[Senate Hearing 110-254]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-254
 
            EXPLORING THE SCOPE OF PUBLIC PERFORMANCE RIGHTS

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 13, 2007

                               __________

                          Serial No. J-110-61

                               __________

         Printed for the use of the Committee on the Judiciary


                                     
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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware       ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin       JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York         LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
            Bruce A. Cohen, Chief Counsel and Staff Director
      Michael O'Neill, Republican Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas, 
  prepared statement.............................................    29
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    33
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     2

                               WITNESSES

DeVany, Dan, Vice President and General Manager, Classical WETA 
  90.9 FM, Arlington, Virginia...................................     8
Lovett, Lyle, Singer/Songwriter, Nashville, Tennessee............     3
Newberry, Steven M., President and Chief Executive Officer, 
  Commonwealth Broadcasting Corporation, Glasgow, Kentucky.......     6
Peacock, Alice, Singer/Songwriter, and President, Chicago 
  Chapter, The Recording Academy, Chicago, Illinois..............     4

                         QUESTIONS AND ANSWERS

Responses of Steven M. Newberry to questions submitted by Senator 
  Specter........................................................    26

                       SUBMISSIONS FOR THE RECORD

DeVany, Dan, Vice President and General Manager, Classical WETA 
  90.9 FM, Arlington, Virginia, statement........................    31
Lovett, Lyle, Singer/Songwriter, Nashville, Tennessee, statement.    34
Newberry, Steven M., President and Chief Executive Officer, 
  Commonwealth Broadcasting Corporation, Glasgow, Kentucky, 
  statement......................................................    38
Peacock, Alice, Singer/Songwriter, and President, Chicago 
  Chapter, The Recording Academy, Chicago, Illinois, statement...    58
U.S. Trade Representative, Washington, D.C., fact sheet..........    62


            EXPLORING THE SCOPE OF PUBLIC PERFORMANCE RIGHTS

                              ----------                              


                       TUESDAY, NOVEMBER 13, 2007

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, Pursuant to notice, at 9:35 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Specter, Hatch, and Cornyn.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. I call the Committee to order.
    First, I do appreciate very much the fact that Lyle 
Lovett--who was performing over at the Birchmere until late 
last night, and I am told by Bruce Cohen you were in his office 
at 8:30 on a rainy morning. I do not think you get to sleep at 
all. We first met in Texas, and I want to thank you for being 
here.
    Like most people, I am an avid music fan. Music inspires 
us, and it connects us to others and to matters larger than 
ourselves. It fills our memories. I am grateful to broadcasters 
for all the music I first heard on the radio back in the old 
days. I also feel strongly that the artists who make our life 
so happy should be compensated for their work. So the issue of 
``performance rights on sound recordings'' can be stated pretty 
simply: Should broadcast radio continue to use musicians' work 
without paying for it?
    I think the issue of performance rights raises an issue of 
fairness. The question is simple; the answer may not be. First, 
is it fair to continue to exempt broadcasters from royalty 
obligations?
    Second, is it fair to U.S. copyright holders for the United 
States not to align its practices with every single OECD 
country? They all recognize, of course, a performance right.
    And is it fair for some kinds of radio equivalents to pay 
royalties to performers but for traditional broadcast radio 
stations to continue to be exempt from such obligations? 
Webcasting and satellite radio pay performers for their work, 
but broadcast radio, which generates advertising revenue by 
playing the same music, does not.
    Fourth, is it fair to require the same payment from small, 
non-commercial, or religious radio stations as broadcasters 
that own many stations and generate very large profits?
    And, finally, is it fair to impose public service 
requirements on broadcast radio but not to make those demands 
of others?
    So I want to be sure that our culture remains vital and 
vibrant. Radio has been part of that vibrancy, whether it is 
old-fashioned broadcast radio or new-fangled Internet radio. I 
want it to survive. I want it to prosper. I want my 
grandchildren to have the widest possible access to good music, 
including classics or new creations. But I also want to be sure 
that the creative artists, those who perform that music, get 
their due. When we turn on the radio, I want to know that the 
voices I hear belong to artists who are being treated fairly.
    I do appreciate the fact that this panel came together on 
very short notice. As I was telling Mr. Lovett before we came 
in, there will be a roll call vote shortly after 10. I will go 
to that. And something that I think I have only done twice in 
all my years here, I have gone to Vermont in the middle of the 
week. I am going to have to take a late morning flight to 
Vermont. Senator Cornyn has offered to sit in for me and 
continue the hearing after that.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Chairman Leahy. With that, I would yield to Senator 
Specter.

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE 
                        OF PENNSYLVANIA

    Senator Specter. Thank you, Mr. Chairman. This is an 
unusual hearing. I have been on this Committee for a while. I 
have not seen so many still cameras in my experience here. I 
think we might have a better public response if we let the 
performers perform as opposed to hearing the Senators do too 
much talking.
    But we have a very important subject and a very complex one 
as we have seen how broadcasting has changed from traditional 
AM-FM, so now we have Internet, satellite, and high-definition 
broadcasting.
    We did make some changes in 1995 to grant the recording 
industry for the first time a performance right in digital 
music transmissions. But it is a complex field with a lot of 
inconsistencies. Satellite radio providers are charged 
different royalty rates than Internet service providers, while 
traditional broadcasters are almost totally exempt.
    We want to encourage performers to come along with the 
tremendous entertainment for the American public. At the same 
time, we want to make the music available in ways that we can 
appreciate those performances. So it is a complex balancing 
act, and I think it is time that the Committee took a very hard 
look at the complex issues which are involved here.
    One of the difficulties is that we have such a crowded 
agenda, last week totally consumed with the new Attorney 
General, later this week very heavily engaged in the Foreign 
Intelligence Surveillance Act. But we all enjoy the music, and 
we all enjoy our radios, and we greatly value the performers. 
And we want to be fair to all sides, so we will take it up and 
try to make as equitable a decision as we can.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you.
    I am going to call first of Mr. Lovett, instead of going to 
further opening statements, if that is all right, just simply 
because of the vote, and obviously the time will be available 
for others. I almost feel it is redundant to offer an 
introduction, but he is a four-time Grammy Award winner from 
Klein, Texas. He has released more than ten albums, many best-
sellers on the Billboard charts. In addition to being a popular 
singer and songwriter, he is a gifted performer. He is an 
accomplished actor. I remember ``The Player.'' He has 
graciously agreed to take time off from his current tour to 
help us focus on this, and as I said, Bruce Cohen and others 
from my staff saw and heard you at the Birchmere last night and 
gave you rave reviews.
    Mr. Lovett, it is all yours. Is your microphone on?
    The little red button.

