    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                             PERFORMANCE RIGHTS ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON COURTS, THE INTERNET,
                           AND INTELLECTUAL PROPERTY

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 4789

                                   __________

                                 JUNE 11, 2008

                                   __________

                               Serial No. 110-141

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

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                           COMMITTEE ON THE JUDICIARY

                     JOHN CONYERS, Jr., Michigan, Chairman
    HOWARD L. BERMAN, California         LAMAR SMITH, Texas
    RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr.,
    JERROLD NADLER, New York                 Wisconsin
    ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
    MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
    ZOE LOFGREN, California              BOB GOODLATTE, Virginia
    SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
    MAXINE WATERS, California            DANIEL E. LUNGREN, California
    WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
    ROBERT WEXLER, Florida               RIC KELLER, Florida
    LINDA T. SANCHEZ, California         DARRELL ISSA, California
    STEVE COHEN, Tennessee               MIKE PENCE, Indiana
    HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
    BETTY SUTTON, Ohio                   STEVE KING, Iowa
    LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
    BRAD SHERMAN, California             TRENT FRANKS, Arizona
    TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
    ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
    ADAM B. SCHIFF, California
    ARTUR DAVIS, Alabama
    DEBBIE WASSERMAN SCHULTZ, Florida
    KEITH ELLISON, Minnesota

                Perry Apelbaum, Staff Director and Chief Counsel
          Sean McLaughlin, Minority Chief of Staff and General Counsel
                                     ------

        Subcommittee on Courts, the Internet, and Intellectual Property

                     HOWARD L. BERMAN, California, Chairman

    JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
    RICK BOUCHER, Virginia               TOM FEENEY, Florida
    ROBERT WEXLER, Florida               LAMAR SMITH, Texas
    MELVIN L. WATT, North Carolina       F. JAMES SENSENBRENNER, Jr.,
    SHEILA JACKSON LEE, Texas            Wisconsin
    STEVE COHEN, Tennessee               ELTON GALLEGLY, California
    HANK JOHNSON, Georgia                BOB GOODLATTE, Virginia
    BRAD SHERMAN, California             STEVE CHABOT, Ohio
    ANTHONY D. WEINER, New York          CHRIS CANNON, Utah
    ADAM B. SCHIFF, California           RIC KELLER, Florida
    ZOE LOFGREN, California              DARRELL ISSA, California
    BETTY SUTTON, Ohio                   MIKE PENCE, Indiana

                         Shanna Winters, Chief Counsel

                        Blaine Merritt, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 JUNE 11, 2008

                                                                       Page

                                    THE BILL

    H.R. 4789, the ``Performance Rights Act''........................     4

                               OPENING STATEMENTS

    The Honorable Howard L. Berman, a Representative in Congress from
      the State of California, and Chairman, Subcommittee on Courts,
      the Internet, and Intellectual Property........................     1
    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Ranking Member, Subcommittee on
      Courts, the Internet, and Intellectual Property................     9
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, Chairman, Committee on the
      Judiciary, and Member, Subcommittee on Courts, the Internet,
      and Intellectual Property......................................    10
    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, Ranking Member, Committee on the Judiciary, and
      Member, Subcommittee on Courts, the Internet, and Intellectual
      Property.......................................................    11
    The Honorable Sheila Jackson Lee, a Representative in Congress
      from the State of Texas, and Member, Subcommittee on Courts,
      the Internet, and Intellectual Property........................    13
    The Honorable Tom Feeney, a Representative in Congress from the
      State of Florida, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    20
    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    21
    The Honorable Bob Goodlatte, a Representative in Congress from
      the State of Virginia, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    24
    The Honorable Brad Sherman, a Representative in Congress from the
      State of Caifornia, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    24
    The Honorable Ric Keller, a Representative in Congress from the
      State of Florida, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    26
    The Honorable Zoe Lofgren, a Representative in Congress from the
      State of Caifornia, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    27
    The Honorable Darrell Issa, a Representative in Congress from the
      State of Caifornia, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    27
    The Honorable Hank Johnson, a Representative in Congress from the
      State of Georgia, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    29
    The Honorable Mike Pence, a Representative in Congress from the
      State of Indiana, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    33
    The Honorable Robert Wexler, a Representative in Congress from
      the State of Florida, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    34

                                   WITNESSES

    Ms. Nancy Sinatra, daughter of the late Frank Sinatra, legendary
      recording artist
      Oral Testimony.................................................    40
      Prepared Statement.............................................    43
    Mr. Steven W. Newberry, President and CEO, Commonwealth
      Broadcasting Corporation
      Oral Testimony.................................................    46
      Prepared Statement.............................................    48
    Mr. Charles Warfield, President and COO, ICBC Broadcast Holdings,
      Incorporated
      Oral Testimony.................................................    61
      Prepared Statement.............................................    63
    Mr. Thomas F. Lee, President, American Federation of Musicians
      Oral Testimony.................................................    81
      Prepared Statement.............................................    84

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of the Honorable John Conyers, Jr., a
      Representative in Congress from the State of Michigan,
      Chairman, Committee on the Judiciary, and Member, Subcommittee
      on Courts, the Internet, and Intellectual Property.............    11
    Prepared Statement of Honorable Sheila Jackson Lee, a
      Representative in Congress from the State of Texas, and Member,
      Subcommittee on Courts, the Internet, and Intellectual Property    14
    Prepared Statement of the Honorable Steve Cohen, a Representative
      in Congress from the State of Tennessee, and Member,
      Subcommittee on Courts, the Internet, and Intellectual Property    23
    Prepared Statement of the Honorable Hank Johnson, a
      Representative in Congress from the State of Georgia, and
      Member, Subcommittee on Courts, the Internet, and Intellectual
      Property.......................................................    31
    Prepared Statement of the Honorable Robert Wexler, a
      Representative in Congress from the State of Florida, and
      Member, Subcommittee on Courts, the Internet, and Intellectual
      Property.......................................................    35

                                    APPENDIX

    Material Submitted for the Hearing Record........................   117

                             PERFORMANCE RIGHTS ACT

                                  ----------

                            WEDNESDAY, JUNE 11, 2008

                  House of Representatives,
          Subcommittee on Courts, the Internet,
                             and Intellectual Property,
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Subcommittee met, pursuant to notice, at 3:22 p.m., in
    Room 2141, Rayburn House Office Building, the Honorable Howard
    L. Berman (Chairman of the Subcommittee) presiding.
        Present: Representatives Conyers, Berman, Wexler, Watt,
    Jackson Lee, Cohen, Johnson, Sherman, Lofgren, Coble, Feeney,
    Sensenbrenner, Smith, Goodlatte, Cannon, Keller, Issa, and
    Pence.
        Mr. Berman. This 1 hour and 20-minute-late hearing of the
    Subcommittee on Courts, Internet, and Intellectual Property
    will come to order. I apologize to everyone, but it truly was
    events beyond my control.
        I would like to begin by welcoming everyone to this hearing
    on H.R. 4789, the ``Performance Rights Act.'' As I said last
    July, I have supported the expansion of the performance rights
    and sound recording for over 20 years with two caveats. First
    is that by extending this right, it should not diminish the
    rights and revenues of the creators of musical works. Secondly,
    terrestrial broadcasters large and small must remain a viable
    source of music.
        The bill we introduced in December does just that. The bill
    is designed to fix a glaring inequity. Currently Section 114
    provides a compulsory license to publicly perform a sound
    recording where there is a digital audio transmission. However,
    terrestrial broadcasters or over-the-air radio broadcasters as
    they are sometimes referred to are not required to pay a
    royalty for their transmissions. They enjoy an exemption from
    the performance right.
        I have long been convinced that fairness mandates that all
    those in the creative chain of the artists, musicians and
    others who bring the recording to life should get compensated
    for the way they enrich our lives. The U.S. is one of the only
    developed countries in the world that doesn't--one of the few
    developed countries in the world--the debate of whether or not
    China is now a developed country--that doesn't require over-
    the-air radio stations to compensate those artists and
    musicians producing the music that broadcasters use to attract
    the audience that generates ad revenues.
        In large part because of music radio is able to profit. Not
    compensating those performers of the music is unfair and
    ultimately harmful to music creation that benefits everyone,
    including the broadcasters.
        Furthermore, the law currently requires all other platforms
    in the U.S. such as satellite and Internet radio to compensate
    the copyright owner. Let me begin by clarifying how we have
    narrowly tailored this legislation.
        First, the bill repeals the current broadcaster exemption,
    but it does not apply to bars and restaurants and other venues.
    Secondly, the bill provides an accommodation for small and non-
    commercial broadcasting by setting a low, flat annual fee to
    allay any expenses relating to negotiation, litigation or
    arbitration. Nearly 77 percent of the existing broadcasting
    stations in this country, including college stations and public
    broadcast, will pay only a nominal flat fee rather than having
    to pay a percentage of their revenues as royalties.
        Third, the bill extends certain performance rights to
    artists, musicians and their record labels. It does not harm or
    adversely affect the revenues rightfully paid to the
    songwriters and other existing copyright owners. Although I
    also understand there are additional protections the
    songwriters are seeking, which we will consider.
        The broadcasters have argued that this bill is unnecessary
    and the exemption is appropriate because of a symbiotic
    relationship that exists between the airplay on radio and the
    promotion of the music leading to future sales. Furthermore,
    the broadcasters suggest that to pay compensation to artists
    and musicians for publicly performing their sound recordings is
    tantamount to a performance tax.
        Finally, there is concern as to how smaller broadcasters
    can survive if required to pay. I would like to briefly address
    each argument in turn and ask any of the witnesses to respond.
    In terms of the promotion argument, let's assume radio
    broadcasts do promote music which leads to greater sales. Don't
    radio broadcasts of sports games also promote the sale of
    tickets and team merchandise, yet don't broadcasters pay to
    broadcast these games?
        Why does the possibility of promotion in the case of music
    sales from over-the-air radio lead to the conclusion that there
    should be no payment made by the broadcasters? How is it that
    Internet and satellite also promote yet they are required to
    pay? Why should over-the-air broadcasts be treated differently?
        Assuming there is a promotional value in the broadcast of
    music, there is nothing in the bill which would prevent a
    copyright royalty judge from factoring in the value of this
    promotion in determining the rates the radio station would have
    to pay. The argument about promotion should not be about
    whether to pay, but how much to pay.
        As to the tax argument, my notion is while calling the
    performance right a tax might make for good rhetoric, it is
    even more accurate to call the exemption enjoyed by the
    broadcasters corporate welfare or even, God forbid, government
    confiscation of property. Since the U.S. code compels
    performers to give broadcasters their music for free, the bill
    merely eliminates an unjustified subsidy to broadcasters and
    requires them to compensate those whose work they use and
    profit from.
        Furthermore, broadcasters do not argue that the money they
    pay to the songwriters constitutes a tax. What is the
    difference?
        Finally, the impact on small broadcasters was clearly a
    concern for us and therefore in the bill, as mentioned earlier,
    we have provided an accommodation for those broadcasters. With
    this bill we have begun to move toward platform parity, rights
    parity, and international parity. The equity argument that
    performers should be entitled to receive revenue for their
    works can no longer be ignored. The Department of Commerce just
    yesterday offered their support for this legislation.
        Circumstances have changed, but it is now time to
    reconsider the exemption for over-the-air broadcasters. In
    other words, put me down as leaning yes on this bill.
        I look forward to working with Members of the Committee to
    address the inequity in the current law. I intend to proceed to
    markup shortly and welcome suggestions for adjustments to build
    broader consensus for this bill.
        I now have the pleasure of recognizing our distinguished
    Ranking minority Member, Howard Coble, for his opening
    statement.
        [The bill, H.R. 4789, follows:]

        Mr. Coble. Thank you, Mr. Chairman. Mr. Chairman, most of
    our colleagues here--strike that. Many of our colleagues here
    and perhaps most, but certainly many regard this bill as black
    and white. If you support the performers, you are adamantly
    opposed to the broadcasters. If you support the broadcasters,
    you are adamantly opposed to the performers. I don't see it,
    Mr. Chairman, as black and white. I see subtle shades of gray.
    And I hear and read compelling and convincing arguments and
    positions from each side.
        Mr. Chairman, as you know, on this Hill when Members of
    Congress don't want to become involved with issues, their stock
    answer is I have no dog in that fight, and I am therefore
    removed. Folks, I have nothing but dogs in this fight.
        The broadcasters on the one hand, friends, performers on
    the other hand, friends. For two and-a-half decades, Mr.
    Chairman, or almost two and-a-half decades on issues involving
    the broadcast industry I have come down on the side of
    broadcasters, not just because I like them, which I do like
    them, but because their positions were sound and meritorious.
        But the issue before us, I believe--this may be subject to
    interpretation. But I believe the issue before us, Mr.
    Chairman, leans toward the performers. I think the performer
    right advocates probably have the better of the argument.
        Last week I announced that I intend to support the bill at
    markup. I was not a co-sponsor because I wanted to retain my
    objectivity. I reached that decision, my friends and Mr.
    Chairman, after much deliberation and consideration of the
    respective arguments presented by all of my friends on either
    side of the issue.
        While I still have questions going forward that I hope we
    can address about how precisely the law should be amended as
    well as concerns about the timing and implementation of any
    changes, the deciding factor for me is that the idea of
    continuing this exemption in perpetuity just does not strike me
    as the right thing to do.
        I have difficulty in reconciling a system of copyright law,
    Mr. Chairman, that requires radio stations to pay the owners of
    musical works a royalty, but denies such treatment to the
    owners of sound recordings. Nor does it make sense, in my
    opinion, for the copyright law to, in effect, choose sides and
    grant preferences to one technology over another, as in this
    case, where satellite and Internet radio broadcasters pay
    copyright royalties to the owners of sound recordings and
    musical works, but traditional radio pays royalties to only the
    owners of the musical works.
        And finally, Mr. Chairman, you will remember as television
    broadcasters maintained that they should be paid retransmission
    consent fees when cable companies carry their signal. It seems
    to me that the Federal law ought to provide the owners of
    copyrighted works, which after all are property, payment when
    their works are selected to be performed publicly and for
    profit by other broadcasters.
        I recognize that changing the law in a manner that affects
    an entire industry, particularly one that is as valuable to our
    communities as our home town broadcasters, is not something
    that ought to be done hurriedly. If this change is to be made,
    Mr. Chairman, I hope we will be able to benefit from active
    discussions and involvement by those who will be most directly
    affected about how best to transition from the old world of
    complete exemption to the new world of full participation in
    this aspect of our copyright law.
        Mr. Chairman, I thank you for having convened this hearing
    today and for assuring all of us that we have excellent
    witnesses so we can benefit from their perspective. It is good
    to have all of you with us.
        And, Mr. Chairman, with that I yield back the balance of my
    time.
        Mr. Berman. Well, thank you very much, Mr. Coble.
        And I now am pleased to recognize a co-sponsor of this
    legislation and the Chairman of the Judiciary Committee, Mr.
    Conyers, for an opening statement.
        Chairman Conyers. Thank you, Chairman Berman.
        I welcome all of our witnesses here today. And I would just
    like to see a show of hands of all the performers and artists
    that are with us today. Raise your hands. I even see some
    instruments out there in the audience as well. Thank you.
        And I am reminded of the passing last week of one of the
    founding fathers of rock and roll, Bo Diddley, who I know would
    be looking down upon us today thinking of how much progress we
    are making. Unfortunately, he didn't see much fairness in terms
    of compensation in his lifetime. And I have been working on
    this issue, I say without embarrassment, longer than anybody
    else here in the Congress.
        But Howard Berman has done an excellent job, not just as
    Chairman of this Committee on Intellectual Property, but in
    terms of his new responsibilities as Chairman of the Foreign
    Affairs Committee as well. And his description of this issue
    doesn't require me to add any additional comments.
        I am not leaning slightly in favor of this bill. I am 100
    percent in support. And we are not going to rest until we get
    this taken care of. Why? Because creativity and intellectual
    property considerations are what the Judiciary Committee is all
    about.
        We want to encourage and stimulate the great American sound
    that now is enjoyed and repeated around the world. I happened
    to be, in particular of all of our music, a jazz aficionado.
    And the lives of musicians and performers and singers has been
    unduly complicated by the fact that we are not fully
    compensating them for all of the great talent and the enjoyment
    that they have brought to us across the years.
        And so, for Chairman Berman and Ranking Member Coble and
    all of us here on this Committee that support your great work,
    I am very proud to see you today. And I think this is an
    historic moment in bringing the equity that characterizes this
    Committee in terms of intellectual property, rights and
    creativity to a new high to include you in, and not continue to
    exclude you out of, the great benefits of this country.
        Thank you.
        [The prepared statement of Mr. Conyers follows:]
    Prepared Statement of the Honorable John Conyers, Jr., a Representative
      in Congress from the State of Michigan, Chairman, Committee on the
       Judiciary, and Member, Subcommittee on Courts, the Internet, and
                             Intellectual Property
        I commend Howard Berman for his leadership in introducing H.R.
    4789, and for holding this second hearing on such an important issue.
        As many of you know, earlier this week a resolution I and others
    introduced honoring the contributions of a founding father of rock and
    roll, the great Bo Diddley, passed the House.
        While he was a music pioneer who created the very foundation of the
    majority of the music played on the radio today, I mention Bo Diddley
    today because of his tireless work in his later years for the cause of
    fair treatment of musical artists.
        Unfortunately, Bo Diddley did not see such fairness in his
    lifetime. Despite all his hard work and his invaluable cultural
    contributions, he had to stay on the road performing into his 78th
    year.
        He could not afford the ``luxury'' of retirement and only stopped
    performing last year when complications from a stroke forced him to.
        Bo Diddley would be pleased that this Committee is doing more than
    just talking about performance rights--that we are taking action to
    promote fairness in the treatment of musical artists.
        The current situation is quite simply not fair to the recording
    artists or to the recording labels.
        I'm sensitive to the interests of broadcasters, and have taken
    pains to ensure that they are not harmed. But everyone but the
    broadcasters agrees that the current system is seriously flawed.
        Every other platform--including satellite radio, cable radio and
    Internet webcasters--pays a performance royalty. Terrestrial radio is
    the only platform that does not pay a royalty for use of an artist's
    music.
        That is a completely untenable situation in the 21st century.
        The specific broadcaster exemption created in 1995 may have made
    sense for the music marketplace of the 20th century, but with rapid
    changes in technology come dramatic changes in usage. And the law
    should be updated to reflect those changes when the old rationales no
    longer apply.
        Calcification of the law--stuck in an outdated reality--is not
    acceptable if we are to fulfill our constitutional directive of
    promoting creativity and innovation.
        The bipartisan and bicameral legislation bill we are discussing
    today would create fairness by bringing broadcasters up to the same
    standards that we require of other music platforms.
        Moreover, this bill will bring the United States in line with other
    developed nations, every one of which currently grants performers a
    right to be compensated for their work when it is broadcast on
    terrestrial radio.
        If you were to go out on the street and speak to 100 people at
    random, most would be shocked to hear that recording artists receive no
    monetary compensation when their songs are played on broadcast radio.
        Today we consider taking an important step closer to ensuring that
    artists who enrich our lives with their talent are treated fairly, are
    able to reap a benefit from their efforts at least somewhat
    proportional to their contribution.
        This bill will establish a fair system in copyright law for
    compensating performers of sound recordings, with appropriate
    accommodations for smaller stations, public broadcast stations,
    religious services, and incidental users.
        And it explicitly protects the public performance rights or
    royalties payable to songwriters or copyright owners of musical works.
        I look forward to hearing from our witnesses today as we consider
    this important step.

