[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
U.S. GOVERNMENT PRINTING OFFICE
42-829 WASHINGTON : 2008
----------------------------------------------------------------------
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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
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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.]
A P P E N D I X
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