    STATEMENT OF LYLE LOVETT, SINGER/SONGWRITER, NASHVILLE, 
                           TENNESSEE

    Mr. Lovett. Thank you very much. Thank you, Chairman Leahy, 
Ranking Member Specter, members of the Committee. I am proud to 
be here today on behalf of the MusicFIRST Coalition. I am a 
member of the American Federation of Musicians, the Recording 
Academy, the American Federation of Television and Radio 
Artists, and Sound Exchange. I am incredibly lucky to be able 
to make my living doing something that I love to do--creating 
art for others to enjoy.
    My first public performances was at the age of 7, singing 
``Long Tall Texan'' in a school talent show. I grew up in Texas 
and still live there in a house that my grandfather built in 
1911. My life and music are forever linked to Texas, but I also 
play with musicians and singers from Nashville and from all 
over the country. The issue you are considering today matters 
to performers all across the U.S., recording all kinds of 
music.
    Songwriters and performers rely on lots of different income 
streams in order to survive. But in this patchwork of income 
streams, there has always been one incomprehensible anomaly: 
when a recording is played on over-the-air radio, the 
songwriter who wrote the words and music receives a performance 
royalty, as he or she should. But the performer receives 
nothing.
    Of course, the songwriter who created the song deserves to 
be compensated when that work generates value for another 
business, as it does for radio. I am proud to be an ASCAP 
member and grateful for the performance royalties that have 
helped me to earn my living as a songwriter. But the musicians 
and singers who perform the song are also creators, and they 
deserve to be compensated as well.
    When radio plays these recorded works, they generate profit 
for themselves because they attract listeners and advertising 
dollars. Yet radio has never compensated performers for the 
value their creative work brings to the radio industry. This 
must change.
    Don't get me wrong. I love radio, and I appreciate the 
support I have gotten from radio over the years. But business 
is business and fair is fair, and they should not get to profit 
from the music we create without compensating us.
    It also would be extremely helpful to performers, and to 
the U.S. balance of trade, to bring our music industry into 
line with the rest of the developed world. Foreign radio 
stations often broadcast a high percentage of American music, 
but we do not get our share of the royalties due to our lack of 
a right here in the U.S. This is amazing. We are responsible 
for 30 to 50 percent of music played on stations around the 
world, and we do not have a performance right? I can understand 
why China, North Korea, and Iran might not. But here in the 
United States?
    I have talked a fair amount about myself today, but this 
issue is not about me. It is about the thousands of performers 
across the country who work so hard to earn livings that are 
very modest in relation to their talent. It is also about the 
future of American culture and its ability to support the 
creators we need. I am honored to have been given an 
opportunity to speak for them. I realize that you are at the 
very beginning of a legislative process and that there will be 
many issues to consider and to resolve, including how to 
protect the rights of songwriters while creating new rights for 
performers. But I am sure we can get this done so it is fair 
and square for everyone involved.
    Thank you for giving me your time today and for all your 
efforts on behalf of creators as you work on this issue.
    [The prepared statement of Mr. Lovett appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much, Mr. Lovett.
    Before we go to questions, Ms. Alice Peacock has joined us 
from Chicago. She is a singer, she is a songwriter, she is a 
recording artist, released two albums. Her songs have been 
featured on a number of hit television shows and movies. She is 
the President of the Chicago Chapter of the Recording Academy 
as well as the President of Rock for Reading, a nonprofit 
organization that raises awareness and resources for Chicago 
area literacy programs.
    On a purely personal note, my sister, Mary, runs an adult 
basic education program in central Vermont, and I will be 
seeing her later today, and I will tell her about your 
testimony.
    Please go ahead, Ms. Peacock.

 STATEMENT OF ALICE PEACOCK, SINGER/SONGWRITER, AND PRESIDENT, 
   CHICAGO CHAPTER, THE RECORDING ACADEMY, CHICAGO, ILLINOIS

    Ms. Peacock. Thank you. Good morning, Chairman Leahy, 
Ranking Member Specter, and members of the Committee. My name 
is Alice Peacock, and I am a singer/songwriter from Chicago. I 
am also a member of the MusicFIRST Coalition, I am President of 
the Chicago Chapter of the Recording Academy, and a member of 
AFTRA. I am truly honored to have the privilege of addressing 
this distinguished Committee about what is one of the most 
important issues facing those of us in the music community 
today.
    As President of the Recording Academy's Chicago Chapter, I 
have the honor of working with hundreds of music creators of 
all types--from those just starting out and hoping to make a 
career in music, to the few--I should note, the very few--who 
have achieved superstar status.
    But the vast majority are just like me, what I like to call 
the ``great middle class of artists.'' Like other Americans, we 
go to work every day to earn a living and support our families. 
Like other Americans, we produce a product that people value 
and want to buy. And like other Americans, we expect to be 
compensated when businesses make a profit from our work 
product.
    Music may be our calling, but make no mistake, it is also 
our job.
    And for the most part, artists are compensated for their 
work. When I sell a record, I make a royalty. When I perform a 
concert, I receive a fee from the promoter. And when my tracks 
are broadcast on satellite radio, Internet radio, or cable, I 
receive a performance royalty.
    All this seems fair. But there is one glaring, inexplicable 
exception to the notion of fair payment: There is no 
performance right for sound recordings for terrestrial radio. 
AM and FM radio--the platforms I grew up with and grew to 
love--do not compensate me when they broadcast my recordings.
    Now, there are people more qualified than I to address the 
legal, historic, and economic background of this issue. I am 
not an expert in copyright law, but I do understand the concept 
of basic fairness. If a business uses recorded music to earn 
advertising revenue, then it should compensate those who 
created that recorded music. It is that simple.
    Now, I understand that this concept nearly always turns 
into a discussion about promotion. Broadcasters say radio 
promotes record sales and so they should not have to pay a 
royalty. But I just do not get that. Every performance has the 
potential to be promotional, but why should that make a 
difference?
    For instance, I just had a gig in Grand Rapids, Michigan. 
Imagine if the club owner used the same logic about promotion. 
What if at the end of the night, after I had packed his club 
with paying customers, he told me that he did not have to pay 
me because my performance helped promote my record sales. Well, 
such a scenario would be unacceptable by any standard.
    Frankly, the promotion argument sounds a little silly. Last 
week I bought a pair of Nike shoes. I wear them everywhere--
except to perhaps Senate hearings. With the Nike logo on my 
feet, I am probably promoting their brand wherever I go. Can 
you imagine if I decided not to pay for the shoes on the 
grounds that my promoting Nike should excuse me from payment? 
My refusal to pay would be called ``shoplifting.'' But radio's 
refusal to pay artists is called ``business as usual.''
    Now, I would like to make one other point, an important 
point about songwriters, who do enjoy a broadcast performance 
royalty. I am also a songwriter, and in addition to the 
affiliations I noted earlier, I am a proud member of ASCAP. 
Many songwriters are not performers, and many performers are 
not songwriters. These are two different jobs and, as Congress 
has legislated, two different copyrights. A new performance 
right for artists should never be implemented at the expense of 
the existing right for songwriters. Any new legislation should 
make this clear. Just as satellite and Internet radio pays 
songwriters and artists, so should terrestrial radio.
    Which brings me back to the issue of fairness.
    Is it fair that only one platform--the $20 billion 
corporate radio industry--be exempt from paying to use the 
music that is the basis of its business? Is it fair that sound 
recordings are not protected with a performance right when 
movies, literary works, and other copyrighted works are? And is 
it fair that American artists lack this basic right when our 
counterparts in every other developed country enjoy fair 
compensation?
    Well, everyone in this room knows the answer is no. But 
you, distinguished Senators, have the power to make it right.
    Now, before I conclude, let me just take a moment to remind 
us all of what this is really about: the music. So this is 
something from my song ``Bliss.''
    [Ms. Peacock sings.]
    Ms. Peacock. So, on behalf of the great middle class of 
recording artists, I urge you to grant a performance right for 
sound recordings. It is only fair.
    Thank you.
    [The prepared statement of Ms. Peacock appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much. I am sitting here 
wondering just how our tremendous reporter gets that into the 
record.
    [Laughter.]
    Chairman Leahy. I think the last time somebody sang part of 
their testimony at a hearing I was at was my late friend Harry 
Chapin. It brings back memories.
    Steven Newberry is the President and CEO of Commonwealth 
Broadcasting Corporation. He is also the National Association 
of Broadcasters Radio Board First Vice Chair. He is from 
Glasgow, Kentucky, and, Mr. Newberry, we certainly appreciate 
you taking the time to come here today.