        Mr. Berman. Thank you very much, Mr. Chairman, for your
    comments to me as well as your substantive remarks.
        I now am pleased to recognize the Ranking Member of the
    Judiciary Committee, my friend, Lamar Smith.
        Mr. Smith. Thank you, Mr. Chairman. Mr. Chairman, I want to
    thank you and Ranking Member Coble for having this hearing on
    H.R. 4789, the ``Performance Rights Act.'' Recording artists
    contribute their unique talents and ability to every song they
    perform. These artists enrich the lives of their fans and
    listeners.
        Requiring a full statutory performance right for sound
    recordings has been sought for many years. In 1995 Congress
    enacted the Digital Performance Royalty and Sound Recordings
    Act, which established a compulsory license for sound
    recordings for non-interactive cable and satellite services. It
    has only been since then that sound recordings have been
    subject to even a limited public performance right.
        At that time, Congress considered and determined to
    expressly exempt both non-subscription transmissions and
    retransmissions of sound recordings such as television, radio
    and business establishment broadcasts. It reasoned that public
    performance on these media benefits artists through increased
    record sales and thus should not be subject to a new direct
    royalty payment.
        I understand the witnesses for the broadcasters today will
    present new evidence that they believe demonstrates a direct
    positive correlation between local radio airplay of songs and
    increased revenue to artists and record labels. The reality is
    copyright law does make distinctions among classes of owners
    and types of technologies with respect to both the entitlement
    to receive and the obligation to pay performance royalties.
        Whether or not these distinctions are sensible and
    justified as sound copyright policy will be the focus of
    discussion today and I expect for some time to come. But
    neither this Subcommittee nor the Congress operates in a world
    of academic theory. The decisions we make impact the lives of
    real individuals and industries, and the effects can be
    immediate and lasting.
        As we move forward in studying this issue, we must
    anticipate and consider the possible effects of any legislation
    in this area and take appropriate steps to eliminate or
    mitigate harmful or undesirable outcomes. For that reason I
    appreciate the steps the Chairman and other sponsors of this
    bill have taken to try and address the specific concerns of
    certain communities and classes of broadcasters.
        In a moment we will have the opportunity to hear two
    broadcasters' own views of whether these proposed
    accommodations address the concerns their members have with
    this bill. But before we do, it appears that the primary
    justification for changing the law seems to be to achieve
    parity among platforms, copyright owners and our international
    trading partners. Without regard to the specifics of each one
    of the parity arguments, it is likely that this measure would
    actually create a number of new disparities that may or may not
    be entirely justified by present or future circumstances.
        That said, this is a complex issue. Outside the Committee
    approximately 200 of our colleagues have sponsored a resolution
    that basically questions the content of this bill. It is clear
    that the advocates for this measure have more to do to persuade
    our colleagues in the House that this measure reflects sound
    public policy.
        Mr. Chairman, again I appreciate your having this hearing
    today. And I know there are meritorious arguments on both
    sides, so we have much to learn. And I will yield back the
    balance of my time.
        Mr. Berman. Are there any other Members who would wish not
    to follow my example and make brief opening statements?
        The gentlelady from Texas?
        Ms. Jackson Lee. Mr. Chairman, you have such an example it
    is hard not to follow your example. And since I came in after
    your example, I will assume that you had a distinguished
    comment to make, one or two at least.
        I do want to echo the comments of my distinguished Ranking
    Member of the full Committee. We have much to learn. And as my
    very distinguished Chairman indicated, that the rights of
    properties are cherished in this Nation. And I would imagine
    that we are also facing, for many who are not here to speak,
    many who have gone on, a great deal of hurt that we have to
    repair as well.
        Property comes in many forms. It comes in the form of the
    intellectual rights of so many musical giants of yesterday,
    today and tomorrow. This past week I introduced commemoration
    of gospel heritage in the United States. I happen to believe
    that we should take credit for some distinctly Americana music
    which may range from rock and roll, jazz, gospel and many
    other, if you will, additions to that line.
        For that reason I believe that this legislation is very
    important. And I would add that the ownership of all mom and
    pop locally based radio stations are also property rights and
    assets that we should be concerned with. So as I listen to the
    presentation of the very important and renown witnesses, who I
    know will speak from the heart and factually as well, I think
    that we have the makings of an important balance.
        And that is the balance that respect, tenets that are
    invested in the Constitution, the due process and the respect
    of property and as well the idea that someone's hard earned
    intellect has to be respected. And when I say the two
    distinguishing factors, I talk about small businesses and small
    radio stations not versus, but also the recognition of
    individual talents of which the Chairman of the full Committee
    spoke.
        So I hope that this hearing will find common ground to
    respect these two important elements. And since this is the
    International Intellectual Property Subcommittee, what better
    place for this debate and discussion to go forward and the
    understanding of this legislation and the resolution of this
    legislation and the fair treatment, the fair treatment, the
    importance of fair treatment to all of those who have given us
    joy, given us comfort and have given us a few steps of dance
    when we needed it. I do think it is time to resolve this in
    this manner as we go forward.
        And with that, Mr. Chairman, I yield back.
        [The prepared statement of Ms. Jackson Lee follows:]
      Honorable Sheila Jackson Lee, a Representative in Congress from the
     State of Texas, and Member, Subcommittee on Courts, the Internet, and
                             Intellectual Property

        Mr. Berman. I thank the gentlelady.
        The gentleman from Florida, Mr. Feeney?
        Mr. Feeney. Thank you, Mr. Chairman, for bringing this
    important issue to us. And I think the gentlelady from Texas
    used the word balance. And I think that is what the hearing
    today hopefully is all about, how we consider the Performance
    Rights Act in this Subcommittee how we balance the rights of
    copyright owners to be compensated for the use of their work
    and the interest of terrestrial broadcasters who currently
    enjoy an exemption, but also provide some great utility to
    America and our communities.
        Since the beginning of the radio music era, terrestrial
    broadcasters have been exempt from paying performance
    royalties. For decades radio was virtually the only medium that
    efficiently took artists' works and put them into the ears of
    Americans. If you became a major artist in America, radio
    played a pivotal role.
        They promoted CD sales, before that, record sales,
    concerts, endorsements, et cetera. But the technology explosion
    over the last quarter century has not only changed the music
    and broadcast industries, but it has changed markets, and it
    has changed America itself.
        Satellite-based radio, Internet sales and music, other
    subscription-based services have entered the marketplace and
    altered the dynamic by which artists are exposed to the general
    public. In some instances, artists have gained substantial
    amounts of exposure in the marketplace by uploading their songs
    to social networking sites like MySpace, for example. Users
    listen to the music and recommend it to their friends on the
    site.
        Nevertheless, the promotional value of local radio airplay
    does seem to translate into some significant revenues for some
    artists and record labels for some period of time after a song
    is initially released. While the promotional value is real, we
    can also see a clear property right that belongs to the
    performing artist or their supporting record label or a
    combination of both. Generally speaking, the purpose of the
    copyright law is to give creative minds and talented
    individuals exclusive control over the use and exposure of
    their work.
        I formed on a bipartisan basis with several colleagues the
    intellectual property caucus in this House. The two questions
    are directed at the heart of the issue before us today. Number
    one, does the current promotional value in light of changes in
    technology of radio airplay fairly compensate artists and radio
    labels for their copyrights? Secondly, should Congress continue
    to intercede in the marketplace to categorically determine that
    promotional value of music and that it is always sufficient
    payment for artists in the changing marketplace?
        In this rapidly changing environment of mass media we can
    expect intellectual property issues not just in this arena, but
    in many other technological areas to force this Committee to
    deal with updates in the way we protect intellectual property
    and reward and protect artists or others that are involved in
    grading intellectual property.
        But I think the gentlelady from Texas put it right. Balance
    is the key for me here. I look forward to hearing the
    witnesses' testimony. I have met extensively with all sides in
    this argument and grateful that the Chairman has held this
    hearing today.
        Mr. Berman. I thank the gentleman. His time has expired.
        The gentleman from Tennessee, Mr. Cohen?
        Mr. Cohen. Thank you, Mr. Chairman. This issue is one that
    affects quite a few of my constituents in Memphis and also some
    folks in Nashville who are also my constituents. I lived there
    for many years. And they are songwriters and they are singers,
    performers. And while the songwriter has been compensated--and
    I have a strong alliance and appreciation of songwriters--I
    think that the singers and performers have been shortchanged.
        I met Sammy Conn one time, and it was great to meet him.
    And I have read about Timmy Van Heusen and listened to Harold
    Arlen's music over the years and all these great songwriters.
    And they have produced beautiful music, and they were geniuses.
    But if it weren't for Frank Sinatra singing their songs, people
    wouldn't be listening.
        There is a way that a performer delivers a song that makes
    it special. And, yes, the songwriter creates it, and the
    songwriter is compensated. But without the singer emoting and
    making it special, you are not going to have people listening.
        I agree that back in the 1950's people like Allen Freid who
    played rock and roll and Dewey Phillips in my home town of
    Memphis who kind of got Elvis out there--without them spinning
    records that people otherwise wouldn't have had access to, you
    wouldn't have had rock and roll. You might not have had Elvis.
        But that is not the situation anymore with the Internet and
    other forms out there. It is not the disc jockeys who are
    mostly playing program music which doesn't give people who were
    originally creative people, originators, an opportunity to
    really get heard. Those people are getting heard on low-
    frequency stations, the ones that I am pleased this bill takes
    into consideration. And I appreciate the RIAA and everybody
    else that worked with NPR and the small wattage stations to see
    that they are not adversely effected by what wasn't intended in
    this bill.
        They are the ones that give the new creative folks an
    opportunity. It used to be that the major broadcast stations
    did. That doesn't happen anymore.
        So I think it has been an injustice that the performers
    had--Elvis, I don't think, ever wrote a song. I doubt Frank
    Sinatra did. But nobody could perform a song like Frank Sinatra
    and Elvis. When you think of singers and you think of music,
    you think of them. You don't think of Stoller and his partner.
    You don't think necessarily of Sammy Conn or Jimmy Van Heusen.
    You think of Elvis. You think of Frank Sinatra.
        When I think of ``These Boots are Made for Walkin','' I
    think of Nancy Sinatra. I am not sure if another singer could
    have made them dance, could have made them walk. Lee Hazlewood
    wrote it, but it was Nancy that made those boots walk. And it
    is the performer that makes things special.
        So they need to be compensated. I think we have come a long
    way. And I am pleased to be part of this Committee that is
    going to end this injustice that has gone on for years and the
    free use of these great people's talents.
        And if I can take 1 minute to reflect, I want to thank Ms.
    Sinatra for being here. I am a big fan of her father's, have
    seen him perform four or five times in my life, have his
    picture up, a big picture in my home and all kind of Sinatra
    books everywhere. But he came to Memphis and performed at the
    St. Jude shower of stars on several occasions, which was a big
    thing in Memphis and a big thing for me to attend.
        And I know that when Elvis came back from serving in our
    military in Germany you facilitated his going to be on that
    show. And I don't think there is a greater moment in show
    business, even though they made those songs, than your father
    singing Love Me Tender and Elvis singing Witchcraft, a great
    moment. Thank you very much.
        [The prepared statement of Mr. Cohen follows:]
     Prepared Statement of the Honorable Steve Cohen, a Representative in
       Congress from the State of Tennessee, and Member, Subcommittee on
                Courts, the Internet, and Intellectual Property

