[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                         PERFORMANCE RIGHTS ACT 

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   ON

                                H.R. 848

                               __________

                             MARCH 10, 2009

                               __________

                            Serial No. 111-8

                               __________

         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            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
LUIS V. GUTIERREZ, Illinois          JASON CHAFFETZ, Utah
BRAD SHERMAN, California             TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

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


















                            C O N T E N T S

                              ----------                              

                             MARCH 10, 2009

                                                                   Page

                                THE BILL

H.R. 848, the ``Performance Rights Act''.........................     2

                           OPENING STATEMENTS

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Ranking Member, Committee on the Judiciary.    18
The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Member, Committee on the Judiciary    19
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Member, Committee on the Judiciary..    20
The Honorable Pedro Pierluisi, a Representative in Congress from 
  Puerto Rico, and Member, Committee on the Judiciary............    21
The Honorable Darrell Issa, a Representative in Congress from the 
  State of California, and Member, Committee on the Judiciary....    22
The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Member, Committee on the Judiciary....    22
The Honorable Ted Poe, a Representative in Congress from the 
  State of Texas, and Member, Committee on the Judiciary.........    23
The Honorable Maxine Waters, a Representative in Congress from 
  the State of California, and Member, Committee on the Judiciary    24
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Member, Committee on the Judiciary    25
The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Member, Committee on the Judiciary.....    25
The Honorable F. James Sensenbrenner, Jr., a Representative in 
  Congress from the State of Wisconsin, and Member, Committee on 
  the Judiciary..................................................    26
The Honorable Brad Sherman, a Representative in Congress from the 
  State of California, and Member, Committee on the Judiciary....    27
The Honorable Daniel E. Lungren, a Representative in Congress 
  from the State of California, and Member, Committee on the 
  Judiciary......................................................    27

                               WITNESSES

Mr. Billy Corgan, Vocalist and Lead Guitarist, The Smashing 
  Pumpkins
  Oral Testimony.................................................    28
  Prepared Statement.............................................    30
Mr. Paul Almeida, President, Department for Professional 
  Employees, AFL-CIO
  Oral Testimony.................................................    31
  Prepared Statement.............................................    37
Mr. W. Lawrence Patrick, President, Patrick Communications
  Oral Testimony.................................................    39
  Prepared Statement.............................................    41
Mr. Stan Liebowitz, Ph.D., Ashbel Smith Professor of Managerial 
  Economics, University of Texas at Dallas
  Oral Testimony.................................................    51
  Prepared Statement.............................................    53
Mr. Steven Newberry, Commonwealth Broadcasting Corporation, on 
  behalf of the National Association of Broadcasters (NAB)
  Oral Testimony.................................................   142
  Prepared Statement.............................................   144
Mr. Mitch Bainwol, Chairman and CEO, Recording Industry 
  Association of America (RIAA)
  Oral Testimony.................................................   190
  Prepared Statement.............................................   194

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Chairman, Committee on the Judiciary...........................    14
Prepared Statement of the Honorable Zoe Lofgren, a Representative 
  in Congress from the State of California, and Member, Committee 
  on the Judiciary...............................................    23


                         PERFORMANCE RIGHTS ACT

                              ----------                              


                        TUESDAY, MARCH 10, 2009

                          House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:08 a.m., in 
room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Committee) presiding.
    Present: Representatives Conyers, Berman, Nadler, Scott, 
Watt, Lofgren, Jackson Lee, Cohen, Pierluisi, Sherman, 
Gonzalez, Weiner, Sanchez, Wasserman Schultz, Maffei, Smith, 
Sensenbrenner, Coble, Goodlatte, Lungren, Issa, Forbes, King, 
Franks, Gohmert, Jordan, Poe, Chaffetz, Rooney, and Harper.
    Staff Present: Stacey Dansky, Majority Counsel; Benjamin 
Staub, Majority Professional Staff Member; and David Whitney, 
Minority Counsel.
    Mr. Conyers. Good morning, everyone. The Committee will 
come to order. I would like to welcome all here in connection 
with the Performance Rights Act, H.R. 848.
    [The bill, H.R. 848, follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Conyers. I think H.R. 848 is an important piece of 
legislation and I think that it is fair to say that the current 
situation involving recording artists is not one that we can be 
very proud of. We hear a song on the radio and someone is 
singing or playing melodies, who receives absolutely no 
compensation. But it's okay, I am told; someone will go out and 
buy their records, so you folks should be glad you're on the 
radio.
    And speaking candidly, I've heard about some performers 
that are a little reluctant to speak publicly in support of the 
bill because of the threatening tone that they have been told 
about why they shouldn't do something like that. And even in 
the Congress, amazingly, some of my colleagues have expressed 
hesitation to cross their local broadcaster, even though they 
say privately, Sure, we support the bill on its merits.
    Now, I have a prediction that sooner or later this measure 
is going to become law. And so the sooner that everybody in 
this room recognizes this and comes to the table in a spirit of 
negotiation, the better it is going to be and the sooner we'll 
get this subject off the table.
    Can you believe that there are only four countries, 
developed countries, on the planet that don't pay performance 
rights? The other three are Iran, North Korea and China.
    And so what we want to do today is to try to fairly examine 
this. Some would have us believe that the artists are being 
done a great favor by getting played at all. But every other 
platform for broadcast music, including satellite radio, cable, 
Internet, Web casters pay a performance royalty; terrestrial 
radio is the only platform that doesn't. And this exemption 
from paying a performance royalty to artists doesn't make much 
sense; and many of them--I don't know about my colleagues on 
the Committee, but I have been to so many charity events for 
musicians that were down on their luck--they've got big health 
care bills or they don't get work. I mean, everybody rises and 
falls.
    So I'm here to begin this discussion. I'll put the rest of 
my statement in the record and yield to my friend, the minority 
Ranking Member, Lamar Smith of Texas.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
in Congress from the State of Michigan, and Chairman, Committee on the 
                               Judiciary