STATEMENT OF STEVEN M. NEWBERRY, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, COMMONWEALTH BROADCASTING CORPORATION, GLASGOW, 
                            KENTUCKY

    Mr. Newberry. Thank you very much, Mr. Chairman. Good 
morning to you Chairman Leahy, Ranking Member Specter, and 
other members of the Committee that are joining us today. And I 
do appreciate your inviting me here to offer the broadcaster's 
perspective on this important issue.
    My name is Steven Newberry. I am the President and CEO of 
Commonwealth Broadcasting. I own and operate 23 radio stations 
in rural Kentucky, and I am testifying today on behalf of the 
over 6,800 local radio members of the National Association of 
Broadcasters.
    With regard to the issue of creating a new performance 
royalty fee for sound recordings, which local broadcasters do 
consider a performance tax, NAB strongly opposes any such 
proposal. We oppose a performance tax because compensation to 
the record labels and performers is already provided under the 
current system. The existing model works for one very simple 
and significant reason: the promotional value of what the 
record labels and performers receive from free airplay on local 
radio stations drives consumers to purchase music. A survey 
done by critical mass media shows that 85 percent of listeners 
identify FM radio as the first place they hear music they 
purchase. And with an audience of over 232 million listeners 
each week, there is no better way to expose and promote talent.
    Beyond just playing music, consider that local radio 
stations give away free concert tickets, conduct on-air 
interviews with bands releasing a new CD, or hype a newly 
discovered artist. Without question, local radio is the engine 
that drives music sales.
    The recording industry knows that music sales soar with 
airplay. Just last week, at the Country Music Awards, Carrie 
Underwood, Kenny Chesney, Sugarland, and Rascal Flatts all 
specifically thanked country radio for their success. And 
Taylor Swift, who was named Best New Artist of the Year, said, 
``I want to thank country radio. I will never forget the chance 
you took on me.''
    While it is true that the recording industry has seen its 
revenues dip in their new digital world, in no way can that 
decline be attributed to local radio. Just the opposite. Local 
radio is essentially free advertising for record labels and 
their performers and provides the best and more direct way to 
reach consumers.
    In 1995, when Congress last examined this issue, lawmakers 
opted to require satellite and Internet radio to pay 
performance fees because these platforms are often available by 
subscription and they both offer consumers true interactivity 
to download songs. Local radio, however, is an entirely 
different platform. We are free. There is no subscription. It 
is not interactive. And between disc jockey lead-ins and 
commercials, no one is stealing music from over-the-air radio. 
Congress came to this conclusion in 1995, namely, that local 
radio airplay does not threaten music sales. In fact, local 
radio directly and positively promotes the sale of music.
    What I fail to understand after nearly 30 years in the 
radio industry is why the recording industry is willing to 
essentially bite the hand that feeds it. The free airplay for 
free promotion concept has established a natural symbiotic 
relationship between local radio and the recording industry. 
Both grow and both flourish together. But a new performance tax 
takes this mutually beneficial system and transforms it into an 
unfair, one-sided scheme that benefits financially only the 
recording industry and to the detriment of local radio 
stations.
    The negative effect of such a dramatic increase in radio 
station cost will be felt by radio stations and their listeners 
across the country and in every one of your States. Many, many 
radio stations across the country are struggling to be 
profitable. Since most of our operating costs are fixed, the 
money to pay for this new performance fee has to come from 
somewhere.
    So as a broadcaster, what are my options? Do I reduce the 
community affairs programming, including essential news and 
weather, in times of emergency? Because I cannot cut my 
electric bill. Am I forced to lay off staff or cut the employee 
benefits at my station? Because I cannot reduce my FCC 
regulatory fees. Do I move to a non-music format, which will 
have the effect of playing less music and will ultimately harm 
the performers?
    There is a reason that the National Religious Broadcasters, 
the National Association of Black-Owned Broadcasters, the 
National Association of Farm Broadcasters, and the Independent 
Spanish Broadcasters Association all oppose the imposition of 
any new performance fees. The answers are not simple, and the 
consequences of this debate will hit both industries in 
unanticipated ways.
    There is simply no justification for changing a system that 
has worked for the music industry as a whole for so many years. 
The United States has the most prolific and successful music 
industry that is the envy of the world. The law as it stands 
today works. Upsetting the careful balance that Congress struck 
by imposing a new performance tax on local radio broadcasters 
would be a shift of seismic proportions. Congress has 
consistently recognized the mutual beneficial relationships 
between local radio and the recording industry, and there is no 
reason to change the law now.
    Thank you for inviting me here today, and I welcome your 
questions.
    [The prepared statement of Mr. Newberry appears as a 
submission for the record.]
    Chairman Leahy. Well, thank you, Mr. Newberry, and I do 
appreciate your coming here.
    Dan DeVany is the Vice President and General Manager at 
WETA 90.9 FM based in Arlington, Virginia. It is a public 
broadcasting station. It switched to an all-classical format 
earlier this year. Before coming to WETA, he worked with the 
National Symphony Orchestra. I think that is where we first 
met.
    Mr. DeVany. That is right.
    Chairman Leahy. And for the Fine Arts Network of Minnesota 
Public Radio. Mr. DeVany, please.