        Mr. Berman. I am pleased to recognize the gentleman from
    Virginia, Mr. Goodlatte.
        Mr. Goodlatte. Thank you, Mr. Chairman. I would like to
    thank you and Ranking Member Coble for holding this hearing on
    the Performance Rights Act. Because the United States has been
    the pioneer for strong intellectual property protections, it is
    no surprise that the copyright industries are so successful and
    are so crucial to our national economy.
        The U.S. copyright industries have created millions of
    high-skilled, high-paying U.S. jobs and have contributed
    billions to our economy. Today we are examining whether an
    exemption that has existed for years which allowed terrestrial
    broadcasters to play copyrighted works without paying
    performance rights royalties is still justified in the digital
    age. This is a tough issue.
        Broadcasters argue that recording artists receive great
    benefits from the airplay their songs get, which result in
    higher sales for the artists. While this is likely true, I
    believe that digital music technologies have come to fruition
    over the past 5 to 10 years that consumers do not rely solely
    on terrestrial broadcast stations for their music any more.
    Other media like satellite radio and online broadcasters also
    deliver promotional value to the recording artists that they
    pay performance right royalties.
        On the other hand, I am very concerned about maintaining
    local radio programming. Local radio programming is one of the
    best and least expensive ways that citizens gain access to news
    and emergency information in their communities. At a time when
    consolidation seems to be the norm, I believe it is important
    to do what we can to encourage radio stations to continue to
    provide local news and information, which often is done at cost
    or at a loss to the radio stations.
        As such, I am pleased that H.R. 4789 contains provisions to
    grant relief to small radio operators who fall underneath the
    revenue threshold in the bill. However, I am still concerned
    that the exemption does not strike the right balance, that some
    radio stations that provide excellent local programming that
    may make enough money to just clear the revenue threshold of
    the bill will be on the fringe.
        It would be a shame if this legislation were to be the last
    straw that caused stations like these to make the decision to
    go ahead and sell to a national conglomerate. I am working to
    ensure that local programming is not adversely affected by the
    good intentions of this bill. And it is my hope that the
    Chairman and Ranking Member of the Subcommittee will join me in
    this effort.
        And again, I thank you for holding this hearing. And I look
    forward to hearing from all of our very interesting witnesses
    today.
        Mr. Berman. I recognize the gentleman from California, Mr.
    Sherman.
        Mr. Sherman. Thank you, Mr. Chairman. Thanks for
    introducing this bill and for your 20 years of work to try to
    bring fairness and justice to those who perform.
        You know, you get a lot of wisdom before kindergarten from
    fairy tales. And we learned before kindergarten that terrible
    things happen to a society that refuses to pay the piper. As
    Americans we believe in the rule of law. We believe in the
    protection of private property. We have one highly anomalous
    exception, and that is the rights of performers of recorded
    music.
        The unfairness and anomalous situation is proven by so many
    examples. We see that satellite and cable broadcasters have to
    pay, giving them an unfair disadvantage perhaps when they
    compete with broadcasters. At the same time, no one has argued
    recently that the satellite and cable broadcasters should not
    have to pay the performance artists, yet they do as much for
    promotion as do the broadcasters.
        We hear the use of the word tax, which is an ugly misuse of
    the English language. A tax produces revenue for government.
    This bill will not.
        And where would we be if the Chinese decided that they
    could use any patent or copyright for anything they manufacture
    and if our private companies want a royalty, that is a tax that
    they are not obligated to pay? Of course, imagine a Chinese
    textile company making Mickey Mouse t-shirts and saying we
    don't have to pay the Disney company. After all, we are
    promoting Disneyland.
        The idea that the satellite or cable broadcasters of paying
    a tax is absurd. The idea that the broadcasters are paying a
    tax when they pay for sports broadcasting is absurd. Calling
    this a tax is absurd.
        One could imagine that I could take my TiVo, record any
    television broadcast, edit out the commercials, Webcast that.
    Would I then when stopped from that activity say I am being
    taxed, I am promoting the program? Because if people watch last
    week's episode they are be inspired to watch this week's
    episode.
        Where are the broadcasters demanding that I start that
    activity, that I have the legal right to do so? Don't they need
    their programs promoted? Likewise, the idea that somehow this
    promotion justifies the free use of these works is absurd.
    Imagine Lindsey Lohan steals a car from the Hertz lot, drives
    it around, refuses to pay and then says I was promoting Hertz.
        Now, it is true that under this bill some may decide--and
    this is the voluntary right of any property owner--to allow the
    use of their property without compensation. Hertz might very
    well decide to give Lindsey Lohan the key. But she can't steal
    them under our law.
        Likewise, some garage band may decide that its best
    approach is to allow free broadcast, uncompensated broadcast of
    their efforts. I should point out also that this bill is
    important from a U.S. competitiveness standpoint. Our current
    law puts this at odds with the laws of the rest of the world.
        We both sit on the Foreign Affairs Committee and know how
    important it is to the Chairman of the Foreign Affairs
    Committee that we reach out to the world and show that we are
    willing to harmonize our behavior with world expectations. And
    in addition we would pick up some $70 million for our artists
    from foreign sources perhaps providing some slight help with
    our enormous great deficit.
        We ought to believe in the rule of law, the right to
    private property. And that means that you do not allow people
    to steal--that is to say to take the use of private property
    without permission and without compensation. This bill is long
    past due. Put me down as undecided. I yield back.
        Mr. Berman. The gentleman from Florida, Mr. Keller?
        Mr. Keller. Thank you very much, Mr. Chairman.
        Thank you, to the witnesses, for being here. I certainly
    respect your opinions on both sides and look forward to hearing
    from you.
        There is a bit of a distinction about how folks in this
    industry get their revenue. Songwriters get most of their
    royalties to do the public performances of their musical
    compositions. While record companies and performers get most of
    their money through record sales, concert tickets and
    merchandising. And there is no question that record labels and
    artists both are hurting right now for two principle reasons.
        Number one, it is piracy. I am very sympathetic to that
    cause and have taken steps to help them. And number two, their
    business model at times was a bit off. People didn't want to
    pay $17.99 for a CD that had 12 songs on it and they only had
    one good song. So folks went to iTunes and bought that song for
    99 cents instead. And now the music industry has adapted, and
    hopefully they can reap the benefits of that.
        But these two things that are hurting the music industry
    were not caused by broadcasters. In fact, the benefit of having
    songs played on the free radio by the local radio stations are
    tremendous. When the songs are played, record sales go up. When
    concerts are promoted, concert attendance goes up. When more
    people attend concerts, merchandising profit goes up, all to
    the benefit of these artists and record companies.
        In fact, the benefits that local radio stations provide to
    artists and record labels is so great that these record labels
    would pay the stations if they were able to get away with it.
    In fact, that is what used to happen in the 1950's. We had
    payola scandals. And payola is the practice by which a record
    label and some independent promoters offer money and other
    gifts in exchange for broadcast airtime for particular songs or
    artists.
        It was such a benefit that the practice has continued as
    late as December of 2006. One company, a radio conglomerate
    called Intercom settled a suit brought by the New York attorney
    general for $4.25 million for engaging in payola. So clearly,
    there must be some benefit to the record companies and artists
    or else they wouldn't be paying the local radio station,
    sometimes illegally, to play their music.
        And so, it was mentioned that, well, look at what happens
    with Disney. They get paid. Well, actually under this bill they
    don't get paid. This proposes to put a fee on the local radio
    stations only. If you are playing the same songs in a Wal-Mart
    or a theme park like Disney or at Olive Garden, the performer
    would not get paid. If you want to be intellectually pure, then
    you should be paid in those venues just as well as on the--if
    the song is played on the radio.
        And so, I am looking forward to what the witnesses have to
    say about these issues. I was amused to see a letter. This was
    issued yesterday by the Department of Commerce in support of
    this bill where they say that there is an economic benefit to
    broadcasters from this bill. I would be curious if the
    broadcasters feel that there is an economic benefit, if they
    think this is in their best interest.
        And I look forward to hearing from both sides on this
    issue. And thank you to our witnesses. I yield back the balance
    of my time.
        Mr. Berman. I thank the gentleman.
        And I yield to the gentlelady from California, Ms. Lofgren.
        Ms. Lofgren. Thank you, Mr. Chairman. I will be brief. I
    know we all want to listen to our witnesses.
        But I just wanted to say I think there are good arguments
    that we will hear on both sides of these issues--of this issue.
    But one of the things that is of concern to me is that if we
    are going to have kind of a parity situation, we need to look
    at platform parity as well. To me, it doesn't make sense to
    have technology used to deliver music determine the amount of
    royalties that are going to be assessed.
        And the recording industry feels that it is adversely
    impacted by the absence of performance royalties from the
    terrestrial broadcasters. The broadcast industry argues that
    royalty payments will devastate local radio. But the industry
    that is in real trouble today is Internet radio. Many
    Webcasters are facing royalty payments that are in excess of
    their entire revenues. And the Arbitron data now shows that
    Internet radio listenership is falling.
        We have 150 Members of the House who co-sponsored a bill to
    take a look at that situation a year ago. And I would ask
    unanimous consent to put a letter in the record. We asked that
    we have a hearing on this subject. I do think it is pretty
    essential to do so.
        I mean, if we take a look at the cable/satellite fees, it
    is about--well, the revenues, total revenues are about $2
    billion in those sectors. Six to 15 percent of it is being paid
    out in royalties. The Internet radio companies generated about
    $150 million in revenue. And they paid at least 50 percent of
    that revenue in royalties. And some paid 100 percent of their
    revenue in royalties. Meanwhile, the broadcast industry
    generated $15.5 billion, and they paid nothing.
        So it seems to me that if we are going to take a look at
    disparity across platforms and it is fair and appropriate to do
    so, it would be a real mistake not to use the opportunity to
    also take a look at Internet radio. And I think if we wait too
    much longer we are not going to have a discussion because it is
    not going to exist any more. And I think that would be a tragic
    outcome because if you want to look at how new artists newly
    break in without being too beholden to labels, it is on
    Internet radio. That is really the freedom and the opportunity.
        And I have heard from some artists who are now telling me
    that one of their top priorities is not pirates any more. It is
    Net neutrality so that they are going to have an opportunity to
    control their future.
        So I wanted to raise that issue. I look forward to hearing
    this debate. But it will not be complete for me until we
    include the Internet radio discussion.
        And I thank the Chairman for recognizing me and yield back.
        Mr. Berman. I thank the gentlelady.
        And the gentleman from California, the chief Republican co-
    sponsor of this legislation, H.R. 4789, Mr. Issa?
        Mr. Issa. Thank you, Mr. Chairman. And it has been a
    privilege to work together on this bill and to see it come so
    far so quickly. When you and I were talking about this, I
    guess, a year-and-a-half ago, I am not sure that we really knew
    that we would catch on so quickly to people realizing that this
    is a question that has to be answered now, not later.
        Very clearly, I think the panel has heard that this is a
    divided dais, that there are some people who are undecided.
    There are some people who are, like Mr. Sherman, undecided in
    one direction. I am also one of those people that is undecided
    in the direction of the intellectual property holders.
        But in setting the tone for this hearing and the markup to
    follow, I would hope that I would set a tone for the
    broadcasters that my co-authorship of this bill, my belief that
    this is clearly a law whose time has come to be reviewed and
    changed does so with an understanding that broadcasters bought
    their band width. The vast majority of them didn't get it for
    free yesterday. They, in fact, purchased their station based on
    a set of rules of the road that existed at that time.
        In a strange and perverse way their stations were worth
    more money because they didn't pay the performer. That is a
    reality of the price they paid.
        So as we transition--and I am confident that we will go
    from free being the balance between the two extremes to some
    amount of money--I think we have to do so recognizing that, in
    fact, we are in a transition. The broadcasters are
    transitioning from analogue to digital. The recording artists
    are dealing with the days of the eight-track and cassette being
    in the rearview mirror and the day of the perfect digital
    master being available on the Internet being here. And it has
    not been a pretty thing to deal with.
        So I would hope that we start looking for the common ground
    that we have not yet found. Broadcasters have, not just in
    large, but in absolute unison, have told me that they cannot
    afford to pay anything. I don't believe that is true.
        I do believe that this bill at least offers out an olive
    branch with concessions for the small broadcaster and certain
    other broadcasters, religious broadcasters and so on. I believe
    that there are additional olive branches that can be offered.
        I believe that a transition period, a significant
    transition period could be put in this bill. But it won't be
    put in if zero versus an intellectual property right is the
    common ground that we are having to choose between. We have to
    choose a compromise, which means both sides have to come to the
    table.
        To that end, I would hope that as we transition from this
    hearing to the markup and beyond that we understand that at
    least in some cases--for example, a performer whose records are
    no longer available commercially cannot get the benefit of
    promotion on the radio. So at least in that case there must be
    some alternative revenue that a person would be entitled to if
    promotion by definition gains them no benefit at all. And there
    are such artists.
        I think additionally if we assume that in some cases the
    broadcasters are, in fact, extremely valuable--the word payola
    was used. And that is clearly illegal. But the fact is that I
    think that the companies representing the artists and the
    artists themselves need to come to terms with the fact that an
    arm's length relationship publicly, you know, done above the
    table that leads to real promotion should be put in the work.
        Meaning your station should be able to say--because you
    have an absolute right to play who you want to or not play who
    you don't want to--that, in fact, if you are going to put
    airtime into promoting a new artist, if you are going to put
    airtime, quite frankly, into playing the ones that everyone has
    forgotten--somebody talked about 12 songs and only one was
    good. Well, I am a Harry Chapin fan. So I have got to tell you
    I like them all. They are all long, but I like them all.
        And some of them don't get the play time. And I would hope
    that they would. So I would hope that we would come to the
    common ground.
        I for one--and I know the Chairman for another--would
    absolutely welcome a constructive dialogue leading to
    innovative ideas on how the broadcasters could find a way to
    transition to paying some revenue, the intellectual property
    holders and their representatives understanding that
    broadcasters will need to find revenue in return for
    affirmative promotion, that we can bring those two together.
        So I look forward to this panel. I know that it will be
    diverse in its views. But I also look forward to the
    negotiations that will be necessary to bring this bill to be
    law.
        And with that, I thank the Chairman for his indulgence.
        Mr. Berman. The time of the gentleman has expired.
        The gentleman from Georgia, Mr. Johnson?
        Mr. Johnson. Thank you, Mr. Chairman. Mr. Chairman, last
    week was the death of Bo Diddley, an artist who did not have
    control over his performances, over his works actually. And so,
    he did not receive royalties for the performance of his hits.
    And at the age of 79 he was still out touring trying to make
    ends meet. And I can think of no greater tragedy than an artist
    who has caused so much joy in the hearts of listeners to have
    to listen to their own rendition played on broadcast radio and
    everyone else in the chain is getting paid except for the
    artist.
        And the artist has to go out and try to duplicate that
    performance every night, six nights a week, 250 nights a year,
    however many nights it is, and could never rest on the just
    royalties that should have been paid for that performance
    because we don't have that right here in the United States to
    pay performance royalties to artists. They are not fairly
    compensated for their creativity and for their investment.
        They are paid royalties, these artists, when their music is
    played on cable television, satellite radio or the Internet.
    But I think most people don't realize that when they turn on an
    AM or FM dial and listen at a rendition that has played
    repeatedly over the past 30, 40, 45 years that the artists who
    made that rendition are not being paid for the performance of
    that work.
        And so, the Performance Rights Act, which I am a co-sponsor
    of, I am proud to be a co-sponsor of, would correct that
    imbalance and that injustice so that artists from pop stars to
    backup singers would be fairly rewarded when broadcast radio
    stations played their music. And this bill will ensure that
    musicians who are threatened or artists who are threatened by
    today's pervasive online piracy would still have strong
    economic incentives and protections when they provide us with
    their works.
        Indeed, the architects of our political system realized
    that creativity must be protected. And Congress has a
    constitutional obligation to protect these artists' work.
    Article 1, Section 8 mandates that Congress--Article 1, Section
    8 of our Constitution mandates that Congress, ``Promote the
    progress of science and the useful arts by securing for limited
    times to authors the exclusive right to their writing.''
        And understanding that writers and authors have this
    exclusive right, it stands to reason that we should compensate
    the performers of those rights for the work that they do as
    well. The courts have held that this mandate applies not only
    to authors of written works, but to all creators of
    intellectual property from inventors to musicians. Congress
    must protect American creation as the property of their
    creator.
        I encourage my colleagues to support this legislation. It
    will reward musicians for their work and other artists. And it
    will fulfill our constitutional obligation to promote the arts
    by securing artists' performance rights to the musical
    performances that they create.
        And I yield back.
        [The prepared statement of Mr. Johnson follows:]
     Prepared Statement of the Honorable Hank Johnson, a Representative in
    Congress from the State of Georgia, and Member, Subcommittee on Courts,
                    the Internet, and Intellectual Property

        Mr. Berman. I thank the gentleman.
        The gentleman from Indiana, Mr. Pence?
        Mr. Pence. Thank you, Chairman. Thanks for calling this
    hearing. I am very much looking forward to hearing from this
    panel, our distinguished witnesses and people on whom I had a
    crush at the age of 10.
        Mr. Berman. It is not you, Tom.
        Mr. Pence. This is a very important issue. I want to
    identify myself with Mr. Keller's remarks. I understand both
    sides of this entertainment economy are hurting. And as
    Congressman Keller said, I am aware that on the performance
    side the principal villain is piracy.
        And let me renew my appreciation for the Ranking Member's
    longstanding leadership on intellectual property issues and the
    Chairman's leadership in this area. This very Subcommittee
    exists for the purpose of addressing and protecting the
    intellectual property rights of the interests represented on
    this side of the argument.
        The other is I am also aware that people are struggling
    among terrestrial broadcasters. I made a living for about 10
    years in and around local radio back in Indiana. And in the
    ever more diverse entertainment economy that we have today the
    point, click, download choices that simply weren't there when
    people were out trying to hustle advertising sales even back in
    the early 1990's represents a very serious, if not existential
    threat to the economic vitality of local radio and terrestrial
    radio. And so, I understand those pressures very much.
        And, Mr. Chairman, I am always interested in new business
    models for the new economy. I can't help but wonder aloud if
    radio stations ultimately will be required by Congress to pay
    artists directly performance fees as considered in H.R. 4789.
    Shouldn't radio stations perhaps enjoy some of the revenues
    from sales within that ADI? And doesn't the technology actually
    exist today to allow a portion of that revenue stream that
    comes out of that ADI to flow back to replenish the coffers of
    performance fees that might be paid? I just find myself
    thinking out loud about that.
        Because I struggle with the Performance Rights Act as
    currently crafted. Although I know there has been a sincere
    effort to carve out exceptions and the like, religious
    broadcasters and local broadcasters. But my question is
    oftentimes as performers if, you know, you could pay radio
    stations to air your records, would you? And that is usually
    the one where the most respected representatives in this
    industry will look at me blankly and not answer me.
        I mean, and if they, in fact, would be willing to pay,
    isn't that kind of prima facie evidence that there is value in
    the airtime? And I listened with great interest to my
    colleagues' thoughtful reflections on the life and career of Bo
    Diddley who recently passed. And as he used the words how
    tragic it was for him to hear his records played on a local
    radio station and not be compensated for that. And I respect
    the gentleman's opinion on that.
        I would only add that I think the only thing more tragic
    for him or any other artist than hearing their record played on
    a local radio station and not being paid would be not hearing
    your record played on a local radio station. I mean, the very
    opportunity for artists to be heard--I expect there have been
    generations of Americans who have come to appreciate the genius
    of Bo Diddley and the genius of other artists who have been
    able to sustain careers over many decades precisely because of
    the infrastructure of local radio in America that keeps the
    work of these people alive and before the public.
        So I am listening. I have an open, if not fertile, mind on
    these issues. But I do bring these fundamental questions to
    this panel. And I look forward very much to the testimony and
    to the ability to have anyone on this panel respond to those
    core issues.
        And I yield back.
        Mr. Berman. I thank the gentleman.
        The gentleman from Florida, Mr. Wexler?
        Mr. Wexler. Thank you, Mr. Chairman. I am not undecided. I
    have two points that seem to me compelling. One, if I
    understand it correctly, the radio stations took in $16 billion
    in advertising revenue last year, and not one cent was paid out
    to compensate performing artists for their music, which makes
    the radio station viable. So $16 billion in advertising
    revenue, zero in payments to performing artists. Something is
    wrong.
        Some of our colleagues have talked about an issue of fair
    compensation. This isn't an issue of fair compensation. This is
    an issue of no compensation.
        We are not talking about 3 percent versus 5 percent or
    whatever the number might be. This is zero versus $16 billion
    in revenue.
        Also, this argument of well, we don't have to pay because
    we promote. And I am just curious when unilaterally declaring
    that we promote someone's product, when that replaced in the
    American economy the requirement that you pay for it.
        It would be one thing if you negotiated it and both parties
    said, well, because you are promoting it, therefore we will
    reduce our price or you won't have to pay us under certain
    circumstances. But the idea that one party unilaterally says,
    well, I am promoting your product, therefore I don't owe you
    anything else--I just don't understand how that fits into any
    type of economic model.
        And when you take that argument to its logical conclusion,
    as some people have talked about older music, well, does that
    mean because older music really is well beyond being promoted
    that older music should be paid for but newer music should not?
    Clearly, that wouldn't seem to be particularly sensible,
    either.
        Thank you, Mr. Chairman, for pushing this very important
    issue.
        [The prepared statement of Mr. Wexler follows:]
    Prepared Statement of the Honorable Robert Wexler, a Representative in
    Congress from the State of Florida, and Member, Subcommittee on Courts,
                    the Internet, and Intellectual Property

        Mr. Berman. I thank the gentleman.
        I should note for the record that the fact that a Member
    chose not to speak on this issue does not mean that that Member
    is not interested in this issue. Secondly, the warm-up
    performers are finished. We will now go to the main event.
        Nancy Sinatra is a world famous recording artist with more
    than 24 chart hits in the U.S. and internationally, including
    the song ``These Boots are Made for Walkin'.'' Nancy has
    written two books about her father, Frank Sinatra. She is very
    active in charitable causes, including Jerry Lewis' MDA
    telethon and songs of love. In 2006 Nancy received a star on
    the Hollywood walk of fame in recognition of her career
    achievements and her contributions to society, and for a long
    time, and I assume it still is, a constituent of Los Angeles
    and our area.
        Steve Newberry is president and CEO of Commonwealth
    Broadcasting Corporation, a multi-station radio broadcast group
    with stations throughout Kentucky. Steve has served as vice-
    chair of the National Association of Broadcasters Radio board
    of directors and president of the Kentucky Association of
    Broadcasters Radio board of directors and president of the
    Kentucky Broadcasters Association. Steve has been active in
    public broadcasting having served for 6 years as a member of
    the national board of trustees of America's public television
    stations and 5 years as chairman of the Authority for Kentucky
    Educational.
        Charles Warfield, good to have you here again. He is
    president and COO of ICBC Broadcast Holdings, which owns and
    operates 17 radio stations in New York City; San Francisco;
    Jackson, MS; and Columbia, SC. Throughout his career Charles
    has served as top manager for radio stations, including WRKS FM
    in New York, WDAS AM/FM in Philadelphia and KKBT FM in Los
    Angeles. Presently he serves on the Radio Advertising Bureau
    executive committee. His community commitments have included
    the American Red Cross, the United Negro College Fund, the
    Urban League, Harlem YMCA and various other groups.
        Thomas Lee is the international president of the American
    Federation of Musicians of the United States and Canada. The
    AFM is an international labor organization representing over
    90,000 professional musicians and over 230 local throughout the
    United States and Canada. Mr. Lee is also a professional
    pianist and served for 24 years on active military duty with
    the President's own Marine band performing 3 or more days a
    week at White House functions.
        It is a pleasure to have all of you here. We appreciate
    your patience.
        And, Ms. Sinatra, why don't you start?

