comments

[Don]

If the record industry made cd's and all matter recorded material reasonable in price this tax would not be needed.
The fact that these companies are overseas makes it even worse!
If I remember my history correctly a revolution took place because of unfair taxes. This tax is nothing but an exercise in greed by the record companies. It makes no sense to purchase a c.d. to listen to one or two songs that I like. that's also begs the fact that when a song is played be a radio station it's free ad for the recording the cut comes from, and the record companies can not convince me otherwise.
So this tax must be beaten back!

[Maggie Giamalvo]

I'm amazed at this whole conversation. The name of this program is Copyright Law Radio, but you never mentioned anything about the copyright laws related to this legislation. When the Copyright Act of 1909 went into effect, radio broadcasts didn't exist, so broadcast of a recorded performance couldn't be included in the coverage. Musicians have been fighting to get this performance royalty (not a tax since it isn't paid to the government) approved for 80+ years. It didn't just come about in recent years due to the economy. This legislation would close the loophole in the copyright laws to include broadcasts of recorded performances over terrestrial radio. Cable, satellite and Internet radio stations (like mine - http://www.UltimateVarietyRadio.com) already pay this performance royalty, in addition to the songwriter royalties too. It's only fair (for all broadcasters and musicians) for terrestrial stations to pay the same royalties. Check out http://www.musicFIRSTcoalition.org for some honest information about this legislation.