 STATEMENT OF DAN DEVANY, VICE PRESIDENT AND GENERAL MANAGER, 
          CLASSICAL WETA 90.9 FM, ARLINGTON, VIRGINIA

    Mr. DeVany. Thank you, Mr. Chairman, Senator Specter, and 
members of the Committee, for giving me the opportunity to 
speak with you today. I am head of Classical WETA, the only 
classical music radio station here in Washington, D.C., and I 
am here today in opposition to the proposal that radio stations 
be required to pay performance fees for broadcasting musical 
material. These fees would impose a significant constraint on 
the ability of community music broadcasters such as WETA to 
provide public service within the publicly funded system in 
which we operate.
    Earlier this year, as you mentioned, Mr. Chairman, WETA 
made the decision to adopt a full-time classical music format 
on our radio station's 90.9 FM and 89.1 FM. We did so when it 
appeared that our Nation's capital would be without any over-
the-air station devoted to classical music. The company that 
owned and operated the last remaining classical music station 
in Washington, WGMS, had decided to move away from the format 
in favor of other types of programming. There was going to be 
no classical music on the radio in Washington.
    For many in this community, it was unthinkable that there 
would not be access to classical music on the radio free and 
available to all. WETA enthusiastically adopted the format as 
part of our core mission to serve the Greater Washington Area 
with programming that is significant, meaningful, and with 
intrinsic value.
    And we did so against a trend in broadcasting where more 
and more radio stations are abandoning the classical music 
format in favor of programming that, it is hoped, will be more 
successful in garnering increased audience and revenue. Last 
year the National Endowment for the Arts reported that the 
number of classical music stations in this country was in steep 
decline and that 6 of the top 30 markets in the United States 
had no classical stations at all. Philadelphia still has no 
classical music radio station.
    WETA is a not-for-profit community broadcaster licensed to 
the Greater Washington Area and chartered to serve the 
community with programming of value and significance. Our 
operating budgets are built upon public funding, the vast 
majority of which comes from voluntary private contributions 
from our listeners. Needless to say, raising this money year 
after year is a central challenge for us and any other 
similarly organized broadcast enterprise.
    We at WETA are proud and passionate about our place of 
service to Washington. And we are not alone in our efforts. 
WETA is part of a family of community stations most of whom 
broadcast a genre of music unique to their markets.
    The current proposal to require radio stations to pay a 
performance fee for material played on the air would be an 
onerous burden on community stations such as WETA who are 
already greatly challenged to raise the money needed to stay on 
the air and provide public service. Like WETA, the operations 
of community music stations are built upon a razor-thin margin 
that cannot withstand additional tolls or tariffs beyond that 
which we already pay to music licensing entities. Payment of 
these additional fees would be difficult for WETA; it might be 
impossible for smaller stations. By the very nature of the 
programming we offer, our audiences are limited, as are our 
resources.
    Please let me be clear. I do not suggest that artists 
should not be fairly acknowledged and compensated for their 
work. I say this as a former professional musician myself and a 
member of a family of working professional musicians and music 
educators.
    We community broadcasters who nurture, promote, and 
preserve art forms such as classical music, jazz, folk music, 
or any other that is underrepresented in mainstream terrestrial 
radio do so as a labor of love and with the deep conviction 
that our efforts support the work of artists most of whom would 
not be heard on radio if we did not exist. We have built 
communities of listeners upon this principle. And we have done 
so in partnership with performers who share our conviction and 
believe that the music to which they are devoted benefits from 
free exposure. It is a system that has worked for many, many 
years, and the ultimate beneficiary is the public we all serve.
    As you review this proposed legislation, I urge you 
consider the effects it would have on community-based music 
stations.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. DeVany appears as a 
submission for the record.]
    Chairman Leahy. Thank you.
    Let me ask this question of both Mr. Lovett and Ms. Peacock 
to followup on what Mr. Newberry and Mr. DeVany have said. If 
you were paid by the radio station, aren't you getting paid two 
different royalties for the same song? How would you respond to 
that?
    Mr. Lovett. Go ahead, Alice.
    Ms. Peacock. Well, Senator, I would say that those are two 
different jobs. I am a songwriter, but I am also a performer, 
so I should be paid fairly for both. They are two different 
jobs.
    Chairman Leahy. Mr. Lovett?
    Mr. Lovett. And I also perform my own songs, but in 
addition to that, I perform songs that I did not write. And it 
is not just about receiving a performance royalty for me myself 
with airplay.
    Ms. Peacock. That is true.
    Mr. Lovett. This performance royalty would extend to the 
musicians that I record with. Those are people who are usually 
not credited as writers of a song, but are extremely 
influential in bringing a song to life and are very much part 
of the creative process.
    Chairman Leahy. But, you know, we hear the radio stations 
speak of the promotional value of hearing it, which also would 
add to your value for concerts and all where others are going 
to be involved. We have also heard of promoters who will pay 
stations to play, sort of supporting this theory there is a 
promotional value to it.
    Are you saying that is not enough?
    Mr. Lovett. Well, certainly radio stations may provide 
promotional value to what we do, but it goes both ways. It is 
the music that people tune in to hear. It is because of the 
music radio stations are able to sell advertising. Radio 
stations work in what we provide, and we are just asking for 
the opportunity to be given fair compensation.
    Ms. Peacock. And may I add, Senator, that satellite radio 
and Internet radio are also playing our material as well and 
offering promotion, but they are paying a royalty. So we are 
just really asking for what is fair.
    Chairman Leahy. Well, that goes back--Mr. Newberry, I am 
trying to tie, in the few minutes I have here, back and forth 
on this. You say the radio play should be sufficient so they 
should not receive additional payment.
    Now, doesn't that imply the performer would want to give 
you the incentive to play his or her work perhaps by permitting 
their work to be played for free? Shouldn't that be the 
decision of the performer whether they want to forego rights to 
encourage airplay?
    Mr. Newberry. Senator, as you referenced, there is a 
relationship with the composers, and those persons that write 
the songs are very limited in their ability to monetize the 
value of those songs. And that is why the broadcast industry 
has had a longstanding relationship with BMI, ASCAP, and CSAC 
to make sure that those who are limited in their ability to 
monetize their work are fairly compensated.
    But I do believe that what the broadcast industry brings to 
the table in opposition or in contrast to satellite and 
Internet broadcasters are 232 million relationships each week 
with our listeners, 232 million people that listen to over-the-
air radio, and certainly there is a value by us introducing 
that artist, by us promoting where the concert is, and that 
gives the performer, whether it be in a small venue or a large 
venue, the ability to sell concert tickets, sell T-shirts, go 
to movie rights, become a celebrity. That is certainly for the 
performer a much stronger opportunity for them to monetize this 
side of the relationship, and I would like to think that 
America's broadcasters have contributed greatly to many, to the 
recognition factor of many of the artists that we have.
    You know, when Mr. Lovett came into the room, there was a 
certain sense of celebrity. And I would like to think that the 
broadcast industry contributed to that. And he has an 
opportunity to monetize that.
    Chairman Leahy. Mr. Lovett, what do you say to that?
    Mr. Lovett. While radio may provide promotional value to 
me, certainly, you know, it is just fair is fair. And the other 
people besides me who participate in these recordings, who do 
not have the same opportunities that I might have to monetize 
my exposure, deserve to be compensated as well.
    Chairman Leahy. My red light just went on. I have further 
questions. If I do not get back, I will submit them in writing. 
I am told the vote is about to start. I will yield to Senator 
Specter.
    Senator Specter. Thank you, Mr. Chairman.
    Chairman Leahy. And when Senator Specter finishes his 
questions, we will stand in recess for the vote once you have 
finished, and then, Senator Cornyn, if you would come back and 
take over.
    Senator Specter. As I study this issue and listen to the 
testimony, I think the system is very illogical as it is 
currently devised. Whether it is fair is a more complex issue. 
But when you start off and say that analog, no performers' 
rights, and digital, performers' rights, because analog cannot 
be copied because it is blurry but digital can, and then in 
1998 we legislate and give performers rights on the Internet 
and satellite and on cable, on TV, that is a mish-mosh. That is 
a crazy quilt, because now you have 1,200 to 1,500 AM-FM radios 
with high definition where it is capable of being recorded. So 
by that standard, the high definition ought to have performers' 
rights. But how you segment that is kind of complicated.
    I think that Mr. Lovett and Ms. Peacock make a very strong 
initial presentation on the issue of fairness, but I think we 
need to know a lot more. I think we need to know how many 
performers are discouraged from entering into the profession 
because they do not receive compensation for their performance. 
And we need to know more from the radio stations what would be 
the impact if you had to pay a performer's royalty. The value 
of radio stations has gone up enormously, just gigantically, 
from what I have seen, and the commercials pay very, very well.
    So the question which is on my mind on commercial radio, 
can you afford it? You certainly receive tremendous benefit 
from the recordings, from the performers' work. Mr. DeVany 
