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





                         PERFORMANCE RIGHTS ACT

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 4789

                               __________

                             JUNE 11, 2008

                               __________

                           Serial No. 110-141

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

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

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

    Subcommittee on Courts, the Internet, and Intellectual Property

                 HOWARD L. BERMAN, California, Chairman

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


                     Shanna Winters, Chief Counsel

                    Blaine Merritt, Minority Counsel












                            C O N T E N T S

                              ----------                              

                             JUNE 11, 2008

                                                                   Page

                                THE BILL

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

                           OPENING STATEMENTS

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

                               WITNESSES

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

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

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

                                APPENDIX

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

 
                         PERFORMANCE RIGHTS ACT

                              ----------                              


                        WEDNESDAY, JUNE 11, 2008

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

    The Subcommittee met, pursuant to notice, at 3:22 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Howard 
L. Berman (Chairman of the Subcommittee) presiding.
    Present: Representatives Conyers, Berman, Wexler, Watt, 
Jackson Lee, Cohen, Johnson, Sherman, Lofgren, Coble, Feeney, 
Sensenbrenner, Smith, Goodlatte, Cannon, Keller, Issa, and 
Pence.
    Mr. Berman. This 1 hour and 20-minute-late hearing of the 
Subcommittee on Courts, Internet, and Intellectual Property 
will come to order. I apologize to everyone, but it truly was 
events beyond my control.
    I would like to begin by welcoming everyone to this hearing 
on H.R. 4789, the ``Performance Rights Act.'' As I said last 
July, I have supported the expansion of the performance rights 
and sound recording for over 20 years with two caveats. First 
is that by extending this right, it should not diminish the 
rights and revenues of the creators of musical works. Secondly, 
terrestrial broadcasters large and small must remain a viable 
source of music.
    The bill we introduced in December does just that. The bill 
is designed to fix a glaring inequity. Currently Section 114 
provides a compulsory license to publicly perform a sound 
recording where there is a digital audio transmission. However, 
terrestrial broadcasters or over-the-air radio broadcasters as 
they are sometimes referred to are not required to pay a 
royalty for their transmissions. They enjoy an exemption from 
the performance right.
    I have long been convinced that fairness mandates that all 
those in the creative chain of the artists, musicians and 
others who bring the recording to life should get compensated 
for the way they enrich our lives. The U.S. is one of the only 
developed countries in the world that doesn't--one of the few 
developed countries in the world--the debate of whether or not 
China is now a developed country--that doesn't require over-
the-air radio stations to compensate those artists and 
musicians producing the music that broadcasters use to attract 
the audience that generates ad revenues.
    In large part because of music radio is able to profit. Not 
compensating those performers of the music is unfair and 
ultimately harmful to music creation that benefits everyone, 
including the broadcasters.
    Furthermore, the law currently requires all other platforms 
in the U.S. such as satellite and Internet radio to compensate 
the copyright owner. Let me begin by clarifying how we have 
narrowly tailored this legislation.
    First, the bill repeals the current broadcaster exemption, 
but it does not apply to bars and restaurants and other venues. 
Secondly, the bill provides an accommodation for small and non-
commercial broadcasting by setting a low, flat annual fee to 
allay any expenses relating to negotiation, litigation or 
arbitration. Nearly 77 percent of the existing broadcasting 
stations in this country, including college stations and public 
broadcast, will pay only a nominal flat fee rather than having 
to pay a percentage of their revenues as royalties.
    Third, the bill extends certain performance rights to 
artists, musicians and their record labels. It does not harm or 
adversely affect the revenues rightfully paid to the 
songwriters and other existing copyright owners. Although I 
also understand there are additional protections the 
songwriters are seeking, which we will consider.
    The broadcasters have argued that this bill is unnecessary 
and the exemption is appropriate because of a symbiotic 
relationship that exists between the airplay on radio and the 
promotion of the music leading to future sales. Furthermore, 
the broadcasters suggest that to pay compensation to artists 
and musicians for publicly performing their sound recordings is 
tantamount to a performance tax.
    Finally, there is concern as to how smaller broadcasters 
can survive if required to pay. I would like to briefly address 
each argument in turn and ask any of the witnesses to respond. 
In terms of the promotion argument, let's assume radio 
broadcasts do promote music which leads to greater sales. Don't 
radio broadcasts of sports games also promote the sale of 
tickets and team merchandise, yet don't broadcasters pay to 
broadcast these games?
    Why does the possibility of promotion in the case of music 
sales from over-the-air radio lead to the conclusion that there 
should be no payment made by the broadcasters? How is it that 
Internet and satellite also promote yet they are required to 
pay? Why should over-the-air broadcasts be treated differently?
    Assuming there is a promotional value in the broadcast of 
music, there is nothing in the bill which would prevent a 
copyright royalty judge from factoring in the value of this 
promotion in determining the rates the radio station would have 
to pay. The argument about promotion should not be about 
whether to pay, but how much to pay.
    As to the tax argument, my notion is while calling the 
performance right a tax might make for good rhetoric, it is 
even more accurate to call the exemption enjoyed by the 
broadcasters corporate welfare or even, God forbid, government 
confiscation of property. Since the U.S. code compels 
performers to give broadcasters their music for free, the bill 
merely eliminates an unjustified subsidy to broadcasters and 
requires them to compensate those whose work they use and 
profit from.
    Furthermore, broadcasters do not argue that the money they 
pay to the songwriters constitutes a tax. What is the 
difference?
    Finally, the impact on small broadcasters was clearly a 
concern for us and therefore in the bill, as mentioned earlier, 
we have provided an accommodation for those broadcasters. With 
this bill we have begun to move toward platform parity, rights 
parity, and international parity. The equity argument that 
performers should be entitled to receive revenue for their 
works can no longer be ignored. The Department of Commerce just 
yesterday offered their support for this legislation.
    Circumstances have changed, but it is now time to 
reconsider the exemption for over-the-air broadcasters. In 
other words, put me down as leaning yes on this bill.
    I look forward to working with Members of the Committee to 
address the inequity in the current law. I intend to proceed to 
markup shortly and welcome suggestions for adjustments to build 
broader consensus for this bill.
    I now have the pleasure of recognizing our distinguished 
Ranking minority Member, Howard Coble, for his opening 
statement.
    [The bill, H.R. 4789, follows:]
    