    TESTIMONY OF NANCY SINATRA, DAUGHTER OF THE LATE FRANK SINATRA,
                       LEGENDARY RECORDING ARTIST

        Ms. Sinatra. Can you hear me? It is a blonde thing. I
    didn't turn it on. Sorry.
        Chairman Berman, Ranking Member Coble, and Members of this
    Committee. thank you all so much for inviting me here today. I
    am very nervous. The truth is I would rather be at the
    Hollywood Bowl in front of 18,000 people singing a song. But I
    am very grateful to you for inviting me.
        When most people are asked how much do you think artists
    are paid when their music is played on the radio they usually
    say a few cents. But as our chairman knows, over the years he
    has learned that we are paid zero. You all know that.
        I actually feel like I should tear up my script and throw
    it out because you have all said practically everything that is
    in here. But then I wouldn't be doing my job. So I will read
    ahead.
        I want to thank Chairman Berman for the leadership you have
    shown on this issue. On behalf of all recording artists--and
    this goes for the musicians, the rhythm sections, the horn
    sections, the reed sections, the string sections--whose names
    people don't know and, of course, the people whose names are on
    marquees, on a CD cover or on an iTunes download. We are all
    very grateful.
        Many years have gone by since we began trying to right this
    wrong. Yet performers still are not compensated for the use of
    their work on broadcast radio. And we are still here still
    trying to get fair pay.
        This is an injustice that compelled my father 40 years ago
    to lend his voice to the cause of fairness. For some of the
    singers and musicians that I know, especially back in the band
    era, their only compensation was their initial salary as a band
    singer, a stipend perhaps. But if they were to receive a
    royalty from their classic recordings that are still being
    played four and five decades later, it would mean the
    difference between having food and prescription drugs or not.
        Imagine, if you will, struggling in your job, perhaps for
    years, to make the best product you can, a product made of your
    blood, sweat and tears. And now imagine people taking that
    product to use to build their own hugely successful businesses,
    just taking it, no permission, no payment, no conscience.
        Imagine those people telling you they are doing you a favor
    by taking your product without your consent because some more
    people might come to know about you and your product. Imagine
    those people now telling you to shoo and go find compensation
    from those other people. And by the way, make some more of that
    product so we can take that, too.
        Now, why is this scenario--does that mean something? Why is
    this scenario so outrageous in the abstract, yet perfectly
    acceptable in the reality of broadcasting? Why is the
    broadcasters' exemption allowed to rob us of our hard-earned
    income, including the millions from broadcasters overseas, very
    important point, who don't have to pay us because our country
    doesn't?
        Why is the broadcasters' exemption allowed to disadvantage
    every other radio platform that does correctly pay us? In what
    other business is the promise of some promotion justification
    for taking someone's product?
        Again, we are in no way seeking to harm broadcasters.
    Please believe me. We just want our fair share. And that is why
    I was pleased also to see that the legislation not only seeks
    fair royalties for recording artists, but it protects
    songwriters and gives an important break to religious,
    educational, non-commercial and small radio stations, the ones,
    who, like the artists we are talking about today.
        Mr. Berman. This means that in about 10 minutes we are
    going to have to recess for a while. But go ahead.
        Ms. Sinatra. I will hurry. I will hurry.
        Mr. Berman. No.
        Ms. Sinatra. This search for justice is not about those of
    us whose careers have branched out and lasted for decades. It
    is not about me. It is not about my dad. Certainly, Dad wasn't
    fighting for this because he needed more money. His fight
    carried on by us all is a simple one of fairness. We are in
    search of fairness.
        Our power lies in communicating our situation and feelings.
    We can sing about injustice, and our instruments can express
    our frustration and yearning, but your power lies in making the
    change. I hope you will consider supporting the Performance
    Rights Act. And thank you very much.
        I would like to know what is ADI. I don't know what that
    means.
        Mr. Berman. I know what ATD is.
        Ms. Sinatra. Okay. I just got it. Thank you. I am sorry I
    took so long.
        [The prepared statement of Ms. Sinatra follows:]
                      Prepared Statement of Nancy Sinatra

        Mr. Berman. I am sorry if that was one of the initials I
    used somewhere. Okay. Thank you very much. I did mention
    earlier that all of your statements will be included in the
    record. We would ask you to limit your testimony to 5 minutes.
    Probably after Mr. Newberry we will have to recess. We have two
    votes which make take 15 or 20 minutes and then come back and
    continue the hearing.
        Mr. Newberry?
        Mr. Coble. Mr. Chairman, may I ask Mr. Newberry a quick
    question? What does ADI mean, Mr. Newberry?
        Mr. Newberry. Area of dominant influence. It is a ratings
    definition for a market area or geographical area.
        Mr. Coble. Thank you.
        I didn't know, either, Ms. Sinatra.

          TESTIMONY OF STEVEN W. NEWBERRY, PRESIDENT AND CEO,
                 COMMONWEALTH BROADCASTING CORPORATION

        Mr. Newberry. Good afternoon, Chairman Berman, Ranking
    Member Coble and Members of this Subcommittee. My name is Steve
    Newberry, and I am president and CEO of Commonwealth
    Broadcasting, which operates 23 stations located in Kentucky.
    Thank you for inviting me to testify today on behalf of the
    over 6,800 local radio members of the National Association of
    Broadcasters.
        I can tell you that all broadcasters, urban, rural,
    religious, public, community, ethnic, large and small
    broadcasters like me have concerns and oppose H.R. 4789. Local
    radio provides to the recording industry what no other music
    platform can, pure music promotion. Radio is free. It is
    pervasive, and no one is harming record label sales by stealing
    music from over the air radio.
        Don't take my word for it. Just look at the recent studies
    that confirm local radio's promotional value. First, NAB
    compiled a report using data from the Nielsen Company and from
    Pollstar that showed the extraordinary promotional value that
    local radio provides to artists and record labels. These slides
    unequivocally show that there is a direct correlation between
    the number of spins or plays on the local radio and the sales
    of albums and singles.
        This direct and positive impact on record sales is
    consistent across diverse genres and is seen regardless of the
    audience. As you can see on the screen and also on the sheet in
    front of me, Taylor Swift, who is the new country artist, has
    an increase in pre-radio airplay. You also see a corresponding
    spike in record sales. The sales mirror the spins. And it
    happens over and over with each song.
        Now, that correlation can also be seen with an artist who
    may initially break on the Internet like Colbie Caillat. On her
    slide you can see the early but modest bump in sales that
    resulted from Internet play of her song Bubbly. But once she
    got exposure on local radio, her sales hit the roof.
        So clearly, there is a strong and predictive relationship
    between radio airplay and sales. But can we quantify it in
    dollars and cents? Yes, we can.
        In a paper just released, economist and Ph.D., Dr. James
    Dertouzos completed an economic analysis that measures the
    promotional value of free radio airplay to record sales. And
    according to this analysis, Dertouzos found that the
    significant portion of record industry sales of albums and
    digital tracks can be attributed to local radio airplay at a
    minimum 14 percent and as high as 23 percent. That translates
    to between $1.5 billion and $2.4 billion of promotion annually.
        Now, those numbers only include the promotional value to
    record sales. It would go even higher if it included the
    promotional value of concerts, tickets or merchandise sales.
    And this is the promotion that artists and labels are getting
    for free.
        Under H.R. 4789 the value of this extraordinary promotional
    and all of the financial benefits that come from it would be
    harmed. Ultimately, less music will be played. Less exposure
    will be provided for artists, particularly for new artists and
    music sales will suffer.
        On the international front it is simplistic to argue that
    because other countries pay a performance royalty the United
    States should as well. First, comparing the United States to
    totalitarian countries like Iran or North Korea is just plain
    silly when you consider the artistic freedom of expression that
    we have here in the United States of America. But it is also
    comparing apples to oranges.
        Most of these other countries created performance royalties
    when the broadcast 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 predominately
    privately owned and operated and does not receive any tax
    subsidies. Clearly, the lack of a performance right has not
    affected the quality or quantity of music in the United States.
    At the end of the day, the U.S. recording industry is the most
    prolific in the world and is more successful than the United
    Kingdom, France, Germany, Canada, Australia, Italy, Spain and
    Mexico combined, all of which have a performance fee.
        Additionally, levying a new performance fee on local radio
    will not and cannot establish true parity. Yes, satellite and
    Internet radio do indeed pay performance fees. But satellite
    and Internet generally rely on subscription fees and offer
    interactivity so listeners aren't encouraged to buy the music.
        Most importantly, I want this Committee to understand what
    this means to local radio should H.R. 4789 become law. Many
    local radio stations are struggling to be profitable since most
    of our operating costs are fixed and our advertising revenues
    are flat, and they are projected to remain flat in the
    foreseeable future.
        I know the intent was to protect smaller market radio
    broadcasters. But as an owner of local radio stations in rural
    markets, I fear it does not.
        I have been in local radio for many years, and for the life
    of me I do fail to understand why the record labels are looking
    to local radio to make up lost revenue. Because weakening radio
    will ultimately harm the performers.
        Local radio is a purely promotional vehicle for artists.
    Radio airplay drives record sales. The system in place today
    has produced the best broadcasting, music and sound recording
    industries in the world. It is not broken. And it is not in
    need of fixing.
        Thank you for inviting me today to give my perspective on
    H.R. 4789. And I will certainly entertain any questions.
        [The prepared statement of Mr. Newberry follows:]
                    Prepared Statement of Steven W. Newberry

        Mr. Berman. Well, thank you very much, Mr. Newberry. And I
    think we will now recess the Committee for these two votes.
    Hopefully we will be back in about 20 minutes. You can make new
    flight arrangements while we are in recess.
        [Recess.]
        Mr. Berman. All right, the hearing will resume. And
    hopefully we can get a little time in before the next
    commercial break.
        Mr. Warfield?

        TESTIMONY OF CHARLES WARFIELD, PRESIDENT AND COO, ICBC
                    BROADCAST HOLDINGS, INCORPORATED

        Mr. Warfield. Thank you. And I was going to start out by
    saying good afternoon, but I guess it is good evening, Chairman
    Berman and Ranking Member Coble and Members of the
    Subcommittee. And thank you for inviting me back to the
    Subcommittee to give you my comments on H.R. 4789, the
    Performance Rights Act.
        My name is Charles Warfield. And I am president and COO of
    ICBC Broadcast Holdings serving primarily African-American
    communities in New York City; San Francisco; Columbia, South
    Carolina; and Jackson, Mississippi. It should come as no
    surprise to anyone that local broadcasters are strongly opposed
    to H.R. 4789 and the imposition of any new performance
    royalties, what we broadcasters consider a performance tax, on
    local radio for the benefits for the recording industry. And we
    oppose H.R. 4789 for one very simple reason. This bill is not
    fair.
        It is said all the time the music business is a product of
    a true symbiotic relationship. Unfortunately, today you have
    before you only two of the three groups that make up that
    relationship. The witnesses' table is missing the third arm of
    the music industry trio. Recording Industry Association of
    America, or RIAA, which represents the big four record labels.
        Clearly, the crux of this issue is performer compensation.
    And frankly, I don't blame the artists. For over 2 years I
    worked for a record label. And I have seen from the inside how
    this industry works. But I can tell you the artists have
    focused their aim on the wrong target. We should be addressing
    the root cause of the artist compensation concern, the record
    labels.
        First, is it fair that the record labels will take a full
    50 percent of any new performer's royalty under H.R. 4789?
    Unfortunately, RIAA is not here to explain why it needs half of
    a new performer's fee that is designed for artist compensation.
        Second, H.R. 4789 is unfair in that it targets local radio
    stations when the real culprits for the lack of artist
    compensation is the result of inequitable, one-sided contracts
    that artists find themselves entangled in for years after they
    have signed with a label. I have heard these awful stories
    about artists who were forced to tour in their later years. But
    the reason these older artists are slogging from city to city
    instead of spending time with their families is not local
    radio. It is their record label.
        An example is rock pioneer Bo Diddley, as we have heard
    this afternoon who recently passed away at the age of 79.
    Despite ill health, Diddley remained a live performing artist
    almost until the end of his life. That is because, according to
    the Associated Press, he and his contemporaries were often paid
    a flat fee to record an album with all rights going to the
    recording company. Records were sold, but Diddley received no
    royalties.
        The A.P. quoted him saying ``I am old. I have never got
    paid. A dude with a pencil is worse than a cat with a machine
    gun.'' Even today artists continue to complain that they lack
    true bargaining power when they sign with a record label.
        Don Henley, front man for the Eagles, called the recording
    industry a dirty business. According to Henley, most artists
    don't see a penny of profit until their second or third album.
        One of the most reported examples is the artist Prince, who
    scribbled the word ``slave'' on his cheek to describe his
    relationship with his label, Warner Brothers. Ultimately,
    Prince was so desperate to get out of his recording contract
    that he abandoned his name to the label.
        And you have multi-platinum artists like TLC and Tony
    Braxton who were forced to declare bankruptcy because their
    recording contracts didn't pay them enough to survive. And
    these are only the most publicized stories. There are untold
    others by smaller, lesser known artists that never get
    reported. There is undoubtedly a problem with artists'
    compensation, but it is not the fault of local radio.
        Third, H.R. 4789 equates artists being paid fairly as being
    paid the same as composers. Yes, composers and their publishers
    who were typically a division of the big four record labels
    receive a royalty from local radio airplay. And this makes
    sense because unlike performers the composers do not have the
    ability to capitalize on their celebrity as do performers.
        Rather an artist is compensated with radio airplay and free
    exposure to 235 million listeners a week. It is this broad and
    far-reaching promotion that propels music sales, touring
    revenues, merchandise sales and a variety of other gains.
        Finally, in addition to targeting the wrong industry to
    solve the artist compensation problem, H.R. 4789 is unfair in
    that it claims to achieve parity between music platforms when
    no true parity can exist. Being a local radio broadcaster
    carries with it large regulatory responsibilities which the
    other platforms do not have. True parity would mean Internet
    and satellite radio abide by decency regulations, public
    interest obligations, payola rules and emergency alert
    requirements.
        But the fact of the matter is that local radio is
    different. We are local. We are free. We are purely
    promotional. And true parity cannot exist.
        The current symbiotic relationship that has existed for
    years between radio and recorded industries is the very essence
    of fairness. But H.R. 4789 takes this balanced system and
    places the heavy thumb of government on one side of the scale--
    dramatically in favor of the performers and records. I believe
    that H.R. 4789 would also have a negative impact on everyone at
    this witness table and even those like RIAA who are not at this
    table.
        Thank you for inviting me here today. And I am happy to
    answer your questions.
        [The prepared statement of Mr. Warfield follows:]
                     Prepared Statement of Charles Warfield

        Mr. Berman. Thank you, Mr. Warfield.
        And Mr. Lee?