raises a good point about public radio, small stations going 
out of business. Well, we do not want to do that. We listened 
to NPR and somehow the Washington station changed its format, 
and now we hear music instead of the old format. And there is 
public financing there, so maybe we can make a dichotomy.
    Can you quantify in any meaningful way, Mr. Lovett or Ms. 
Peacock, what the promotional value is? You do sell your 
records and you do attract people to your shows because you 
have become famous for what people hear over the air when they 
are not paying for it. Can it be quantified to any extent? And 
the subordinate question is: How many performers are 
discouraged from entering the profession? We certainly want to 
encourage you to perform, Ms. Peacock. That is the only time I 
have seen the red light go on when I did not want the--when the 
speaker was a performer from going on.
    Respond to that question. How many people are discouraged--
can you quantify it to any extent--by not receiving performers' 
royalties?
    Ms. Peacock. Senator Specter, I cannot quantify it. I do 
not know to what amounts. I do know that people go into music, 
such as myself, because of we are passionate about it, because 
we have no other choice. Music is my calling. It truly is. But 
it is my job, and it is how I support myself. And as I call it, 
as sort of the great middle class of artists out there, I make 
my living from different revenue streams. I am also an 
independent label, so, you know, I am a small business. And so 
I feel that, you know, if somebody is creating a business model 
on my work, based on my work, I should be compensated fairly. 
That is where the fairness issue comes in, and this is my job, 
that is their business model, and there should be compensation.
    Senator Specter. So, Ms. Peacock, you say you perform for 
passion not for money, sort of like Senators who are in this 
line for passion and not for $165,000 a year.
    Ms. Peacock. But you do have to pay the bills.
    Senator Specter. Senator Hatch has royalties, too.
    [Laughter.]
    Senator Specter. But he is entitled to them.
    Mr. Newberry, how well are your constituents doing, the 
radio stations, aside from the public stations? Isn't it a 
pretty lucrative line these days? Can you afford to pay 
performers and still stay in business with a significant 
profit?
    Mr. Newberry. Senator, as I was listening to Ms. Peacock's 
answer to your question just a moment ago, it struck me that we 
probably find ourselves in the same position. I would consider 
myself a member of the middle or lower class of the broadcast 
community. Sixty-five percent of the radio stations in this 
country are outside of rated markets. It is rural America. And 
I can assure you that those small market radio stations in 
today's economy, with the challenges that are being faced, with 
the consumer confidence level where it is, with gas prices 
going up, many, many stations, as I said in my oral testimony, 
are struggling to find profitability. And the impact of these 
fees being paid by those radio stations would be dramatic and 
would be devastating because stations would have to make hard 
decisions. We are a fixed-cost industry.
    Senator Specter. Mr. Newberry, would it be rational to make 
a distinction somewhere along the line between the stations you 
describe and those which are profitable?
    Mr. Newberry. Senator, I think it is an issue of principle, 
because what I would say in response to that is the larger 
stations that are in the metropolitan areas provide even 
greater value to the artist. They reach more people. They have 
more impact. So I think it is a balanced system, and for us to 
bifurcate the industry I think would be a mistake.
    Senator Specter. Well, when we establish public policy, we 
try to do it in terms of stimulating entrepreneurialism, and 
performers are certainly in the free enterprise system 
entrepreneurs. But we want to keep radio stations going, too. 
The first thing all of us do when we get into the car is turn 
on the radio. The first thing we do. And we hear a lot of 
commercials. A lot of commercials. The first thing I do is turn 
on television--I asked my staffer, I saw in my notes Internet 
and satellite have to pay performers. I wondered about 
television. A lot of good music on television. And I was told 
that on cable they have to pay performers.
    Well, it is a vexing issue, and we want to be fair. We want 
to keep the radio stations going. We also want to keep the 
performers going.
    Senator Hatch has more experience in this field than I do. 
He can provide more of the answers. But the Chairman has put us 
in recess until the vote concludes. We will all be right back.
    [Recess 10:17 a.m. to 10:27 a.m.]
    Senator Cornyn. [Presiding.] I will call the hearing back 
to order. I hate to interrupt all the good conversation, but I 
do want to make sure we move our way through the hearing in the 
interest of your time as well as ours.
    First I want to thank Chairman Leahy for convening this 
important hearing. I was thinking there has not been one I have 
enjoyed personally as much in a long time because of the 
entertainment and because of some of the personalities who are 
here. And I was thinking, Mr. Lovett, as Chairman Leahy was 
talking about your contributions to music, which are many, that 
Texas has produced a large number of our Nation's most storied 
musicians, from Bob Willis--Wills. Excuse me. I do not know why 
I said ``Bob Willis.'' I was looking at Ray Benson as I was 
thinking that.
    [Laughter.]
    Senator Cornyn. I remember his performance, riding with Bob 
at the Kennedy Center, which I enjoyed a lot. It celebrated the 
life of Bob Wills. I do not know why I said ``Bob Willis.'' 
Excuse me.
    To Willie Nelson, from Janis Joplin and Norah Jones, from 
Buddy Holly to Stevie Ray Vaughn, and from Robert Earl Keen, 
who I understand was your housemate at Texas A&M. Is that 
correct, Mr. Lovett?
    Mr. Lovett. Well, we were friends. We lived right down the 
street from one another, and we met there, and, you know, we 
sat around and played a lot of music together.
    Senator Cornyn. Well, I want to also say that my own 
appreciation for music has overcome some early hurdles in my 
life when my parents forced upon me trombone lessons in first 
grade. And then I learned later when I went to college, I 
learned how to play the guitar badly. But I found that the 
opposite sex was not attracted to trombones.
    [Laughter.]
    Senator Cornyn. They were not attracted to my bad guitar 
playing either.
    Then let me just relate one other personal anecdote and 
then segue into my questions. When I went to law school and 
became a lawyer, I worked for a senior partner in my law firm 
in San Antonio, and one of his clients was ASCAP. And he would 
sue local clubs for non-payment of royalties, and he would give 
me the responsibility to go about midnight, usually on a Friday 
or Saturday night, along with a United States Marshal, with a 
writ of execution, to levy the writ of execution on the cash 
register and the proceeds that were accumulated during the 
evening's course of business. And I was always appreciative 
that we did not encounter someone with an attitude, and perhaps 
even a gun, that would have challenged that, or I might not 
have been here.
    But, of course, the royalties that we were helping to 
collect for ASCAP I would be interested in understanding 
because--and maybe the record would benefit from knowing how 
that money is distributed vis-a-vis the author, the writer, 
versus performer versus the music publisher and others.
    Mr. Newberry, could you perhaps enlighten us a little bit 
on that?
    Mr. Newberry. Certainly, Senator. Every radio station in 
the country pays a fee to ASCAP, BMI, and CSAC through 
independent licenses with each of those three entities. And it 
is based on a percentage of revenue that the stations are 
audited for and remit to those three entities on a monthly 
basis, generally.
    The funds have been distributed--and I am not intimately 
familiar, but familiar as it relates to being a broadcast 
owner. The funds have been distributed to the composers based 
on the airplay of the songs, and we are required by law and by 
the license agreement to provide to those companies an audited 
portion of our play list for a given period of time. Sometimes 
it is 3 days; sometimes it is 7 days. It can be longer or 
shorter. We provide that, and then they, through a statistical 
analysis, allocate the funds back to their various composers.
    Again, that is my understanding. I am not an employee of 
any of those three companies, but as a broadcaster, that is my 
understanding of how the practice works.
    Senator Cornyn. Do any of the royalties or fees associated 
with that flow back to the performer, Ms. Peacock, Mr. Lovett, 
to your knowledge? Or does it solely go to the benefit of the 
creator of the music? By ``creator,'' I mean the songwriter.
    Ms. Peacock. It goes to the songwriter.
    Senator Cornyn. Only. Is that right?
    Ms. Peacock. Only.
    Mr. Lovett. Yes, sir.
    Senator Cornyn. Do you know why that has been historically 
the case?
    Mr. Lovett. Well, songwriting and performing are, as Ms. 
Peacock said in her opening, two separate jobs. They are two 
separate things. As a songwriter, someone else might record and 
perform my song. And as a performer, I might record and perform 
someone else's song.
    Senator Cornyn. Mr. Newberry?
    Mr. Newberry. If I could just add, the broadcasters 
recognize--as stated earlier, the broadcasters recognize that 
the composers are limited on their ability to monetize their 
artistic work. They do not have, generally, as much opportunity 
to go out and perform merchandise sales, et cetera. So the 
broadcast industry certainly wants to be fair. And for many 
years, we have been paying those fees to the composers and are 
very comfortable with that relationship and value that 
relationship immensely. While they are two different jobs, 
there are also two different compensation structures for that.
    Senator Cornyn. Ms. Peacock, you alluded to the fact that 
satellite broadcasters already pay a performance fee to 
recording artists or somebody who performs somebody's music. 
How did that come about? As part of a negotiation process? It 
was not mandated by Congress, I gather.
    Ms. Peacock. You know, I am actually not familiar with the 
exact details of it, but I believe it was several years ago 
that this started happening. I receive royalty rates when my 
songs are played on XM or Sirius or Internet radio or cable. So 
I receive checks usually through a SoundExchange or something 
like that.