    
    
    Mr. Coble. Thank you, Mr. Chairman. Mr. Chairman, most of 
our colleagues here--strike that. Many of our colleagues here 
and perhaps most, but certainly many regard this bill as black 
and white. If you support the performers, you are adamantly 
opposed to the broadcasters. If you support the broadcasters, 
you are adamantly opposed to the performers. I don't see it, 
Mr. Chairman, as black and white. I see subtle shades of gray. 
And I hear and read compelling and convincing arguments and 
positions from each side.
    Mr. Chairman, as you know, on this Hill when Members of 
Congress don't want to become involved with issues, their stock 
answer is I have no dog in that fight, and I am therefore 
removed. Folks, I have nothing but dogs in this fight.
    The broadcasters on the one hand, friends, performers on 
the other hand, friends. For two and-a-half decades, Mr. 
Chairman, or almost two and-a-half decades on issues involving 
the broadcast industry I have come down on the side of 
broadcasters, not just because I like them, which I do like 
them, but because their positions were sound and meritorious.
    But the issue before us, I believe--this may be subject to 
interpretation. But I believe the issue before us, Mr. 
Chairman, leans toward the performers. I think the performer 
right advocates probably have the better of the argument.
    Last week I announced that I intend to support the bill at 
markup. I was not a co-sponsor because I wanted to retain my 
objectivity. I reached that decision, my friends and Mr. 
Chairman, after much deliberation and consideration of the 
respective arguments presented by all of my friends on either 
side of the issue.
    While I still have questions going forward that I hope we 
can address about how precisely the law should be amended as 
well as concerns about the timing and implementation of any 
changes, the deciding factor for me is that the idea of 
continuing this exemption in perpetuity just does not strike me 
as the right thing to do.
    I have difficulty in reconciling a system of copyright law, 
Mr. Chairman, that requires radio stations to pay the owners of 
musical works a royalty, but denies such treatment to the 
owners of sound recordings. Nor does it make sense, in my 
opinion, for the copyright law to, in effect, choose sides and 
grant preferences to one technology over another, as in this 
case, where satellite and Internet radio broadcasters pay 
copyright royalties to the owners of sound recordings and 
musical works, but traditional radio pays royalties to only the 
owners of the musical works.
    And finally, Mr. Chairman, you will remember as television 
broadcasters maintained that they should be paid retransmission 
consent fees when cable companies carry their signal. It seems 
to me that the Federal law ought to provide the owners of 
copyrighted works, which after all are property, payment when 
their works are selected to be performed publicly and for 
profit by other broadcasters.
    I recognize that changing the law in a manner that affects 
an entire industry, particularly one that is as valuable to our 
communities as our home town broadcasters, is not something 
that ought to be done hurriedly. If this change is to be made, 
Mr. Chairman, I hope we will be able to benefit from active 
discussions and involvement by those who will be most directly 
affected about how best to transition from the old world of 
complete exemption to the new world of full participation in 
this aspect of our copyright law.
    Mr. Chairman, I thank you for having convened this hearing 
today and for assuring all of us that we have excellent 
witnesses so we can benefit from their perspective. It is good 
to have all of you with us.
    And, Mr. Chairman, with that I yield back the balance of my 
time.
    Mr. Berman. Well, thank you very much, Mr. Coble.
    And I now am pleased to recognize a co-sponsor of this 
legislation and the Chairman of the Judiciary Committee, Mr. 
Conyers, for an opening statement.
    Chairman Conyers. Thank you, Chairman Berman.
    I welcome all of our witnesses here today. And I would just 
like to see a show of hands of all the performers and artists 
that are with us today. Raise your hands. I even see some 
instruments out there in the audience as well. Thank you.
    And I am reminded of the passing last week of one of the 
founding fathers of rock and roll, Bo Diddley, who I know would 
be looking down upon us today thinking of how much progress we 
are making. Unfortunately, he didn't see much fairness in terms 
of compensation in his lifetime. And I have been working on 
this issue, I say without embarrassment, longer than anybody 
else here in the Congress.
    But Howard Berman has done an excellent job, not just as 
Chairman of this Committee on Intellectual Property, but in 
terms of his new responsibilities as Chairman of the Foreign 
Affairs Committee as well. And his description of this issue 
doesn't require me to add any additional comments.
    I am not leaning slightly in favor of this bill. I am 100 
percent in support. And we are not going to rest until we get 
this taken care of. Why? Because creativity and intellectual 
property considerations are what the Judiciary Committee is all 
about.
    We want to encourage and stimulate the great American sound 
that now is enjoyed and repeated around the world. I happened 