                TESTIMONY OF THOMAS F. LEE, PRESIDENT,
                    AMERICAN FEDERATION OF MUSICIANS

        Mr. Lee. Good afternoon, or close to early evening.
    Chairman Berman, Ranking Member Coble, Members of the
    Committee, my name is Tom Lee. I am the international president
    of the American Federation of Musicians on behalf of 90,000 AFM
    members and artist members in over 230 affiliated locals across
    the country, I thank you for your attention and your leadership
    on this important issue of performance rights.
        And I am also honored to speak to you today on behalf of
    AFM's fellow performer organization, AFGRA, the Music Managers
    Forum, the Recording Academy, the Recording Artists Coalition,
    the Rhythm and Blues Foundation, the Society of Singers and the
    Vocal Group Hall of Fame. Together we represent tens of
    thousands of performers.
        Dozens of our members have been here to Washington this
    week and today to tell you their stories. And I just want you
    to know how much they appreciate the opportunity to meet with
    you and be part of this hearing.
        Many others are visiting their Congress Members probably as
    we speak, so they are not present here. I am privileged to
    appear here with Ms. Nancy Sinatra, who is a great performer.
    There is nobody in this room, I would bet you, who hasn't tried
    to attempt to sing ``These Boots are Made for Walkin' '' or
    ``Something Stupid'' or ``Only Live Twice.'' In fact, some of
    my best friends sing ``Something Stupid'' when they are around
    me. I don't understand it.
        But, of course, it is a great pleasure to honor Ms.
    Sinatra's father, the incomparable Frank Sinatra. He loved
    musicians. And I know they loved him. And he was a member of
    our union for over 50 years. And no matter how big Frank
    Sinatra got, he never forgot the musicians who helped him.
        One of Sinatra's biographers quotes him as saying that he
    liked to be around bands and be part of their glamour. And, of
    course, in the end he was the most glamorous and had the most
    glamorous career of all. But he never forgot the artistic
    partnership between musicians who play an instrument and
    musicians whose instrument is their voice.
        There is a tremendous amount of talent in our business, but
    not really that much glamour. So fame and fortune are very much
    the exception, not the rule. A successful performer is not
    necessarily one who is a household name. Successful performers
    are the ones who can quit their day jobs. Their music may be
    classical or grunge, jazz or country, rock or sahano, bondo or
    blues or folk. They may be established mid-tier artists, or
    they may be just starting out.
        They create artistically successful recordings aimed at
    loyal fans. And those fans follow their careers avidly, even
    though they are not front page news. Or they may be successful
    session performers who contribute to the professionalism and
    creativity of recordings. And I am thinking, for example, of
    Vice President Harold Bradley of the International Federation
    of Musicians. You probably haven't heard his name before today,
    but you absolutely have heard his guitar.
        He was recording with Elvis. He has recorded with Patsy
    Kline when she did ``Crazy,'' Brenda Lee's ``I Am Sorry,'' Roy
    Orbison's ``Only the Lonely,'' Roger Miller's ``King of the
    Road,'' Tammy Wynette's ``Stand By Your Man,'' Johnny Horton's
    ``Battle of New Orleans'' and, in fact, 30,000 recording
    sessions this individual has been on. He is a true session
    artist.
        All these varied performers have a few things in common.
    First, they have tremendous talent. They take a song, whether
    their own or someone else's and transform it to words and notes
    on a piece of paper into a unique living and breathing work of
    art that has tremendous value as we know today.
        Second, they are incredibly hard working. Performers labor
    long and hard to develop their musical skills and their
    business opportunities.
        Third, they may do it for love, but they also have to eat.
    They have to provide for their families just like everybody in
    this room.
        Fourth, in most instances, they don't get a weekly or
    monthly paycheck. They are entrepreneurs, small business people
    who patch together many different income streams to earn their
    living.
        Royalties, concert fees, t-shirts and the whole range of
    payments for artists and background musicians, every kind of
    payment, large or small is important to string together for
    them to make a living. Like Frank Sinatra, the AFM started
    fighting for a performance right in sound recordings decades
    ago. And we are all still fighting today. And it is not because
    we are greedy, and it is not because we don't care about radio.
        It is a question of justice, business and art. And it is a
    question of paying people for their creation of an intellectual
    property that has great value. The truth is that the art we
    make has a business value. Radio is not the only industry that
    uses recorded music to make money. But it is the only one with
    a free pass to pay performers nothing. That is unfair any way
    you cut it.
        It is even more unfair given that radio's competitors,
    satellite radio, Internet radio and cable pay us. And it hurts
    the American economy because it causes us to lose millions of
    dollars in payments for our U.S. musicians. The United States
    is the only developed country without a performance right in
    sound recordings. What is wrong with this picture?
        And the U.S. repertoire played by foreign radio is huge.
    But none of that money flows to the U.S. because we don't have
    a reciprocal right.
        Artists around the world see this as unfair. And a few
    months ago, more than 6,000 of them expressed support for
    performance right in the United States. And I am pleased to
    announce that an additional 1,500 additional artists have
    stepped forward since then to add their voices to our cause,
    including such celebrated artists as Paul McCartney, Eric
    Clapton, P.J. Harvey and Ozzy Osbourne.
        With your permission, Mr. Chairman, I would like to enter
    that document into the record.
        Mr. Berman. Without objection, that will be included.
        Mr. Lee. Thank you, sir. Today the sound recording is the
    second class citizen of copyright law. Every other performable
    work enjoys a performance right.
        For example, radio pays songwriters for the use of their
    underlying song. And it is right, and it is fair, and it is
    part of H.R. 4789 to protect those songwriters' interests. And
    as performers we will work in any way we can to make sure that
    our songwriters' interests are protected.
        We are just asking for the same fair treatment. H.R. 4789
    contains special provisions to benefit small and non-profit
    radio stations. Their royalty obligations will be small and
    predictable. But performers are the classic small business.
    They are always taking risks. Their rewards are generally
    modest and never predictable. And they need help.
        Radio may help to spread cultures. But let's be clear about
    one thing. It is the performers that create the culture. Every
    business that benefits from their worth should contribute to
    their livelihood. That is fair. That is American. That is what
    will keep the art and business of music strong in this country.
        This hearing is not about the record labels and their
    relationship with their artists. That is a different topic on a
    different day. This is about fairness in radio. This is about
    paying those who create intellectual property that is deemed to
    have value. And indeed, $16 billion a year in value, as far as
    I am concerned, proves that it has value.
        So let's take into consideration the individuals whose
    enormous talent create this intellectual property of great
    value. Thank you for your attention and for your help. And I
    stand ready to answer any questions.
        [The prepared statement of Mr. Lee follows:]
                      Prepared Statement of Thomas F. Lee