    Senator Cornyn. Do any of our witnesses know why XM Radio 
or satellite radio has been treated differently from 
terrestrial radio when it comes to paying fees to performers as 
opposed to composers?
    Mr. DeVany. Senator, I believe one of the reasons is that 
in the case of satellite radio, it is a subscription- based 
system as opposed to a free, over-the-air system. So that those 
who receive that service are already paying for it.
    Mr. Newberry. The same would apply to the cable industry as 
well.
    Senator Cornyn. And I guess the advertising revenue that is 
available to terrestrial radio stations is not as available, I 
guess. As I recall my XM Radio subscription, I do not think 
there is a lot of additional advertising associated with it. So 
the fee for service basically is a substitute for advertising 
revenue. Is that right?
    Ms. Peacock. Well, that is true. There is not as much 
advertising on the satellite radio. However, Internet radio is 
free, and they also pay a royalty.
    Senator Cornyn. OK. I think it was Mr. DeVany or you, Mr. 
Newberry, who talked about a symbiotic relationship between the 
performers and radio.
    Mr. Newberry. It was me, sir.
    Senator Cornyn. And it seems clear--and I think Ms. Peacock 
and Mr. Lovett acknowledged they benefit from the exposure 
given them on radio, but they, I think, make a pretty 
compelling argument that that should not be the limit of the 
benefit that they receive if, in fact, the marketplace would 
provide for additional compensation by virtue of their 
performance rights.
    Could you speak specifically to that argument, that while 
certainly they do acknowledge the benefit of promoting their 
record sales otherwise, that they should not be limited to 
that?
    Mr. Newberry. Absolutely, Senator, and the relationship 
that I did refer to in my testimony as symbiotic has to deal 
with the value that we provide in a relationship that has been 
in place.
    I will tell you that it is really a three-party 
relationship. One of those parties that is not at the table 
today that I would hope would engage in this discussion, and 
that is the recording industry, the actual record labels, 
because many times they own a 50-percent interest in what the 
performers' rights fee would be, or tax, whatever we wanted to 
call it.
    But we help promote the label, the artist. We help promote 
their venues. We help promote their celebrity. We help to make 
them familiar so that you hear the song that is played. We play 
it on our station, and there is a direct correlation, and you 
can see that we drive the sales of the merchandise and the 
sound recordings. And I think that that relationship is very 
proven. We can provide documentation to show that, the 
correlation between the two. But I would encourage that the 
record labels, the multinational record labels, be brought into 
this discussion because they are very much a part of this 
relationship.
    Senator Cornyn. As I understand it, there currently are 
prohibitions against play-for-pay or payola.
    Mr. Newberry. Yes, sir, absolutely.
    Senator Cornyn. If a performance fee is levied on over-the-
air terrestrial radio, would it make sense to remove those 
payola laws? In other words, I am trying to figure out if 
Government intervenes in this relationship, this business 
relationship, as Mr. Lovett says, between the performer, 
between the creator, the people who actually broadcast it, to 
what extend should Government be in the middle of this by 
prohibiting economic relationships that might ultimately work 
their way out in a free market, a freer market?
    Mr. Newberry. First of all, I think from a logical 
correlation or one step leads to another, if we are paying for 
the fees, then one could say--if we are paying for the rights 
to perform the songs, then one should say that we should be 
compensated for that. I do not think that is the right model. I 
do not think for artists it should be who has the most money 
gets the most airplay. I think it should be a case of who 
provides the best artistic content gets the most airplay.
    So I would hate to see us go in a direction that pay for 
play became the standard because I think that that would be a 
tragedy for many, many artists that are working to evolve. 
Broadcast radio, over-the-air radio, we introduce thousands of 
artists each year, and if I might, I could relate a personal 
story.
    Last year at this time, I had an opportunity to meet a very 
shy, very retiring, very quiet, very modest young lady by the 
name of Taylor Swift, who had just released her first song, and 
she was just very--almost timid. And then when I saw her 
perform on the Country Music Association Awards the other 
night, I saw this young lady that had blossomed into a great 
performer. I am very proud of what radio has done to introduce 
her to the listening audience, and certainly her talent has 
taken her beyond--I do not want to say radio contributed all of 
her success. But I think that seeing artists evolve like Taylor 
Swift--and if we got into a pay- for-play circumstance, I think 
we would miss a lot of artists that would be introduced to the 
listening public otherwise.
    Senator Cornyn. I would be interested, Mr. Lovett and Ms. 
Peacock, talking about the prohibition of radio play for pay 
and whether that would or should be removed--I am not 
advocating that. I am just trying to figure out how heavy the 
hand of Government should be in intervening in basically a 
business, market-based determination of value and who gets paid 
for what. I think the arguments you have made are pretty 
compelling, but I wonder whether there might be some other 
consequences to increase Government intervention in your 
business relationships that would not be beneficial in the long 
run or whether you harbor any of those concerns.
    Mr. Lovett. Our position is really pretty simple. Mr. 
Newberry has--I appreciate what Mr. Newberry has done for me in 
a promotional way. Certainly, radio adds value to what I do. 
But it simply works both ways. Musicians and artists add value 
to what radio does, and it is just--what we are talking about 
is bringing this performance royalty into line with practices 
that could be viewed as standard across the world, and talking 
about--Ms. Peacock made the point that Internet radio is free 
as well, but we are talking about bringing our practices in 
line with standards that are prevalent in the developed world.
    They add value to us. We do not argue that, and we thank 
radio for that. And in no way are we trying to put small market 
radio out of business. Goodness gracious, we rely on radio. We 
need radio. We support radio. We mention radio at all of our 
shows. You know, at shows that- -we are often in business with 
the radio station to help promote a show. I make it a point to 
thank our sponsoring radio station.
    It is a symbiotic relationship, and we are just talking 
about bringing these practices in line with the standard. And I 
think the coalition is--as performers, we are looking to the 
Congress for your wisdom and what is fair. We are just asking 
for a fair look at this, and we appeal to you to help us figure 
out what is fair. And the coalition certainly I think has in 
mind ideas that would--where smaller market commercial stations 
would not pay the same money that larger market stations would, 
and certainly non----
    commercial stations would have a lesser payment as well.
    So we appeal to you to--we are interested simply in 
fairness, and we are grateful for this opportunity to be 
considered.
    Senator Cornyn. Thank you very much.
    Senator Hatch?
    Senator Hatch. Well, I want to thank the Chairman and the 
Senator from Pennsylvania for holding this hearing on 
performance rights. The subject of royalty payments is an 
important one, and it deserves this Committee's attention. As a 
songwriter, I have had the advantage of meeting and mingling 
with some of the finest and talented individuals in the world, 
and certainly in our country, the best our country has to 
offer.
    Some people are under the wrong impression that everyone in 
the music industry is making a fortune. But they are not aware 
that all too often it is a struggle to survive.
    I will never forget, I gave the keynote address at the 
ASCAP national convention 1 year, and a thousand songwriters 
were there, and I told how I got involved in writing music, and 
part of it was so I could understand this field and understand 
all of the problems. And it really has taught me an awful lot 
about it.
    But I had just received my first royalty check for 57 
bucks, and I said, ``And I just got my first check for 57 
bucks,'' and I held it up and the place went wild. I mean, they 
screamed and shouted and stood on chairs. And I thought, My 
gosh, they treat U.S. Senators pretty well.
    [Laughter.]
    Senator Hatch. I sat down next to Marilyn Bergman, who is 
the head of ASCAP, and a great songwriter herself, Academy 
Award-winning songwriter with her husband, Alan, and she said, 
``Senator, the reason they are so excited is that there are a 
lot of great songwriters there and hardly any of them will ever 
get a royalty check.''
    It is really that tough. It is a tough business. If you are 
a performer, you have at least a chance. But even there, there 
are those who really hit it big, and there are those who just 
continue to strive who may be every bit as good, but just for 
some reason do not click like they would like to.
    I recognize there is no easy solution to the performance 
rights issue. It is a complex area of the law, and I am glad 
that Chairman Leahy has made this hearing possible. And I 
consider it a valuable opportunity to learn more about this.
    Let me just say that the more I get into it, the more I 
realize that it is very, very complicated. I have to say that 
it is true, isn't it, that Europe, just as an illustration, 
pays performance royalties? They pay writers' royalties. I 
know. I have received royalties from Europe. But I do not get 
them from America. I have just wondered about that many times 
and, of course, have gotten into it.
    Mr. Lovett, I thank you for your testimony today. I 
appreciate you and Ms. Peacock taking the time to be here. And 
I appreciate you two gentlemen who have your own problems here. 
So as a songwriter, I am sympathetic to royalty payments, not 
because I ever expect to make any real money at this, although 
actually it is surprising. But it troubles me that music sales 
and revenues are in decline. Most writers have to take second 
jobs--or first jobs in order to write, and then they have to 
really, really work very, very hard to get even a chance to--
and some of them are wonderful writers, but just do not have a 