to be, in particular of all of our music, a jazz aficionado. 
And the lives of musicians and performers and singers has been 
unduly complicated by the fact that we are not fully 
compensating them for all of the great talent and the enjoyment 
that they have brought to us across the years.
    And so, for Chairman Berman and Ranking Member Coble and 
all of us here on this Committee that support your great work, 
I am very proud to see you today. And I think this is an 
historic moment in bringing the equity that characterizes this 
Committee in terms of intellectual property, rights and 
creativity to a new high to include you in, and not continue to 
exclude you out of, the great benefits of this country.
    Thank you.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, Chairman, Committee on the 
   Judiciary, and Member, Subcommittee on Courts, the Internet, and 
                         Intellectual Property
    I commend Howard Berman for his leadership in introducing H.R. 
4789, and for holding this second hearing on such an important issue.
    As many of you know, earlier this week a resolution I and others 
introduced honoring the contributions of a founding father of rock and 
roll, the great Bo Diddley, passed the House.
    While he was a music pioneer who created the very foundation of the 
majority of the music played on the radio today, I mention Bo Diddley 
today because of his tireless work in his later years for the cause of 
fair treatment of musical artists.
    Unfortunately, Bo Diddley did not see such fairness in his 
lifetime. Despite all his hard work and his invaluable cultural 
contributions, he had to stay on the road performing into his 78th 
year.
    He could not afford the ``luxury'' of retirement and only stopped 
performing last year when complications from a stroke forced him to.
    Bo Diddley would be pleased that this Committee is doing more than 
just talking about performance rights--that we are taking action to 
promote fairness in the treatment of musical artists.
    The current situation is quite simply not fair to the recording 
artists or to the recording labels.
    I'm sensitive to the interests of broadcasters, and have taken 
pains to ensure that they are not harmed. But everyone but the 
broadcasters agrees that the current system is seriously flawed.
    Every other platform--including satellite radio, cable radio and 
Internet webcasters--pays a performance royalty. Terrestrial radio is 
the only platform that does not pay a royalty for use of an artist's 
music.
    That is a completely untenable situation in the 21st century.
    The specific broadcaster exemption created in 1995 may have made 
sense for the music marketplace of the 20th century, but with rapid 
changes in technology come dramatic changes in usage. And the law 
should be updated to reflect those changes when the old rationales no 
longer apply.
    Calcification of the law--stuck in an outdated reality--is not 
acceptable if we are to fulfill our constitutional directive of 
promoting creativity and innovation.
    The bipartisan and bicameral legislation bill we are discussing 
today would create fairness by bringing broadcasters up to the same 
standards that we require of other music platforms.
    Moreover, this bill will bring the United States in line with other 
developed nations, every one of which currently grants performers a 
right to be compensated for their work when it is broadcast on 
terrestrial radio.
    If you were to go out on the street and speak to 100 people at 
random, most would be shocked to hear that recording artists receive no 
monetary compensation when their songs are played on broadcast radio.
    Today we consider taking an important step closer to ensuring that 
artists who enrich our lives with their talent are treated fairly, are 
able to reap a benefit from their efforts at least somewhat 
proportional to their contribution.
    This bill will establish a fair system in copyright law for 
compensating performers of sound recordings, with appropriate 
accommodations for smaller stations, public broadcast stations, 
religious services, and incidental users.
    And it explicitly protects the public performance rights or 
royalties payable to songwriters or copyright owners of musical works.
    I look forward to hearing from our witnesses today as we consider 
this important step.

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



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


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



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



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

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

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



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

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

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



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

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

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



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

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

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



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

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