        Mr. Berman. Well, thank you, Mr. Lee and all the witnesses.
    I am going to defer my questions and comments until the end.
    And I will recognize my Ranking Member, Mr. Coble, for 5
    minutes.
        Mr. Coble. Thank you, Mr. Chairman.
        Good to have you panelists with us today.
        Mr. Warfield, you were with us about a year ago. You need
    to visit more often. It is good to see you again.
        It is good to see all of you.
        Mr. Newberry, let me start with you. The bill, as you all
    know, includes a carve out for small radio stations so they are
    able to pay a flat annual fee of $5,000 for the unlimited
    performance of recorded music. Mr. Newberry, does this
    provision address your concerns regarding the impact of small
    stations and small businesses?
        Mr. Newberry. Congressman, it is problematic from the
    standpoint that a lot of small market stations--and granted in
    Washington I am sure $5,000 is a small amount of money. But for
    a small market operator of an AM station or a small FM station
    that may very well be dealing less than $100,000 a year with a
    profit margin of 10 percent or less--and profit margin in most
    of these cases defines what the owners take home for their
    work. This is not after they have been paid. It is their take
    home pay.
        So $5,000 is a significant amount. And if you take a small
    broadcast operation that has an AM/FM combination in a small
    community like Princeton, Kentucky or somewhere in rural North
    Carolina, now you have $10,000 of obligations to pay. So I
    understand the intent with that.
        As a small market broadcaster I appreciate the intent. But
    I think the amount is something that would be an economic
    burden on those who find it most difficult to find
    profitability in our industry.
        Mr. Coble. I thank you, sir.
        Mr. Warfield, you expressed concern about the economic
    circumstances of recording artists and criticized the bill
    because it would direct half the fee to the record label rather
    than to the artist. Now, are you suggesting, Mr. Warfield, that
    broadcasters could support a bill that provides a higher
    percentage of the royalty directly to the artist? Or do your
    concerns relate to other aspects of the bill?
        Mr. Warfield. My concerns relate to the status and the
    condition of the artists themselves and experiences that I have
    had with artists and in the industry as to why they face some
    of the financial difficulties that they have. And it has
    nothing to do, quite honestly, with the bill or with radio with
    this issue. And I think that that is an issue that should be
    looked at and considered.
        Mr. Coble. I thank you for that.
        Mr. Lee, broadcasters have testified that radio stations
    provide tens of millions of dollars in free publicity and
    promotion to the performers of sound recordings in the form of
    concert promotion and publicity, et cetera. Given the truth of
    this statement, and I don't doubt it, why is it that this
    valuable compensation is not considered by artists to be
    sufficient payment for the performance of their works?
        Mr. Lee. Well, sir, first of all, the graphs that were
    shown to us today I have no understanding of the study. That
    wasn't shared with us. And I don't think anyone disagrees that
    there is a promotional spike when radio stations play certain
    artists' recordings. But there is a lot more that goes into a
    touring artist than a radio station playing the recording.
        You buy newspaper ads. You put up billboards. You have all
    kinds of promotional material that is taking place. To
    attribute every artist's spike in their record sales to simply
    the fact that they are being played on the radio is not taking
    into consideration all of the other things that go on around
    promoting that artist.
        And I would say to you, as someone said earlier, when you
    broadcast a baseball game, a basketball game, NFL football, you
    are promoting the purchasing of tickets at actually a lot
    higher fees in some cases than what they are for concert
    artists. You are promoting a huge organization. And you are
    paying for it.
        The radio stations have to pay for that signal. We are
    suggesting that there is nothing different if you are going to
    pay for a signal to promote a basketball game than intellectual
    property owners and the creators are entitled to these fees as
    compensation as well.
        Mr. Coble. Thank you, Mr. Lee.
        One more question, if I may, Mr. Chairman.
        Ms. Sinatra, we have heard about the recent passing of Bo
    Diddley. And I was an avid Bo Diddley fan. But my genre, as
    most of my colleagues know, flows more from country and
    bluegrass and Porter Wagoner, of course, pre-deceased Bo
    Diddley. Let me ask you this, Ms. Sinatra. How do you think
    your life and the lives of the late Porter Wagoner, of the late
    Bo Diddley--how might those lives may have been different if
    the Congress had enacted a performance right for recording
    artists when it was considered some almost three decades ago?
        Ms. Sinatra. Addressing the older performers, the recording
    artists, I am only guessing that their lives, I am pretty sure,
    their lives would have been a lot better.
        I know of many singers, including some in the 1940's and
    1950's, who died penniless, and I think that they could have
    maybe lived longer--who knows? Their families could be
    enjoying, or they could be enjoying, something a little better
    now, if they had received royalties all those years.
        As far as I am concerned, my own career, I have done
    extremely well, so I am not talking about me with this. I am
    talking about them, talking about the younger people starting
    out, who need royalties in order to continue their work in the
    arts. They don't receive them.
        And I am also talking about the musicians, many of whom
    that I have worked with for 40-plus years, still travel with me
    to this day--that is the only time they get paid is when they
    are working for me, and I make sure they get paid. And the side
    of that is that I never make a dime on the road. So if we are
    talking about that, I don't know what to tell you.
        Mr. Coble. Well, that is a fair response. I thank the
    witness.
        And, Mr. Chairman, I thank you as well and yield back.
        Mr. Berman. The time of the gentleman has expired.
        Next, the gentleman from North Carolina?
        Okay. Then the gentlelady from Texas, based on order of
    coming in earlier?
        Okay. You are going to yield your time to Mr. Wexler? Oh.
        All right. Then I think it is Mr. Johnson. [Laughter.]
        The gentleman is recognized for 5 minutes.
        Mr. Johnson. Thank you. Me first, gentlemen. Yes. Okay.
        Ms. Sinatra.
        Ms. Sinatra. Yes, sir.
        Mr. Johnson. I want to thank you vicariously. I want to
    thank you. I really want to thank your daddy for creating so
    many works on wax that people listen to and will continue to
    listen to in perpetuity. And he gave so much joy.
        And he was also a man who looked kindly upon people of my
    race, by the way, and I deeply appreciate that.
        By getting back to what we are talking about, Mr. Sinatra
    has so many renditions that are so special and unique that they
    could never be duplicated, and so we just play them over and
    over again. And whenever that is broadcast on broadcast radio,
    the artist, or his estate, does not partake in that moneymaking
    proposition.
        And I assume that your life and the life of Mr. Sinatra's
    heirs would be enhanced, if you all were able to partake in
    such revenues. Am I correct about that?
        Ms. Sinatra. I am sure you must be. We are very fortunate
    in that my dad owned most of his own masters, as I own most of
    my masters.
        Mr. Johnson. Okay. So that shuts that down.
        Ms. Sinatra. It takes the other stuff away----
        Mr. Johnson. Your dad was very smart.
        Ms. Sinatra. That is why I said we don't talk about us in
    this particular bill----
        Mr. Johnson. Yes.
        Ms. Sinatra [continuing]. Because we are already okay.
        Mr. Johnson. Well, I tell you, that it is not the norm,
    though, among the performers. Most performers don't own their
    masters.
        Ms. Sinatra. That is right.
        Mr. Johnson. And so what I said applies to so many others,
    who you are representing today, and I appreciate that.
        Let me ask Mr. Newberry. The broadcast radio industry has
    undergone substantial conglomeration since Congress first
    established copyright protection for sound recordings in 1971.
    Isn't that a fact?
        Mr. Newberry. The world has changed. Yes, sir. There has
    been a change in the organization of our industry, and there is
    a tremendous amount of additional competition.
        Mr. Johnson. A lot of conglomeration or consolidation.
        Mr. Newberry. Certainly.
        Mr. Johnson. And so therefore it is true to report that
    many of the stations that broadcast popular music are owned by
    major media corporations, correct?
        Mr. Newberry. Well----
        Mr. Johnson. True or false?
        Mr. Newberry. Commonwealth Broadcasting is certainly not a
    major media corporation, but certainly there are publicly
    traded companies in broadcasting.
        Mr. Johnson. But it is a multinational company.
        Mr. Newberry. Yes, sir.
        Mr. Johnson. And this----
        Mr. Newberry. Just as further clarification, minimal amount
    of international activity. Most of these are American
    companies, American licenses.
        Mr. Johnson. Certainly, but big companies.
        Mr. Newberry. And small ones.
        Mr. Johnson. But mostly the major media companies have been
    consolidating their hold on the broadcast radio industry. Would
    you agree to that, Mr. Lee?
        Mr. Lee. I absolutely would agree to that.
        Mr. Johnson. And would you agree to it also, Mr. Warfield?
        Mr. Warfield. There has been a certain amount of
    consolidation in our industry, but there are 13,000 stations in
    the United States. Many of those radio stations are owned by
    what we refer to as Mom and Pop, small organizations.
        Mr. Johnson. Certainly. I know there are a lot of small,
    five-watt, 20-watt, 100-watt stations, but the 50,000-watt
    stations, 100,000-watt stations, the big boys--they are owned
    by the big media conglomerate.
        Mr. Newberry. That is not correct.
        Mr. Warfield. That is not correct. Many stations are in
    individual hands and run small companies.
        Mr. Newberry. A 100,000-watt station in Bowling Green,
    Kentucky, owned by a competitor of mine.
        Mr. Johnson. Okay.
        Mr. Newberry. Small market, small business.
        Mr. Johnson. Small markets, but large markets, where the
    real money is made--they are controlled by the major media
    corporations. Now, you are going to try to hoodwink us on that,
    but I think everybody that there has been consolidation in the
    industry, and you all have admitted to it.
        Now, given this shift into more larger media conglomerates
    controlling the broadcast industry, and while at the same time
    they have TV and newspaper outlets as well, this consolidation
    has been ubiquitous, and everybody knows it.
        Don't you think, Mr. Lee, that the industry is much better
    equipped today than it was in 1971 to pay performance
    royalties?
        Mr. Lee. I think they absolutely are equipped, much better
    equipped to pay performance royalties.
        And I just want to make one thing clear. We are not out to
    make the small companies a lot of business. We want them to
    play our members' products. We are interested in that taking
    place. But we have 75 percent, I think is the number, that are
    small radio stations, and we have made provisions in the bill
    for small radio stations.
        But when Beyonce Knowle comes out with a new recording,
    that radio station is going to say, ``We have to play her
    recording and every other top artists' recordings, because that
    is how they sell their ads.'' It is a $16 billion a year ad
    industry.
        They are not promoting our records as much as they are
    selling ads to make money for themselves. 2.3 million sound
    recordings are played a day. Now, those are not all the top
    recordings that are getting the promotional service that seems
    to be suggested here.
        And I just have to say one other thing to Mr. Coble's
    question about the individual, the older musician. I can tell
    you right now of a musician in Nashville, Tennessee. He was on
    18,000 recording sessions.
        That individual now is sitting in the nursing home,
    recovering from a broken hip. He is almost blind, and his
    hearing is almost gone, but he can hear well enough to hear a
    radio station that plays his songs--that is from Elvis to Dolly
    Parton to Ray Price to Emmylou Harris to Conway Twitty to
    Charlie Pride to Porter Wagoner to Loretta Lynn. He is hearing
    those songs play, and he is getting no revenue from it, and
    everybody else is making money off of it.
        Mr. Berman. The time of the gentleman has expired.
        The gentleman from Florida, Mr. Keller, is recognized for 5
    minutes.
        Mr. Keller. Thank you very much, Mr. Chairman.
        Mr. Lee, let me begin with you. Under this proposed
    performance fee legislation, the record labels would get 50
    percent of the money, and musicians 2.5 percent. From the
    musician's perspective, is that a fair allocation, for the
    record companies to get 20 times as much as the musician?
        Mr. Lee. Well, the artist will get 45 percent. The singers
    and background musicians will share 5 percent. That is correct.
        Mr. Keller. And musicians are 2.5 percent, and the
    background singers 2.5 percent. Is that correct?
        Mr. Lee. That is correct.
        Mr. Keller. And you are here as part of the musicians'
    union, correct?
        Mr. Lee. To represent that this legislation should be----
        Mr. Keller. Right. And my question is from a musician's
    perspective, who is slated to get 2.5 percent, is that a fair
    allocation, compared to the 50 percent given to the record
    label?
        Mr. Lee. Well, we would always be interested in acquiring
    more percentage for the musicians. I think everybody would
    understand that. But there is one other aspect to this. When
    you have been on 18,000 recordings, and your recordings are for
    multiple artists, that adds up rather quickly.
        Mr. Keller. Right. Now, I will stick with you, Mr. Lee. The
    copyright registrar has testified that restaurants, bars and
    retail stores should also be paying a performance fee. Do you
    agree?
        Mr. Lee. That is not the subject of this legislation.
        Mr. Keller. That is the subject of my question, and it may
    well be the subject of legislation, if I seek an amendment, so
    I would like you to answer it. Do you agree that these bars and
    restaurants and retail stores should also be paying a
    performance fee?
        Mr. Lee. If you were to offer that as an amendment, we
    would absolutely not oppose that.
        Mr. Keller. Would you support it?
        Mr. Lee. We would support it.
        Mr. Keller. Okay.
        Mr. Warfield, turning to you, the Department of Commerce
    sent out a letter yesterday. Have you had a chance to look at
    that?
        Mr. Warfield. No, sir. I have not.
        Mr. Keller. In this letter the Department of Commerce says
    this bill is good for you, that it is in the broadcasters'
    economic interests to support this legislation. I will just
    read you the quote, since you haven't read it.
        The Department of Commerce ``testified before this
    Committee that establishing a public performance right to a
    sound recording was in the long-range economic interests of all
    parties, including U.S. recording companies and broadcasting
    stations.''
        You are a broadcaster. Do you think it is in your economic
    interests to pass this legislation?
        Mr. Warfield. Absolutely not, sir.
        Mr. Keller. Did they ever contact you and ask you if it was
    in your economic interests while writing this letter?
        Mr. Warfield. Absolutely not.
        Mr. Keller. Mr. Newberry, do you think it is in your
    economic interest as a broadcaster to pass this legislation?
        Mr. Newberry. No, sir, I do not.
        Mr. Keller. Has the Department of Commerce ever contacted
    you and asked you if it was in your economic interests to pass
    this legislation?
        Mr. Newberry. No, sir, it did not.
        Mr. Keller. Okay.
        Ms. Sinatra, you have had the number one hit in America in
    1966 with ``These Boots are Made for Walkin'.'' In a very
    humble way, you didn't even mention it in your opening
    statement.
        Let me ask you, as someone who has done what few people
    have ever done--that is, have a number one hit--do you believe
    your famous song could have become a number one hit without the
    local airplay it got from local radio stations?
        Ms. Sinatra. That was just so long ago. It was way back in
    the last century. I don't know the answer to that, for my
    success was extremely visual. That is why--and it sounds
    terribly immodest--it was almost iconic, because it was the
    look, the boots, the miniskirt, the hair.
        Mr. Keller. Right.
        Ms. Sinatra. Everybody copied. I did television mostly in
    those days, and I think radio may have helped me. I don't know.
    I know they jumped on the record at some point, but I honestly
    don't know at what point.
        Mr. Keller. Okay. Thank you.
        Well, did you tour to promote that song with concerts?
        Ms. Sinatra. I actually never toured----
        Mr. Keller. Okay.
        Ms. Sinatra [continuing]. To promote the record. It was
    basically Ed Sullivan, Smothers Brothers, shows like that that
    made that record for me, I think.
        Mr. Keller. All right. Thank you.
        Turning back to broadcasters, we have heard comments from
    the other side that essentially boil down to this. You all
    sometimes have a lot of revenue, so why don't you just take
    that revenue and pay it to the performers? And it is
    essentially trying to characterize you as greedy, to be honest.
        I have to tell you what I have observed from my local radio
    station, as someone from Orlando, Florida. After 9/11 happened,
    our local Top 40 stations and country stations dropped
    everything they were doing every single day to put me on the
    air, at no benefit to them, just to let people know what is
    going on.
        I went through Hurricane Charlie in 2004. My mom lost her
    home. That was destroyed. They had me on the air, radio and top
    stations, every day to advise people what was going on.
        We went through tornadoes that killed over 20 people in my
    congressional district. With no benefit to themselves, they
    dropped all their programming and their advertising to have me
    on the air every single day.
        Let me start with Mr. Newberry.
        Mr. Berman. Mr. Keller, time is--why don't you finish this?
        Mr. Keller. I will try to wrap this up.
        Mr. Newberry and Warfield, are you concerned that by
    imposing this so-called performance fee, that radio stations
    would be less able, in the event of national emergencies and
    other critical things like 9/11 and Hurricane Katrina, to
    provide that type of service to their communities?
        We will start with Mr. Warfield.
        Mr. Warfield. I take it there are some operators that would
    have to cut significant services, would not necessarily have
    staff to that, or have the ability to do that and forego the
    revenue that would be required. I think there would certainly
    be a diminution of services provided to the community,
    unfortunately, as well as information and programming.
        Mr. Newberry. Yes, I do. And just to make a correlation to
    what you are talking about, and I appreciate the fact that your
    local stations did that, Mr. Lee earlier said there is a lot
    more that goes into the success of a concert than radio
    promotion, and I will tell you there is a lot more that goes
    into the success of a radio station than the music.
        And it is the connection it has with the local community.
    And for us to look at assessing a fee on the top dollar of a
    radio station would cause dramatic effect to the services we
    could be provide.
        Mr. Berman. Mr. Newberry?
        Mr. Keller. Thank you, Mr. Chairman.
        Mr. Berman. Mr. Keller, your time has expired.
        The gentleman from----
        Ms. Jackson Lee is recognized for 5 minutes.
        Ms. Jackson Lee. Thank you very much, Mr. Chairman. Thank
    you very much, Mr. Chairman.
        I am glad I followed by distinguished friend from Florida,
    because I don't perceive what we are trying to do as ``I got
    you.'' This is not an ``I got you'' piece of legislation.
        I hope that although applause came when song names were
    rendered, I hope that applause comes when members want to
    strike a balance to make this work, because frankly, it is a
    broken system, and we do need to fix it.
        And we need to distinguish between heaps of profits that
    some broadcasters are making versus the smaller entities, and
    we need to find the kind of balance, if you will, that comports
    to the response to the songs, to songsters, the persons who
    give life to these songs, along with those who own the business
    entity of broadcasting.
        So I first of all want to thank all of the witnesses for
    their presence here today. And I ask for you to beg my pardon,
    if I in some way accelerate the questioning, because it is
    pointed in order to get the right solutions here.
        Let me first start with Ms. Sinatra and thank her so very
    much. I am so glad that she is admitting non-humbleness,
    because you are an icon, and I want it to be matched to your
    father, because you are here, but let us not in any way
    discount the wonderful entertainment and fun that you provided
    for us and continue to do so in the music that is being played.
        Ms. Sinatra. Thank you.
        Ms. Jackson Lee. And certainly there is nothing to diminish
    the heroic status of your dad, both in theater and movies and
    certainly in song.
        And my question would be to you, because one of the
    witnesses made mention of--and probably not in a purposeful,
    wrongful manner--but made mention of whose fault is it that
    people of yesteryear got these unfortunately deadbeat
    contracts.
        And in the arena that I have traveled in, the music that
    maybe my mom and dad listened to, there were a lot of Negro and
    colored artists, who got a lot of deadbeat contracts. And they
    got them pennies on the song, if you will.
        Do you think it is the fault of those that sang songs over
    the decades for the kind of--were they, if you will, delinquent
    and without diligence, that they would up sometimes paupers, as
    they sang songs that made us joyful?
        Ms. Sinatra, was it the fault of those who sang songs that
    some of their contracts were poorly done?
        Ms. Sinatra. Well, without diligence, perhaps it was true,
    because most musicians are just so grateful to have any
    opportunity to perform. They will do just about anything to be
    able to get a record made, and probably be a little careless
    regarding the contract.
        But most of us, or I should say many of us, don't even have
    labels anymore. So many labels are gone, and I don't know how
    much we can blame this on the label release.
        Ms. Jackson Lee. So in essence, you are balancing your
    answer, which is that the love of the art caused a lot of
    singers to just go forward.
        Ms. Sinatra. I think that is true.
        Ms. Jackson Lee. And the labels that were there may not
    even exist now, and so there is no real relief to go even back
    to the label.
        Ms. Sinatra. In many cases, yes.
        Ms. Jackson Lee. And maybe the label was equally in the
    dark in those years past, because it has been pointed that the
    labels have been at fault.
        And I want to go to Mr. Warfield, because you did seem to
    suggest, ``I have got mine, and you get yours.'' And I don't
    think in this hearing room that can be the only solution. We
    have got to find a way to balance this question.
        So tell me in the array of individuals or the way of your
    representation, what is the average, if you will, yearly
    revenue that your broadcast stations have? What is the range of
    them?
        Mr. Warfield. I can speak on behalf of the industry
    overall. Our industry generated roughly $20 billion revenue in
    2007, and our industry also in 1999 generated $20 billion in
    revenues. We have an industry that is a--you look at in place
    here when you look at it--is down, and has been experiencing
    difficulties as an industry for a number of years.
        And that is just the facts about radio. I have heard
    questions about consolidation and the impact, and there is sort
    of behind that the greed factor about broadcasters. We are
    trying to provide the best service that we can in our
    communities, to continue to serve those communities and to be
    viable businesses in an industry that is not growing.
        Ms. Jackson Lee. Well, but you do have consolidation.
        Mr. Berman. I am sorry, but the time of the gentlelady has
    expired.
        Ms. Jackson Lee. Did he finish his point?
        Mr. Berman. I think he did.
        Did you?
        Yes.
        Ms. Jackson Lee. All right. Are we having a second round,
    Mr. Chairman?
        Mr. Berman. If you want to.
        Ms. Jackson Lee. I would like one. Thank you.
        Mr. Berman. I have got a hearing. We have got to get done
    before the votes.
        Ms. Jackson Lee. That would be great.
        Mr. Berman. No rounds after the votes.
        We will let you go. Until the votes, you are captive.
        Ms. Jackson Lee. Thank you. I yield back.
        Mr. Berman. Okay.
        The gentleman from California, Mr. Issa?
        Mr. Issa. Thank you. And I will probably sort of continue
    in the same genre as the gentlelady from Texas.
        Mr. Warfield, I have a set of figures that we have
    compiled. We think it is accurate. You have 17 stations?
        Mr. Warfield. Our company today has 17 stations. That is
    correct.
        Mr. Issa. Okay. Fourteen have revenues less than $1.25
    million.
        Mr. Warfield. That is correct. I don't know the numbers by
    heart, but I won't question that.
        Mr. Issa. I was a CEO once. I didn't know the numbers by
    heart, but I was always pretty close.
        So those 14 stations would each pay $5,000 under this act,
    agreed?
        Mr. Warfield. As the act is?
        Mr. Issa. Okay.
        Mr. Warfield. Just calculate that based on what is there,
    that sounds about right.
        Mr. Issa. Okay. And let us just take sort of a middle of
    the road kind of a station. Well, let us take one. KVVN-AM
    revenues are about $1.2 million.
        Mr. Warfield. That is correct.
        Mr. Issa. How much of that is labor?
        Mr. Warfield. How much of that--excuse me?
        Mr. Issa. Is labor.
        Mr. Warfield. Labor? I would say at least 50 percent of
    that.
        Mr. Issa. So you have got $600,000 in labor. I would assume