chance, and especially when they are not performers themselves.
    Now, I believe that we have to do something to keep the up 
and coming songwriters and performers motivated and able to 
make a good living. However, I am concerned, as Senator Specter 
is, about the unintended consequences that may be created by 
any--and as Senator Cornyn is, that may be created by any 
action that Congress might take. But common sense tells me that 
if stations face paying significant sums of money in 
performance royalty payments, it is going to impact their 
programming decisions, and here is my concern. This could lead 
to a scenario where well-established artists benefit at the 
expense of newer or lesser known artists. And I do not want to 
see that happen either--not that I do not want established 
artists to do well.
    If I were running a radio station and had to pay for the 
use of a song, I would likely play music that is more popular 
to ensure that my ratings remained high and that I could sell 
my advertising needed to pay for the new royalty expense. Now, 
that is great for the well-established artists of the world, 
but what about the artists who are struggling to just break 
through or just get a chance. And we have new ones every year 
that come through that are really, really good. But if they do 
not have a chance, it is going to be something. How would such 
a royalty payment structure sustain the vast majority of 
artists who are in that group?
    Now, let me just say this: Mr. Newberry, could you explain 
some of the limitations, the restrictions terrestrial radio 
faces which do not burden other platforms, such as satellite 
radio and Internet music services? And if we accept the 
proposition that parity is a good policy, how do we achieve it 
given some of the restrictions placed upon terrestrial radio 
that other platforms may not have?
    Mr. Newberry. Senator, as a broadcaster, I am very proud of 
the relationship that I have with my listeners in the 
community, and I think one of the things that you are alluding 
to is the overriding public interest obligation that we as 
licensees have for our communities that satellite radio has not 
had to demonstrate. Certainly someone that is streaming 
independently does not have those obligations.
    So we do have a relationship that we have to maintain in 
our communities. I am very proud to be a local broadcaster. I 
love the fact that last Friday night I was doing a high school 
ball game with some friends. Actually, it was not exactly big 
listenership, but it was a T-ball football game, Little League 
football games. And I love the fact that our communities are 
engaged in that.
    Mr. Lovett said earlier that music is what builds 
relationships with the listeners. It is a component, but it is 
not the sole component of what builds our listenership. It is 
the overall relationship that we develop.
    So, Senator, you talk about the obligations or the 
responsibilities, and you raise the question of parity, and I 
think your point is dead on. But I would also tell you that 
that is not something that I would ever want to give up. I am 
very proud of the relationship and the expectations that we 
have. I am proud to be a broadcaster. I think that that is a 
unique opportunity for me to contribute in my community, and I 
think that is what differentiates us also from satellite and 
from Internet and other forms of broadcasting and makes us a 
stronger opportunity.
    Senator Hatch. All right. Ms. Peacock, I have heard the 
argument that radio stations should not have to pay performers 
royalties because they promote the sales of music. We have had 
that throughout this hearing. Now, is broadcast of your music 
beneficial to you as a singer and as a songwriter?
    Ms. Peacock. Yes, it is.
    Senator Hatch. Sure, it is. It appears to me that advancing 
technologies today enable radio stations to further promote the 
music that they play much easier than in the past, these 
advance technologies. For example, I am aware that several 
radio stations provide play lists on their websites and direct 
links for listeners to purchase artists' music right then and 
there. Now, it seems that this level of exposure on the Web 
fostered by radio stations would be a significant benefit to 
performers. What are your thoughts on that? And I think I 
understand them
    Ms. Peacock. It is a benefit to performers, absolutely. And 
I do not argue with that. Basically, I think as Mr. Lovett 
said, what we are asking for today is fair treatment for 
performers, to bring us up to date and up to the standards that 
are across the world in developing countries that also pay a 
performance royalty.
    If I could comment on Mr. Newberry's comment about 
broadcasting Little League and public service things, you know, 
the broadcasters have free air space and so they are supposed 
to be doing community broadcasts. So that is part of their job 
as well, to be part of a community. And if you are a radio 
broadcaster and let's say you are maybe a larger station and 
you are broadcasting the Cubs game or, you know, the local 
sports network, you have to pay for that. You have to pay for 
that content.
    So while radio does provide a service, and absolutely it 
does provide promotion to an artist, we are part of their 
content. They built the business model upon our work, and we 
should be compensated fairly.
    Senator Hatch. I have gone over, Mr. Chairman, but let me 
just take one more second and just say this: I lean very 
heavily in favor of the artists and writers because I know that 
Europe is going to drop royalties if we do not provide a means 
whereby royalties are paid on terrestrial radio. And I do not 
want to see that happen. Already, at least one country has 
thrown it in our face in refusing to pay royalties. The 
question is: Can we do this in a way that does not bankrupt 
terrestrial radio? Can we do it in a way that is fair to the 
struggling artists or to struggling people, writers, who really 
are great but just are not known yet? Can we do it with enough 
optimism and opportunity on both sides of the equation to be 
able to make this work?
    For instance, I listen to your program all the time. Is it 
Mr. ``De-vahn-y'' or ``De-vane-y''?
    Mr. DeVany. It is DeVany.
    Senator Hatch. Yes, well, I knew that you--when you do 
classical music, I thought maybe it was just pronounced 
differently.
    [Laughter.]
    Senator Hatch. But I do not want you to go bankrupt, nor do 
I want you to have a great deal of trouble. But, also, there is 
just simple equity here. I do not want to see Europe and other, 
like you say, Mr. Lovett, developed world drop paying royalties 
because we refuse to do so. But this problem of the newer 
artists and those who are up and coming and those who have not 
been known yet and those who need opportunities is one that 
bothers me. But I am going to work hard to see if we can come 
up with some legislation and be fair to both sides but 
literally does what is right with regard to content. And what 
is right is when people create something of value and it is 
used by others, there ought to be some payment for that.
    Now, I have not seen the legislation yet, but I am going to 
be very interested in the legislation. I will not be interested 
in it if it is all one-sided or all the other. But, on the 
other hand, I think that terrestrial radio has got to wake up 
on this a little bit, too. You do provide great services. You 
do help established artists. You do a lot of good. On the other 
hand, I hope we have a country where there is a lot of 
opportunity for up-and-coming people who have ability, and 
maybe some of those who are older and are no longer capable of 
going out and performing and getting accepted. And I would 
think it is in the best interests of all of us to be able to 
come up with a form like that.
    So I would challenge the radio industry, terrestrial radio 
industry, to help us to come up with some ways of helping you. 
If you have restrictions and difficulties that make it much 
more difficult for you to do something that I think is 
equitable, when you listen to these artists here, you ought to 
find some way of doing it. And we are not interested in hurting 
anybody. We just want to make sure that the system works well 
and that it is an international system that does not just work 
in Europe but can work here as well, and that we reward talent 
and we reward innovation, we reward creativity. Because without 
it, I do not think that the radio stations are going to do well 
either. And it seems to me there has got to be an element of 
give and take here that hopefully we on this Committee and 
throughout the Congress can resolve. Well, I am going to work 
hard to see if we can resolve that, and I just personally 
appreciate the testimony of all of you here today. I have 
listened. I am not interested in hurting anybody. I just want 
to make sure that we have a system that works and works fairly 
and makes sense. And to that degree, I am going to do my very 
best to work with my other colleagues on this Committee and 
listen to them and try to come up with some answers here. Thank 
you, Mr. Chairman. Senator Cornyn. Mr. Chairman, before I 
completely relinquish any right I have to conduct the hearing 
back to you, could I ask unanimous consent that my statement be 
made part of the record? Senator Specter. Without objection. 
Senator Cornyn. Thank you, Mr. Chairman. Senator Specter. Just 
a few more questions. Mr. DeVany, you talk about the stations 
which cannot afford to pay performers. Do they pay the 
songwriters? Can they afford that?
    Mr. DeVany. At this point, they have been. Like Mr. 
Newberry said, all stations are paying a fee to ASCAP and BMI.
    Senator Specter. Do you know how much they pay the 
songwriters?
    Mr. DeVany. Let me make a distinction here on that 
particular issue when it comes to public radio. Those stations 
are non-commercial radio, those stations which fit the criteria 
to be what is called CPB qualified--that is to say that they 
are eligible to receive funding from the Corporation for Public 
Broadcasting--are also the beneficiary of having, through the 
Corporation for Public Broadcasting, payments made on their 
behalf to ASCAP and BMI. It is part of the way, as I understand 
the corporation is chartered, to provide that kind of royalty 
support.
    Senator Specter. Payments made on their behalf by whom?
    Mr. DeVany. By the Corporation for Public Broadcasting. 
Through the Corporation for Public Broadcasting.
    Senator Specter. Well, would that be a possible way to pay 
performers like they pay writers?
    Mr. DeVany. It is possible. At this point it is unclear, at 
least to me, how that would work. However, it is possible.