    that you have $60,000 in health care costs alone just for that
    labor, right?
        Mr. Warfield. Roughly 10 percent.
        Mr. Issa. Okay. So could you afford $5,000 into $1.2
    million in that case?
        Mr. Warfield. That radio station is a talk radio station,
    so it would not apply.
        Mr. Issa. Oh, I am sorry. The format said ethnic. It
    didn't----
        Mr. Warfield. It is targeted to the Vietnamese community in
    the San Francisco Bay Area.
        Mr. Issa. Okay. Well, let us actually move up. I am going
    to take a liberty. WARQ Rock revenues are about $1.4 million to
    $1.5 million, not covered by the current $5,000 cap. But let us
    just say for a moment that it was .5 percent, so you would be
    at $7,000. On $1.425 million, half of it being $700,000 worth
    of labor, would $7,000 make the difference of that company
    staying in business or not?
        Mr. Warfield. Labor at that radio station is considerably
    higher, because this is a rock radio station. There are a lot
    of air personalities, and all of our day parts, and the costs
    of marketing, promotion. That radio station, the cost of
    operations is probably close to 85 percent.
        Mr. Issa. Okay. So if you went on that station and said we
    have paid $7,000 to the performing artists, because we think it
    is the right thing to do--.5 percent of our gross revenues--and
    we think that is the right thing to do, because we think these
    old rockers ought to get some revenue, when they can no longer
    roll through town and tour, do you think that would be worth--
    would that be a normal promotion that might pay you a dividend
    of at least $7,000 of listener royalties?
        Mr. Warfield. Probably not.
        Mr. Issa. You don't think people would care enough that
    you----
        Mr. Warfield. I think the fact that the radio station is
    supporting those artists and playing that music in that
    marketplace and doing other promotion for the----
        Mr. Issa. I appreciate that. My question, though, is could
    you afford it? Could you afford $7,000 into $1.4 million on
    that?
        Mr. Warfield. It would probably cost us services in our
    operation in the Columbia, South Carolina, market. It is not a
    stand-alone radio station. It is part of a group of stations.
        Mr. Issa. But you wouldn't fold, if we mandated you pay
    $7,000.
        Mr. Warfield. Would we fold? Probably not. But it would
    cost in services to the community.
        Mr. Issa. And don't you pay roughly $28,000 to the
    songwriters on that $1.4 million, roughly?
        Mr. Warfield. There is a requirement to pay that. That is
    absolutely correct.
        Mr. Issa. Okay. So it doesn't kill you to pay $28,000, but
    $7,000 would cause cutbacks.
        Mr. Warfield. Cost of that operation.
        Mr. Issa. Okay. If you are already paying the $7,000, it
    would be figured into your business model, but you are not
    paying it right now.
        Mr. Warfield. Well, it might go into a decision that we
    would make as to what we would do with our radio stations in
    that market.
        Mr. Issa. Okay. I kind of see that. So I think we can
    probably live with the fact that you pay $28,000 to the
    songwriters--$7,000 or even $28,000 probably isn't what we are
    talking about. We are talking about whether or not your
    promotion value makes it legitimate to pay nothing.
        Mr. Warfield. Yes.
        Mr. Issa. That is basically the status quo.
        Mr. Warfield. Yes.
        Mr. Issa. Okay. Let me ask you another question. I am being
    rhetorical, but it is important, because we are trying to find
    some middle ground, and the NAB isn't going to give us middle
    ground, so I am hoping I can get it from businessmen.
        If we allowed you straight over the table to charge for
    every song that you played, if you were promoting a song or a
    concert coming through town, and you could earn revenues from
    that, then would it be unfair to take 2 or 2.5 percent or some
    figure for what you play, remember that you can offset that
    with revenue?
        Mr. Warfield. I don't know what kind of a business model
    that is. I would have to sit down as the CEO of the company and
    see if that makes sense in a marketplace that is going through
    tough times.
        Mr. Issa. One last follow up. The question I am asking--you
    said that it was worth paying nothing to the people whose music
    you are playing, because of the promotion value.
        I am saying if you can monetize that, wouldn't it be fair
    to collect from those that you choose to pay that you haven't
    monetized, and collect from those that you believe you are
    promoting?
        Mr. Warfield. I don't know how that model would work, sir.
        Mr. Issa. Okay. So I am going to summarize for you that you
    believe as of today that your worth of your promotion causes
    you to pay nothing, but you haven't looked into what the value
    of monetizing your promotion would be.
        Thank you, Mr. Chairman. I got my point across.
        Mr. Berman. Thanks. I think so.
        The gentleman from Florida, Mr. Wexler?
        Mr. Wexler. Thank you very much, Mr. Chairman.
        Mr. Warfield, if I could just follow up Mr. Issa's
    conversation with you, I am having a hard time understanding
    the equity of your position.
        I understand you make the argument that somehow the value
    of the promotion that you provide therefore obviates the need
    to provide even one cent of compensation to the performing
    artists.
        It would seem to me the only logical position would be that
    yes, in fact, there is a promotional value that a radio station
    provides to a performing artist, and that promotional value
    should be a factor in the formulation of the royalty that is
    paid.
        That is a value provided by the radio station, and the
    value of the music provided by the performing artist to the
    radio station should be calculated together, and there should
    be an economic calculation that is made, based on the equities
    of the situation.
        But to have the strident formula that the value of the
    promotion always exceeds in every situation from the beginning
    of time till the end of time the value of the product of the
    performing artist defies logic to me.
        So we seem to have two extreme situations in the music
    industry. On the one hand, we have Internet radio, which pays
    what seem to be fairly significant percentages of revenue, and
    then we have your companies that pay zero percent of their
    revenue to royalties.
        And as the questioning points out, which of course is in
    the bill, the idea that somehow this bill compromises the
    financial interests of smaller stations--that is really a
    misnomer.
        That is really not an argument, because as we now know,
    smaller stations will pay out a flat fee. And that flat fee in
    most instances will be $5,000 or even less in terms, I
    understand, of educational institutions or some other
    institutions, which $5,000 in the context of most of these
    businesses is a fairly small, almost nonexistent percentage, of
    the business activity.
        So help me understand the equity of your position in light
    of the value of the promotion. And tell me why is it that in
    other instances like Internet radio, where the royalty
    represents a very significant amount, in some instances I
    understand even half or more, why should we go on with this
    relationship that you benefit by, when there doesn't seem to be
    any economic justification or fairness to the performing
    artists?
        Mr. Warfield. I have been in this industry for 30 years,
    running radio stations in large markets, small markets, have
    worked with artists, have been with radio stations that have,
    quite honestly, launched the careers of many artists, some of
    whom are household names today, some of whom would have never
    had careers without the benefit of airplay in our markets, and
    at no point was there any question about the value of what we
    did.
        The same thing is true today, as we continue to promote
    those artists--those artists that I started with some 30 years
    ago, as well as the new artists today. There is a tremendous
    benefit to these artists and to the labels.
        You want to equate that with fees that we pay by streaming
    the Internet. I think it was even said here at some point this
    afternoon that maybe those fees, maybe that is exorbitant.
        We had a business model that is running people away and
    causing these businesses to fail. Is that what the intent of
    this might be?
        Mr. Wexler. Tell me, if you would, why isn't it not the
    best response that the value of the promotion, the factor in
    the royalty payment, why is it always 100 percent and zero? Why
    isn't it a factor?
        Mr. Warfield. The ratio as it has existed through all of
    these years has been the fact that it has benefited these
    artists, as well as these labels, for the entire time I have
    been in this career.
        There has been a tremendous benefit that has accrued to all
    of them through this. And we feel that that balance has been
    well for this industry for the last 60 years and should
    continue.
        Mr. Wexler. So you are saying that in every instance the
    value of the promotion exceeds the value of what the work
    product was of the recording artist to the radio station.
    Therefore, you owe them nothing, in every instance since the
    beginning of music.
        Mr. Warfield. There is a strong recording industry in this
    country, stronger than any other country, in America, and I
    think the value has certainly been reflected in their success.
        Mr. Wexler. Thank you.
        Mr. Berman. The gentleman from Tennessee. We should note
    that sometimes the victory goes to those who stay the latest.
    Notice who is left. [Laughter.]
        Mr. Cohen. The last shall be first.
        Let me ask the two gentlemen here from the broadcast
    companies. I don't know which would be the best one. Maybe this
    is for the purpose of Mr. Warfield, I guess.
        What is the typical percentage that a good, healthy radio
    station pays out right now on copyrights for compositions or
    music?
        Mr. Warfield. It is not a percentage. It is calculated now
    based on the market size that the operation is in.
        Mr. Cohen. Yes, now a percentage of your gross you could
    probably guess what is an average. Is it 1 percent of the gross
    sales? Is it 2 percent, 20 percent?
        Mr. Warfield. It is a fee that is set. It is not a
    percentage. It is a fee that is set with the----
        Mr. Cohen. I know that that is not, but you get a radio
    station----
        Mr. Warfield. As your revenues fluctuate, that number
    fluctuates also, but it is set based on the market size.
        Mr. Newberry. There was an historic basis that did not work
    on the percentage. And he is not trying to avoid the question.
    The honest answer is totally the percentage will move, based on
    the revenue of the station.
        Mr. Cohen. Well, let us take the work I did.
        Mr. Newberry. It is 5 to 7 percent.
        Mr. Cohen. Five to 7 percent. Good.
        Mr. Newberry. Historically.
        Mr. Cohen. That is what I am trying to get to. And you make
    this up. You have advertises, right? What do you think it would
    cost, if we pass this bill? Do you expect it is going to cost
    you another 5 to 7 percent?
        Mr. Warfield. It could cost this industry $5 billion to $7
    billion.
        Mr. Cohen. I don't mean that, but I mean a percentage of a
    typical radio station. Five to seven is what you pay out
    normally to the copyrights that you pay now.
        Mr. Newberry. I can tell you that $5,000 a year for a lot
    of stations, small market stations, would be well in excess of
    5 to 7 percent.
        Mr. Cohen. So if it is 5 to 7 percent, you could just
    increase your advertising costs by 5 to 7 percent, couldn't
    you?
        Mr. Newberry. On today's economy, no.
        Mr. Warfield. Not in today's economy we are in.
        Mr. Cohen. But you could do it. Are you suggesting that
    people wouldn't advertise?
        Mr. Warfield. It would not be supported by the advertising
    community. That is correct.
        Mr. Cohen. What would they do? Just kind of go to a color
    ad or something?
        Mr. Warfield. What has been happening is they would buy
    less advertising from the industry.
        Mr. Cohen. They would buy less advertising.
        I didn't realize the industry was hurting that bad.
        Mr. Warfield. Well, he referenced earlier that our industry
    has been flat for the past 5 years.
        Mr. Cohen. Your executives--what do you think their income
    increased last year? Do you have any idea what the average
    broadcasters--say NBC--what percentage did his or her income
    increase last year?
        Mr. Newberry. He has no radio station, so I wouldn't have
    anything to----
        Mr. Warfield. I can only say----
        Mr. Cohen. Give me some fine radio station--Clear Channel.
        Mr. Newberry. The compensation was down last year.
        Mr. Cohen. The compensation was down?
        Mr. Newberry. The CEO's compensation, to my recollection,
    was down last year.
        Mr. Cohen. What do you think it has been over the last 5
    years?
        Mr. Newberry. Don't know.
        Mr. Cohen. I would submit to you that if you look at it--we
    can look at it afterwards--that the compensation of the
    executives, managers has increased on an annual basis over a
    certain number of years by a goodly percentage. And that is
    borne by the advertising costs.
        And somehow or another, they all do good enough to charge
    more to the advertisers to compensate for your executive
    salaries, and we get along. But when it comes to paying the
    singers that give you the songs that give you the income to
    give the executives their salaries, you can't afford it.
        Mr. Newberry. Congressman, I can tell you as a matter of
    fact that my compensation has been flat for the past 5 years.
        Mr. Warfield. And I can also sit here and say that over the
    last 5 years my compensation has been down.
        Mr. Berman. I think Ms. Sinatra has something you wanted to
    say on this question?
        Ms. Sinatra. I am sorry to interrupt. I just have a
    question. I think ``Something Stupid,'' the duet with my dad,
    was number one in 1968--something like that. And I remember
    those days vividly, because my father was so excited to have a
    number one record. I think it might have been his first one. I
    don't know.
        But in those days radio was announcing who was singing,
    what the label was, what the song was called, sometimes before
    they played it, and sometimes after.
        Now, fast-forward 40 years. What I hear mostly is a
    computer-generated program. So my question is, where is the
    promotion now?
        Mr. Newberry. I can address----
        Mr. Cohen. I yield the balance of my time to Ms. Sinatra.
    [Laughter.]
        Mr. Newberry. I can address that from my personal
    experience, and I am sure we could line up broadcasters all day
    that had similar experiences.
        WPTQ in Bowling Green, Kentucky, is a rock station. It has
    a Saturday night show, it has a Sunday night show, that is
    promoting local artists. It back announces songs that are
    released within the past 6 months to a year. No, we don't.
    Every time we play Led Zeppelin, we don't tell you the song,
    because it is a standard. It is a classic. But that is part of
    the promotional value of that radio station.
        I can bring bands that we play that are not able to get
    recording contracts, but we play them, because they are able to
    do their own recording. That value is there, and for it to
    summarily be said that our industry is being run by computers I
    think is an over exaggeration.
        Ms. Sinatra. No, I didn't say that. I just need to move.
    [Laughter.]
        Mr. Berman. Do you want to get a last gasp in here, Steve?
        Mr. Cohen. Further Congressman saith not.
        Mr. Berman. I am just going to yield myself 5 minutes to
    make a couple of comments and ask a few questions.
        Mr. Warfield, both of you are really great witnesses. You
    have a tough argument, but you are great witnesses, and you do
    as well as can be done. You, Mr. Warfield, have not mellowed in
    9 months. [Laughter.]
        And there is something funny about the point raised by Mr.
    Keller. The Commerce Department thinks you will do better if
    our bill passes. You don't know why they think that, but they
    don't think you are the right judge of how your industry will
    do better. They are a better judge of it.
        You are a better judge of how the recording industry will
    do than they are of what they think is in their interests,
    because they are wrong to be pursuing payment for performance,
    because all they are going to do is kill the goose and all
    that. So you are a better judge of their business model and
    what they think is in their interests than they are.
        And on the issue of who is testifying and who isn't, I
    think we should one day have a hearing--I say this; it is not a
    promise, but it is in my mind clear--let us get Clear Channel
    and the biggest music label and have just a hearing of them.
        In other words, we aren't seeing the big multinational
    conglomerate radio station owners coming to testify here. We
    are seeing a couple of very effective entrepreneurial owners of
    some stations, but many of them on the smaller side, make the
    case. So each group does what they want to do.
        But the thing I most wanted to disabuse you of is--and I
    understand why you say it, and I think there is some historical
    truth to it--the notion that these days--I think the labels
    would love it, if it were still the case--that the labels have
    put a ring through the nose of the recording artists and are
    leading them to be their front people for their interests, and
    that the recording artists do not have a sophisticated and
    intelligent understanding of what their interests are, and that
    somehow these people, whatever the conditions were 25 years ago
    or 40 years ago or 50 years ago--and we know some horrible
    stories from those periods of time and those contracts.
        That is all true and accurate history--but the notion
    that--these days that they have formed a vibrant coalition,
    aggressively pursued their interests, and hand-in-hand with the
    union representing the musicians and the other organizations--
    they don't have the ability to know what is in their interests,
    and they are being led somehow by the labels, that ain't the
    world today.
        And I am sure the labels, off the record, will let you know
    that they maybe wish that were the world today, but it isn't
    anymore. So I don't think we should discount the sophistication
    of the recording artists in understanding what they are facing
    now.
        My question is two things--you haven't really responded to
    this--I raised in my opening statement. Others have touched on
    it. Explain to me why this is a tax, and what you pay for
    musical compositions isn't a tax.
        Explain to me why what you promote for owners of sound
    recordings and for the performers and the musicians and the
    backup singers is so valuable to them that you shouldn't have
    to pay that, like your promotional value for the musical
    compositions that promote these early sales.
        And I think there is a debate about whether spin on the
    radio causes sales or popularity of the recording causes the
    spin. I am not sure your study effectively addresses that. But
    explain what is the distinction between the two. Why is it okay
    to pay that for the musical compositions, and not here?
        And then the second one, and then I will let you folks
    respond, is baseball, sports, promotion. Here we are mandating
    a compulsory license. You don't have to go out and negotiate
    with the NBA and the major league baseball and come to an
    agreement with them.
        And I know those guys, and they are trying to suck as money
    out of you as they possibly can, to give you the right to
    broadcast their game.
        And you promote their sports, and you promote their
    attendance, and you promote their merchandising by virtue of
    your coverage of their game. And you still pay them a lot of
    money for the promotional benefits you give them. What is the
    justification for that?
        Mr. Warfield. Sir, I am going to defer to my associate, Mr.
    Newberry, on this last question about the baseball and sports
    franchises.
        Mr. Newberry. I am glad you brought that up, because I
    think that is a classic case and analogy for the situation we
    are talking about here.
        There are many stations that will negotiate with a baseball
    team or a football team, but this same concept was attempted to
    be applied down to smaller teams that have less market value,
    have less name recognition.
        So at high schools and small colleges, they attempted to
    charge radio stations a fee to carry the game. Radio stations
    stopped carrying the ball game, because it did not make sense.
        Mr. Berman. Fair enough.
        Mr. Newberry. Can I continue?
        Mr. Berman. Sure.
        Mr. Newberry. And I think what you are going to see is if
    we turn the relationship that has served this industry,
    performers and the radio stations, so well for these years, if
    we turn this into strictly monetary exchange, we are going to
    find ourselves in the exact same situation, that we will only
    play the songs that give us the highest return on that
    investment, and that smaller artists and unknown artists and
    people that are trying to get into the industry are going to
    have a much more difficult time finding time on the airwaves,
    because they are going to be like that single A baseball team
    or that small college team.
        And if there is not a return on the investment, we are
    going to make a decision that that is not what we should be
    playing.
        So the unintended consequence of this bill is going to be
    that those that have money are going to make a lot more money,
    and those that are struggling are going to be left out on a lot
    of radio stations.
        It is exactly like the----
        Mr. Berman. And the musical compositions?
        Mr. Newberry. Those people don't have an opportunity to
    monetize. The composers----
        Mr. Berman. What is the mechanical?
        Mr. Newberry. Excuse me?
        Mr. Berman. What is the mechanical?
        Mr. Newberry. The composers write the songs and hand it
    off. The only way they have the ability to earn income is from
    the----
        Mr. Berman. Wait, wait, wait, wait, wait, wait. You play.
    People buy. That is your argument.
        Mr. Newberry. They don't make any money off of----
        Mr. Berman. Sales of records, of CDs?
        Mr. Newberry. I don't know what the mechanics of that
    compensation are, but they certainly can't do T-shirts, they
    can't do concerts, they can't tour.
        Mr. Berman. No, they have----
        Mr. Newberry. A witness here earlier today talked about how
    there are people that have been involved in writing many, many
    songs.
        Mr. Berman. So they have a mechanical.
        Mr. Newberry. But you don't know who they are. They do not
    have the celebrity that our industry has created for the
    performer.
        Mr. Berman. My time has expired by a lot.
        Mr. Issa. Mr. Chairman, I was so captivated I didn't
    notice. But I am going to continue as best I can down somewhat
    the same track.
        Mr. Warfield, I will give you a little bit of a break. I
    think we sort of beat to death Q & A, other than one question.
    You did previously testify that the amount paid off to the
    writer by the industry was about $450 million to $500 million a
    year. Is that right?
        Mr. Warfield. That is correct, sir.
        Mr. Issa. Okay. So the industry can afford $450 million a
    year to the people who created the sheet music, but not
    anything to the people who actually did the performance. That
    is what we are saying here.
        Mr. Warfield. There is a benefit that accrues to those
    individuals above and beyond the $500 million that is paid by
    broadcasters. So there is a benefit that they do get.
        Mr. Issa. Okay.
        Mr. Newberry, I am going to switch to you for a little bit.
        And Ms. Streisand, I hope you understand that you can come
    up with a question at any time, because you did so well.
        But, Mr. Newberry, you said something about the sheet music
    that kind of got me. Somebody writes a song. They are going to
    make money when I perform it live in concert, right, if I am a
    singer. They are going to make money off of my DVD.
        They are going to make money if, quite frankly, I need to
    buy 500 copies of the song so that we could sing it at church.
    So there are ways to monetize that have nothing to do with your
    radio station, right?
        Mr. Newberry. Sure.
        Mr. Issa. Okay. I just wanted to make sure that if radio
    goes out of business, that these writers may still make a
    living somewhere. I agree with you that they can't tour, except
    maybe doing an American Express commercial saying, ``You don't
    know me,'' but it is hard getting me through the station.
        I mentioned Harry Chapin. He is gone. He is a writer. His
    family continues to get revenues on that side, but they don't
    get anything when ``Cats in the Cradle'' plays, unless he gets
    it from the writing. He doesn't get it from his rendition of
    it.
        What if we up here determine that every rendition was in
    fact an original work of art definably separate from the
    writing? In other words, Ms. Sinatra there, when she did a
    song, her song was very different from the sheet music. What if
    we simply decided that we were going to give that a separate
    right, and as such it would have to be negotiated separately.
    Would that give you a problem?
        Mr. Newberry. First, I don't have copyright experience or
    expertise, but certainly if I am trying to negotiate with every
    individual, there is a logistics that would----
        Mr. Issa. Okay. Do you benefit from the mandated?
        Mr. Newberry. But we would not play the song.
        Mr. Issa. Okay. Well, if all songs fell under that. But
    right now you benefit from the fact that you can grab any song
    and play it--any song and play it.
        Mr. Newberry. Any broadcaster can.
        Mr. Issa. Okay. So you have the right to play, but they
    don't have the right to withhold.
        Now, all the bands these days are doing music video. If
    starting tomorrow, 100 percent of their performances were music
    video, and they did not in fact produce a separate DVD, you
    wouldn't have the right to strip it out, so you would lose the
    ability to play their music on your station, even though they
    had a music video, because stripping it out would be illegal.
        You can't take TV shows and simply rebroadcast them. You
    can't take music videos and DVDs and broadcast them. You don't
    have that right. So in a sense they could take away your right
    by simply moving.
        If CDs aren't selling, they might just go to their
    copyrights being linked to their music video, and as a result,
    you would lose the ability to play all the new music, right?
    What would that do to your business model?
        Mr. Newberry. It would change my business model.
        Mr. Issa. Okay. Well, let us do a couple more business
    models, because I am a hard-nosed businessman. If I went to
    sing right now, it would end the industry, at least as we know
    it.
        So presently both of your stations are substantially still
    analog, I assume?
        Mr. Newberry. Yes, sir.
        Mr. Issa. Okay. Do you want to make them digital?
        Mr. Newberry. We are converting one of our stations.
        Mr. Issa. Okay. But what if we up here--because we have the
    responsibility; it is actually next door at the Energy and
    Commerce--but what if we, recognizing that the fair use that
    has existed--and I came out of the consumer electronics
    industry; I believe in fair use--the fair use that allowed for
    copy over the air radio for me to put on to my cassette or
    eight-track or whatever happened--what if we said, well, you
    know what? Since you are not paying anything, we can't allow
    that to continue digitally, because now there is going to be a
    perfect copy made.
        What if we took away that ability? Do you think that would
    affect your business model, when people just couldn't?
        Mr. Newberry. Sure. I would do more talk.
        Mr. Issa. Okay. But in other words, if people couldn't
    record off the air, because you didn't pay anything for that
    performance, and if they turned into a personal digital copy--
    --
        Mr. Newberry. I am just saying I would not program that
    station. If I made the decision to go to digital, I would
    either, a, not go digital, or I would put a product on there
    that didn't require me to.
        Mr. Warfield. In many cases it is just business not to go
    digital.
        Mr. Issa. Okay. So you may stay analog, and that is fine.
    Some people do that.
        Just one last question. What if we simply gave all the
    individual artists the right--or the record labels--to
    withhold, and said, look, you have the right to withhold from
    terrestrial broadcasts?
        And what would you do? Would you simply only play the ones
    who in fact didn't withhold? Or would you negotiate with the
    ones who had the right, and chose to withhold? And I am talking
    about the major labels or individuals.
        Mr. Warfield. Being the business manager, I would make a
    business decision. I would make a decision where I wanted to
    invest the money. And if they wanted to withhold, and I
    determined it wasn't worth it, I wouldn't play it.
        Mr. Issa. Okay. So if we changed it, and the Beatles label
    was withhold for separation negotiation, you would suspect some
    station would step forward and pay 3, 4, 5 percent and play
    them, and as a result there would be revenue where there isn't,
    regardless of the historic promotion. Is that fair to say?
        Mr. Newberry. You would have a dramatically different
    broadcast industry. You would have communities that would
    suffer dramatically because of that decision.
        Mr. Issa. No, I understand. I just suspect that ``Abby
    Road'' would get a little more play for pay.
        Mr. Chairman, I only have one question sort of for the
    record.
        Mr. Newberry, I gave Mr. Warfield so many questions I
    missed one that I would appreciate it if you would answer it
    for the record.
        You talked about your promotion. Would you deliver to this
    Committee a record of what songs, labels and individuals over
    the last year you feel you have promoted by your playing--
    separately from simply playing? In other words what benefit you
    have analyzed in your company you gave by promoting the singer,
    label, the song, a concert coming up.
        Mr. Newberry. Sure.
        Mr. Issa. Okay. I would appreciate it if you would deliver
    that for the record.
        Mr. Newberry. Absolutely.
        Mr. Issa. Thank you very much.
        Thank you, Mr. Chairman.
        Mr. Berman. The gentlelady from Texas?
        Ms. Jackson Lee. Thank you very much, Mr. Chairman.
        All of us, I guess, will put on the record that any song
    coming from our lips would run everybody out of the room. So we
    admire all of you for the fact that you know music and enjoy
    music.
        Mr. Chairman, this is a comment that I hope that you will
    listen to. I think as we have had this very open discussion, it
    really comes down to numbers. I think that when I say numbers--
    profit--how much this would ultimately cost, what the burden
    would be on the various broadcast owners.
        And it think it is important to note on the record that we
    do have Section 3 in the bill that deals with the special
    treatment for small noncommercial, educational and religious
    stations and certain uses. And I know that one of my colleagues
    raised the question, and there is a certain amount, and, Mr.
    Chairman, I am going to on the record now indicate that I would
    like to work with you.
        I believe in this present market that number might need to
    be increased, because I think the intent is to--but it might
    need to be increased, because small numbers because of
    inflation, small stations, whether religious or otherwise,
    might be worth more than what the figure is in this bill.
        But I do want, for example, the station in Houston, Texas,
    KCOH, in case anybody is running back to report on this
    hearing, to be aware that I am aware of their circumstance. And
    as I am aware of their circumstance, I am concerned about the
    underlying issues.
        Mr. Lee, I am not going to leave you out--my namesake--and
    so I want to pose this question, that I think has been
    represented by Mr. Newberry and Mr. Warfield very eloquently,
    and that is that they pay a licensing fee. The radio stations
    will say we pay what they call--contribute to the licensing of
    music. So they pay some money.
        And you represent your side of the industry. So the
    question they would ask is why then they don't need to pay an
    artist fee, because they make a payment that contributes to the
    licensing of music.
        Can you explain that argument from your perspective, maybe?
    Does that substitute for paying the artist, in your instance?
        And you are in the industry. Do you think the framework of
    this legislation--you have heard the two gentlemen; I respect
    their industry; I am concerned about what they have represented
    here--do you think this is the final act that breaks the camel
    is back, with respect to this legislative framework?
        Is this going to put, from your perspective, these
    gentlemen and others out of business? Mr. Lee?
        Mr. Lee. Five thousand----
        Ms. Jackson Lee. You have to turn on your mike and speak
    loudly. Thank you.
        Mr. Lee [continuing]. Five thousand dollars I cannot
    believe is going to put any small radio station out of
    business. It is going to recognize that artists have created
    something of value. It is a very small amount of money to pay.
    And by the way, all of us own the airways, and they are free.
        And it is really appalling that people, who create the kind
    of value that is played over and over and over for the last 40
    and 50 years, are perceived as having--``Gee, we just don't
    have enough money to recognize your talent and ability.''
        Ms. Jackson Lee. And how do you respond to their point that
    they contribute to the licensing of music. They pay some kind
    of fee, and so they shouldn't have to pay an artist.
        Mr. Lee. I am not sure that I understand it. They pay a
    licensing fee. They pay the songwriters, and that is whom they
    pay at this point in time. But licensing fee to the musicians--
    there is nothing.
        Ms. Jackson Lee. And so the payment to the songwriters you
    don't think equates as a business expense that could substitute
    for what they might have to pay to the artist.
        Mr. Lee. I believe there is enough money in radio ads, and
    it is clear the kind of money that is being made. It is a $4
    billion industry for talk shows.
        I believe that if the radio industry felt that they could
    make more money with talk shows--and by the way, they have to
    pay people when they do talk shows--if they could make more
    money by doing $20 billion in talk shows, I think you would see
    that take place.
        It is clearly there is a huge value for music. And as much
    as they have tried to walk around that, the fact is it is
    intellectual property.
        It is created by highly talented individuals, and right now
    those individuals--we are offended that we are sitting here
    listening to people say there is no value to that. Well, maybe
    there is, but we can't pay you anything for it.
        Ms. Jackson Lee. And Mr. Lee, this is a game of numbers.
    And if small stations are now exceeding in revenue, and they
    are still small, you would see the reason for possibly lifting
    the cap so that you would include more small stations.
        You are not here trying to harm real Mom and Pop stations,
    are you?
        Mr. Lee. We absolutely are not. And it is important to our
    local musicians to be able to have their recordings broadcast
    on their local stations.
        Ms. Jackson Lee. So if the cap was raised just a little bit
    to meet inflation, you would be okay with that. You think that
    would be reasonable.
        Mr. Lee. Certainly.
        Ms. Jackson Lee. Mr. Warfield and Mr. Newberry--if I could
    finish this Chairman, Mr. Chairman--you heard the comparison
    about talk radio, which I think Mr. Newberry commented on.
        Frankly, would you in essence shut down all of your music
    stations, if this legislation was passed, and go to talk? And
    do you think the market would tolerate that?
        Mr. Warfield. I would say that no, that is not realistic
    that everyone would go to talk. What you would see is there
    would be more broadcasters' formats, certain formats, would not
    be viable, would not be played.
        Gospel would certainly be one of those formats that would
    be challenged if it had to pay a fee, simply because it is not
    one that gets a significant amount of advertiser support
    relative to some other formats.
        You would see some of those formats just go away. Smooth
    jazz might be another one of those. It would probably just go
    away, because there would not be enough support to offset any
    additional fees that would be attempted to be charged against
    some of these formats.
        Ms. Jackson Lee. Mr. Newberry?
        Mr. Newberry. In our size market, there is a tremendous
    amount of talk programming that is available on a barter basis,
    barter being that there is imbedded advertising from national
    services, so we are able to broadcast at no additional cost.
    That makes it very appealing.
        I would also agree that while all of the music stations
    would not go away, in Glasgow, Kentucky, I have four stations
    that are currently playing music.
        I would expect I would take the most successful stations
    that I had--one or two--be willing to pay some type of fee,
    move some other products to talk, and then play only the songs
    that I thought would give us the highest return on that
    investment, and wouldn't be taking as many risks with new
    artists.
        Ms. Jackson Lee. Mr. Chairman, I know my time is up.
        Mr. Berman. Your time is.
        Ms. Jackson Lee. And I will simply say I think this is a
    story that we heard before the FTC came into business or the
    STC.
        I frankly believe these distinguished businessmen would
    make it work. They would have music stations. They would pay
    the fees, and all would be well. I would like to work with
    them. I think we can, as we make our way through this
    legislative process.
        I thank the witnesses.
        And I thank the Chairman.
        Mr. Berman. Thank you.
        The gentleman from California?
        Mr. Issa. Ms. Sinatra, I want to close on----
        Mr. Berman. We will be out of here by nine. [Laughter.]
        Ms. Jackson Lee. Now there is a third round. Good.
        Mr. Issa. Ms. Sinatra, I just want to close on sort of an
    upbeat, downbeat note. Not only did you have your own personal
    success, but you come from a legendary family. You grew up in
    the music business.
        If you could just close by telling us not about your
    success, not about your father's success, but about just
    briefly the hundreds of artists that you remember that did
    great work that you don't hear played on the radio today.
        They have no revenue from performance. They were probably
    played in the 1950's, 1960's and 1970's. They are not played
    today, and their CDs are out of print. But if you would just
    give us a little inkling, because you lived with those people
    going in and out of your life.
        I would appreciate it, because this hearing is concentrated
    on what is played and what the value is. And I think uniquely
    somebody who has had so many decades--successful decades--in
    this business knows about the people that were left behind. And
    if you would close on that, I would appreciate it.
        Ms. Sinatra. Well, thank you for that question for two
    reasons--one because of my friends that I grew up in this music
    business with, and the other because I have my own radio show
    on satellite radio.
        And I purposefully play those people, such as Joanie
    Sommers, who is probably one of the best singers who ever
    lived. And I heard a terrible rumor that she is not doing well
    right now. Jerry Southern. I am trying to think of who else I
    would play that you might know.
        I play the early band singers--Helen Forrest, of course,
    and Helen O'Connell. I am naming all women, but, believe me,
    there are a lot of men in this thing.
        And my listeners email me and call me. I have a way of
    receiving phone calls. And they are so grateful to hear their
    favorites again, like Harry James, Betty Grable, Alice Faye,
    Tommy Dorsey.
        I am also playing people like Neil Diamond, even though the
    station is called Seriously Sinatra, I am playing what I
    consider to be the new American songbook--writers like Burt
    Bacharach, Neil Diamond, Paul McCartney.
        So I am trying to present to people, in my 3-hour show, a
    vast array and eclectic array of artists. And, yes, you are
    right, many of whom are never played--that I know of--on other
    stations.
        Mr. Issa. Thank you, Ms. Sinatra. And if you would play
    Dolores Hope for me sometime, you will play--I have her album.
    Almost nobody does.
        Ms. Sinatra. I promise.
        Mr. Issa. I look forward to it. Thank you.
        I yield back, Mr. Chairman.
        Mr. Berman. Just in closing, I would be curious if 77
    percent of the stations receive the $5,000, or in some cases,
    $1,000 cap under this legislation, if $5,000 were too much, is
    there a reasonable ``affordable'' figure here that is less than
    that? Or is zero the only reasonable amount?
        Mr. Newberry. Mr. Chairman, I think one thing that was
    stated earlier that I want to make sure I clarify. There is
    value for what these artists have done. There is no question
    about that.
        I think Mr. Lee said that all I have created--and I think
    speak for Mr. Warfield--we are not saying that there is not a
    tremendous value of the products that have been created.
        What we are saying is there is that there is tremendous
    value in the promotions we have provided.
        Mr. Berman. But that is the point. We can't--we don't know
    quite how here, and we shouldn't be weighting that. That is
    what existing law says. ``Whether or not the service may
    substitute for or may promote the sales of phono records or
    otherwise may interfere with or may enhance the sound recording
    of the copyright owners' other streams of revenue from a sound
    recording.''
        That is just the kind of argument that is right to make
    before a copyright royalty judge or panel, and put into
    evidence. And if this bill needs to make that more explicit,
    tell us how to.
        No one is trying to deny the promotional value. You are
    conceding the value of what these artists and these sound
    recordings contribute to your stream of revenue. We have a
    meeting of the minds about values. We just don't know how to
    monetize them.
        That is what this process will produce. It is how to weigh
    all of that. And I don't think anything we are doing in this
    bill takes way from your argument. It just requires you to risk
    paying some money for what you are now using that somebody else
    owns.
        Mr. Newberry. And I think that--again, I can only speak
    from the perspective of the small market broadcaster--record
    labels used to work with stations in our size markets very
    aggressively to break artists and make sure that they got
    played. They have made financial decisions, and we don't hear
    from record label representatives anymore.
        We do hear from independent artists that are looking to get
    played. We do hear from people that are trying to do it.
        But I think in the Glasgow, Kentuckys, of the world it is
    going to be extremely difficult to quantify the value of the
    promotional outlet. I think it is absolutely. I think it is
    real.
        But I think it is much more diversified and spread among
    many, many more artists than it is as it is concentrated as you
    move up, and those artists become more successful.
        So I am not trying to not answer your question. But I think
    that there is a principle there that we obviously disagree
    with. And that is not intended to say--to Mr. Wexler's point
    earlier--this is not intended to say we don't see value. We
    just want to make sure that the value of what we provide is
    seen.
        Mr. Berman. Mr. Goodlatte has seen that we were still in
    the fourth hour of this hearing and has come to join us and is
    recognized.
        Mr. Goodlatte. Imagine how much more time would have been,
    if I had not joined you this early for your third round of
    questions.
        But thank you, Mr. Chairman.
        Mr. Berman. You are welcome.
        Mr. Goodlatte. I do appreciate your forbearance, and I
    would just like to explore one area that I understand in my
    absence hasn't been addressed, and that is the Nielsen report
    related to impact that playing songs on the radio has in terms
    of the sales of the song.
        And I wondered if Ms. Sinatra or Mr. Lee were familiar with
    that report, and if you have any reaction to it.
        Ms. Sinatra. Yes, I know what it is, I think. The Nielsen
    report is the rating----
        Mr. Goodlatte. It is a rating service, but in this case
    they did a study, which indicated that when an artist's song is
    played on the radio, the sales of the song increase. I wondered
    if you had----
        Ms. Sinatra. Oh, no, sir. I haven't seen that.
        Have you, Tom?
        Mr. Lee. No, I haven't seen it. And I would like to have
    seen it before we sat down here. I don't know who paid for the
    report. I have no idea what the parameters were.
        I do know that if a company is commissioning a report, and
    a predetermined outcome is adjusted, that it is not difficult
    for any well-run company to come out with a report that may be
    positive to the person who is paying the bill.
        Mr. Goodlatte. Well, and since I have a copy of the report
    here, and it has the National Association of Broadcaster's name
    on it, that certainly would cause us to ask Mr. Newberry and
    Mr. Warfield if they would like to comment on it.
        But let me----
        Mr. Warfield. There certainly has been----
        Mr. Goodlatte. Mr. Warfield, if I might put it in context
    first, because I agree that this appears to show that there is
    promotional value in playing songs over the airwaves.
        I am wondering, though, don't the sales numbers and the
    data also reflect that there is a value of playing those songs
    over the other media that do pay performance rights royalties,
    like satellite radio and online broadcasters.
        Mr. Warfield. Well, first of all, that is Nielsen's report
    that is being distributed by the NAB. And I don't believe that
    that report reflects any other promotional support behind that.
    It does show what happens with a trusted radio and spin and
    sales.
        Mr. Berman. Would the gentleman yield just on that?
        Mr. Goodlatte. Yes, sir.
        Mr. Berman. A quick look at this chart, without any offer
    of expertise, indicates that it is ambiguous. If there is a
    clear relationship, it is what extent do sales lead to greater
    radio play, or radio play lead to greater sales.
        And just a quick look at the chart, it is not so clear that
    it is the greater the radio play that leads to sales as it is
    that there is an equally likely conclusion that when those
    sales start going up, the radio starts playing those songs.
        And I just throw that out as a possible alternative reading
    to this NAB perspective.
        Mr. Newberry. Not to be argumentative, Mr. Chairman, but I
    believe the report clearly indicates that it is the airplay
    that helps drive the sales of those individual artists, whether
    they were being played on satellite or other alternative
    formats and then were played on terrestrial radio, that there
    were spikes--clear spikes--in the sales of their material.
        Mr. Goodlatte. Well, if I might ask a follow-up question to
    this very excellent question of the Chairman, would the spin
    numbers for satellite radio and online broadcasters generally
    correspond to the spin numbers shown in the Nielsen report?
        In other words, in general do a Top 40 station on a
    satellite radio and a Top 40 terrestrial broadcast station play
    a similar assortment of songs a similar number of times during
    a given period?
        Mr. Warfield. On certain channels, they could. But I think
    I know where you are going with that, but there is a difference
    in the number of subscribers for a satellite network in total,
    and then divide it by 100 channels, versus the 270 million
    listeners that we reach each week.
        So terrestrial radio is so much more ubiquitous than
    satellite radio. It is certainly at this point. I don't know
    whether it will always remain that way. But you would think
    that, yes, on the Top 40 channel on one of the satellite
    services, the spins might increase. But this is based on
    terrestrial spin time.
        Mr. Goodlatte. Let me ask all of you in my closing moments
    here to tell me what you think about the future of music
    delivery. Where will the recording industry structure its
    delivery and sales in the future in a way that allows recording
    artists and record companies to reap the reward of their work?
    Anybody have any thoughts about that?
        Ms. Sinatra. I don't know, but it looks like it is going to
    the Internet, doesn't it?
        Mr. Lee. It may. It may.
        Mr. Goodlatte. Mr. Lee, go ahead. You jumped in first. Go
    ahead, Mr. Lee.
        Mr. Lee. Okay. I think the recording industry and the
    artists and the musicians are all exploring what is the best
    business model. There are potentials, as you see now, for
    catalogs to be licensed to iPhones--not for sure, but catalogs
    to be licensed to organizations or a company that allows a
    legal download.
        We are all concerned about piracy, and I think all of us
    understand that the business model has to change. But in the
    same context, the business model with radio listening has
    changed as well. There are more people that are listening to
    music on the radio, in our estimation, than ever has been in
    the past.
        And so, as people have more choices to listen to the
    different styles of music, that is terrific, because when you
    have a Sirius or a satellite that has something like 70 or 80
    or however many channels they have, you can actually pick out
    the style of music you want to listen to on a regular basis.
        And I believe Congress recently passed a piece of
    legislation that allows radio companies to have several HD
    channels. So it would be possible for a radio station to do
    that--I believe this is the case--to have a classic rock
    station and three substations, one for 1970's rock, one for
    1980's rock, and one for 1990's rock.
        So we believe it is important that all of those streams of
    income, which may be the new business model for musicians and
    for the holders of copyrighted material, have to be
    incorporated into income for musicians and copyright holders.
        Mr. Goodlatte. Mr. Chairman, if I might allow the
    broadcasters to share their thoughts on whether that is a
    correct vision, or whether you think you would set it a
    different way.
        Mr. Newberry. I think you can look back on the radio
    industry, that we have made efforts to adapt to increased
    competition. I think just as an observer, the record industry
    really struggled with how to modify from traditional retail
    sales to distribution in the digital age.
        So I do think in the future--to Ms. Sinatra's point--I do
    think you are going to see distribution by the Internet. But I
    think, Mr. Chairman and others, this is a classic case where
    our two industries could be partnering with each other to help
    the end result, as opposed to being at opposite ends.
        I think the radio industry would certainly help monetize
    the value of our promotion, and many stations are already doing
    this.
        You hear a song on the radio. You can go to the Web site,
    and it will show you the last 10 songs that were played. You
    are able to say I would like to download that song or I would
    like to make the purchase.
        Radio stations are doing that all across the country, and I
    think that is how the partnership is intended to work between
    radio stations, recording artists. And certainly the record
    labels are part of this three-legged stool.
        Mr. Berman. Is this what you meant earlier by bartering?
        Mr. Newberry. No, sir.
        Mr. Berman. Oh. [Laughter.]
        Mr. Newberry. We would certainly be glad to profit share
    with you on it.
        Mr. Lee. It is the listeners' choice as to whether they
    want to purchase it or not. As long as they can listen to it
    for free, or listen to it for whatever a subscription fee is,
    they don't necessarily have to purchase it. And if they are
    going to listen to it, then the musicians and the artists and
    the intellectual property holders are entitled to be
    compensated.
        Mr. Warfield. There is a history in this industry and in
    the country that as these songs are heard, and they are heard
    on free over the air terrestrial radio, that it does drive
    sales.
        It is no question about that. These artists continue to
    benefit from it, unlike any other platform that is available to
    them. It shows that this business model, as it has been in
    place, is still working for all parties.
        Mr. Goodlatte. Thank you, Mr. Chairman.
        Mr. Berman. I think it is a good time to end.
        [Whereupon, at 6:51 p.m., the Subcommittee was adjourned.]
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