    Senator Specter. Would you explore that and get back to the 
Committee?
    Mr. DeVany. Yes, sir.
    Senator Specter. Would you let us know?
    Mr. DeVany. Yes, sir, I will.
    Senator Specter. Because if you are talking about a class 
of stations which cannot afford to pay, but they pay the 
songwriters, let's see if we can work that out for the 
performers.
    Mr. DeVany. I would like to make just one other 
distinction, if I may, sir. There is a class of station out 
there that is not, what I said before, CPB qualified, are not 
eligible to receive that. They are very, very small stations 
with volunteer staff and that kind of thing. They work very 
much--
    Senator Specter. Do they pay songwriters?
    Mr. DeVany. I believe they do, proportionally smaller.
    Senator Specter. What I am looking for, if they can afford 
to pay songwriters, why not performers? When you say they 
cannot afford to pay.
    Mr. DeVany. It is a margin that is so slim, sir, that it 
can be very, very difficult to do.
    Senator Specter. Well, could you quantify for us how much 
do they pay songwriters, who actually makes the payments, so we 
could explore that--
    Mr. DeVany. I can--
    Senator Specter. If I may finish--as a legislative channel. 
Mr. Newberry, you have your hand up.
    Mr. Newberry. Yes, sir. Unfortunately, I do not have a 
Corporation for Public Broadcasting or another entity that pays 
the fees. I pay the fees. They are paid from the operating 
income of the radio station. As an industry, it is about $500 
million that is paid to the composers. It is based on revenue. 
It is not based on profitability; it is based on gross 
revenues. So there is a formula, and it generally runs between 
5 and 7 percent of the gross revenues of a radio station.
    And your answer to the question of if you can pay one, can 
you not pay the other, with all due respect, Senator, the pie 
is only so large. And increasing those additional fees, 
particularly in the markets that I am referring to, that I--
    Senator Specter. What would you think about payment on 
profitability as opposed to payment on gross revenues?
    Mr. Newberry. I would still have concerns with the very 
principle that we are paying by what we are providing to these 
artists and to the multinational record labels by promoting 
their products. So I would go back to that and say that, on 
principle, I am opposed to it. But certainly when you are 
looking at someone's profitability as opposed to someone's 
gross revenues, that does enable a different standard of 
measurement that I think--
    Senator Specter. Well, I know you would prefer not to pay. 
I understand that.
    Mr. Newberry. We are paying in a different--
    Senator Specter. I have been listening to your testimony. I 
understand that.
    Mr. Newberry. Yes, sir.
    Senator Specter. But when you talk about gross revenues, 
you are talking about something which does not correspond to 
ability to pay. You talk about profitability, it may.
    Mr. Newberry. Yes, sir. Philosophically, I would still 
disagree with that, but that is a measurement to--
    Senator Specter. Well, how about a sliding scale, Mr. 
Newberry, as we structure our tax laws so that the stations way 
down the line on profitability would be paying a lesser 
percentage than those in the urban areas who have a greater 
ability to pay?
    Mr. Newberry. I mentioned this earlier, and I am not sure 
if you were in the room at the time. But one of the things that 
is of concern to me when we go down that path is that I believe 
in the equation of fairness. The larger urban stations, 
metropolitan stations, provide even greater value to the artist 
and to the recording companies, to the record companies. So I 
think that the argument could be made that their value is even 
more--
    Senator Specter. I was here. I heard that.
    Mr. Newberry. Yes, sir.
    Senator Specter. I heard that promotional argument, and it 
has a lot of weight. But it may not carry the whole day. Or it 
may. We really cannot legislate in the dark, and we are pretty 
much in the dark.
    1 Do you know how much the Internet and satellite folks pay 
or the TV on cable pay?
    Mr. Newberry. No, sir, I do not.
    Senator Specter. Well, we are going to have to find that 
out. I am not expecting you to have those answers, but I think 
that is a relevant question.
    Mr. Newberry. Yes, sir.
    Senator Specter. And it may be that they ought to pay more 
if there are some who cannot pay as much. We have to make that 
allocation.
    You talked about the number of stations you have, and their 
profitability and their inability to pay. Could you provide the 
Committee with some figures on that? How many--
    Mr. Newberry. About my personal stations or--
    Senator Specter. No, no. You are the President--well, let's 
see. You are a member of the National Association of 
Broadcasters.
    Mr. Newberry. Yes, sir.
    Senator Specter. Can the association provide us with 
information about how many members you have, how many radio 
stations there are?
    Mr. Newberry. Certainly.
    Senator Specter. And give us some idea quantitatively as to 
revenue and ability to pay and also how much you pay the 
composers?
    Mr. Newberry. Yes, sir. We will cooperate with the 
Committee in any way that you request, and we will certainly 
provide that information.
    Senator Specter. All right. We would like to know what the 
facts are so we have some way of gauging the merits of your 
contention, just aside from the generalizations.
    Ms. Peacock and Mr. Lovett, are you in a growing 
profession? Are more people vying to become celebrity star 
performers? Do you have an organization which gives us some 
idea as to how many performers there are at work?
    Mr. Lovett. We are certainly in a changing business. The 
music business has, I think, changed more in the last 10 years 
than ever.
    Senator Specter. How has it changed?
    Mr. Lovett. Well, in the way people receive music, in the 
way people hear music, because there are so many different 
outlets to hear music, not just terrestrial radio but satellite 
radio, cable radio, Internet radio; the way people are able to 
preview and to purchase music.
    Senator Specter. Well, we would like to encourage more 
people to be performers. Can you give us some standard as to 
what we might look to, to encourage more performers?
    Mr. Lovett. You know, people play music. I think people are 
interested in writing music and performing music because, as 
Ms. Peacock said earlier, they just cannot help it, because 
they feel somehow compelled to do it. People love music.
    Senator Specter. Well, I am looking for some motivation 
from pay.
    Mr. Lovett. Yes, sir.
    Senator Specter. They feel compelled to do it. We do not 
have any business in the field. If they are compelled, they are 
compelled. But if they would be encouraged, we would like to do 
that. But we would have to have some handle on how we 
encouraged people.
    Mr. Lovett. Yes, sir. Well, this--
    Senator Specter. The last thing you want Congress to do is 
to legislate not knowing what the facts are.
    Ms. Peacock. We do have organizations--
    Senator Specter. And I am groping for some facts.
    Ms. Peacock. I am thinking of some organizations, Senator, 
like the Recording Academy that could provide maybe some of 
those statistics or organizations, I guess, maybe like AFTRA.
    Senator Specter. The Recording Academy?
    Ms. Peacock. Yes, the Recording Academy.
    Senator Specter. Well, if that could be done, it would be 
appreciated.
    Ms. Peacock. Sure.
    Senator Hatch. Could I interrupt on that point? I have one 
gold and one platinum record. But I have been told I would have 
more if it wasn't for piracy. Piracy is basically making it 
very difficult for even established artists like yourselves to 
continue to get gold and platinum records--in other words, 
500,000 CDs sold or a million CDs sold. And it is almost 
impossible to get a diamond record.
    I mean, the point is the really top artists might be able 
to do that, but the whole industry is suffering because of 
piracy and because of lack of compensation. Is that a fair 
comment?
    Ms. Peacock. I think that is true. When we talk about 
changes in the industry, not only are our people getting their 
music from different sources as well as terrestrial radio, but 
they are turning to satellite radio and Internet radio, which 
we are paid a royalty for, but I am also seeing many artists 
leaving and forming their own labels as well. So I think you 
have the independent artist out there who I think--that is who 
I am representing today, the middle-class independent artist 
that needs those different income streams to make a living, 
because that is my job.
    Senator Hatch. You bet.
    Mr. Lovett?
    Senator Specter. Let me regain the floor here. I am not 
going to charge you with--or ask you to figure out the piracy 
issue.
    Senator Hatch. No, I am not asking them to do that. But 
what I am trying to point out is that that is another pressure 
on artists and writers and performers that adds to the 
pressures that they have. And I worried about a lot of people 
who are very, very talented but who have to just get out of the 
industry because we are failing here to resolve some of those 
conflicts. And, you know, people think when it is on the 
Internet it is free. These young kids think it is just free. 
They do not believe they have to pay anything for that. And 
that is part of the overall thing. That is the only reason why 
I bring that up, because it is a very complex, very, very broad 
set of problems that are very difficult to understand and very 
difficult to resolve.
    Senator Specter. Do we have anyone here today representing 
the pirates?
    [Laughter.]
    Senator Hatch. I represent the anti-pirates.
    Senator Specter. Well, trying to work within the confines 
of the witnesses we have and the issues we have, I think you 
get the thrust of what we are looking for, some of the hard 
facts as to why you cannot afford more on the broadcaster side 
and why the fairness issue is bolstered by the promotion as 
being inadequate and how you lure more people to your 
profession to supplement the passion which you have 
articulated.
    We are going to keep the record open for questions. It is a 
very busy day here, and I think everybody on the Committee is 
very much interested in this subject, and we are looking to 
find an equitable solution. And there may be some questions 
which others will have, so technically the record will be kept 
open.
    Thank you all, and that concludes the hearing.
    [Whereupon, at 11:07 a.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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