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    Mr. Smith. Thank you, Mr. Chairman.
    The purpose of copyright law is to promote the public 
interest by encouraging the creation of new works of 
authorship. To accomplish this, the law seeks to balance the 
interest of creators in receiving compensation for their work 
with a public benefit that is derived from encouraging greater 
access to such works.
    The fundamental question presented by H.R. 848, the 
Performance Rights Act, is to what extent the copyright law 
should give rise to a royalty payment each time a sound 
recording is performed publicly. Requiring a full statutory 
performance right for sound recordings is a change that has 
been sought by performing artists in the record industry for 
years.
    H.R. 848 amends Section 106 and 114 of the copyright act to 
eliminate the exemption that AM and FM radio stations have 
enjoyed since the development of broadcast radio. The exemption 
permits these stations to broadcast sound recordings to the 
public without having to compensate performing artists. 
Proponents of current law assert that performing artists, 
particularly those with an active recording contract, benefit 
financially from having their songs performed extensively over 
free radio. They have asked why, if radio does not promote 
music sales, do artists and record labels send free CDs to 
radio stations and encourage programming managers to have their 
tracks spun as often as possible.
    On the other hand, copyright owners note they should be 
entitled to exercise their rights to license the use and 
distribution of their works. They assert that when the law 
restricts them from doing so, they should at the very least be 
compensated for the commercial use of such works.
    The economic downturn has resulted in a double hit for 
radio stations. It affects the ability of radio stations to 
generate revenue through advertising sales, which have 
decreased over 20 percent in the last 2 years. It also affects 
their ability to raise capital and secure financing to continue 
operations.
    While the economic future of radio stations, recording 
artists and record labels is uncertain, my own view is that 
they are likely to need each other for some time to come. The 
sooner the parties recognize and accept this fact, the better 
for all concerned. Frankly, though, negotiation on the subject 
of performance rates is unlikely in the near future. So in the 
short term, what I propose is that the parties agree to have a 
third party entity conduct an objective study of the economic 
impact of royalty payments on performing artists and radio 
stations.
    Stakeholders would offer issues to be evaluated, and at 
least there will be some quantitative analysis to help mold 
legislation. Such a study would need to be conducted by a party 
that is clearly not aligned with either side of the debate. 
This entity would evaluate the likely impact of a range of 
royalty rates in a variety of economic circumstances.
    During my time for questions, I will ask our witnesses if 
they will agree to this proposal. Before Congress chooses to 
act or withhold action on any matter, we have an obligation to 
ensure all legitimate concerns are fairly reviewed and 
addressed.
    Mr. Chairman, thank you for having this hearing today. And 
I'll yield back the balance of my time.
    Mr. Conyers. Howard Berman has long been our intellectual 
property leader on Judiciary, and though he is Chairman of 
Foreign Affairs, his interest in this subject still continues. 
We are glad that he is with us this morning.
    Mr. Berman. Thank you, Mr. Chairman. It was your reference 
to North Korea, China and Iran that brought me here--no.
    First, I would like to particularly thank the Chairman for 
his commitment and his dedication to getting this bill passed. 
Fairness to the artists and parity between the platforms are 
all reasons to support this bill. The equities for repealing 
the broadcaster exemption are clearly in favor of paying 
artists and musicians for songs that are played on terrestrial 
radio. What I'd like to do is raise a couple of questions for 
my amiable adversary, Mr. Newberry, and Mr. Patrick regarding 
their justifications for opposing the bill.
    Mr. Newberry's argument goes like this. This is testimony 
from the March 10th--from today's hearing. I quote:
    ``As Congress has repeatedly recognized, the radio industry 
provides tremendous practical and other benefits, both to 
performing artists and to record companies. The recording 
industry invests money promoting songs in order to garner radio 
airplay and receives revenues when audiences like and purchase 
the music they hear.
    ``Artists consistently recognize the fact that radio 
airplay is invaluable. Simply put, when audiences hear music 
they like on their radio, they are likely to purchase that 
music.''
    A couple of responses to that argument:
    Specifically built into this bill is a way to take into 
account the value that Mr. Newberry talks about of promotion. 
Section 114(f)(2)(b) directs in this legislation, Title 17--
directs that when the copyright royalty judges establish 
reasonable rates in terms of royalty payments for public 
performances of sound recordings, when those performances are 
played on radio stations, they shall base their decision on 
economic, competitive and programming information presented to 
the parties, including subsection (i), whether use of the 
service may substitute for or may promote the sales of records 
of that performance.
    Now, if you don't like that standard, let us know. But the 
idea that the bill doesn't take into account promotional value 
isn't true. And if the promotional value outweighs the value of 
the music to the station, the determination on rates will 
reflect that.
    Secondly, while it is possible that the station provides 
such great promotion that it obviates the need to pay the 
artists, I ask you to consider the comparable situation, where 
the station in fact will pay, as they do now, handsomely to 
broadcast sports games. There is clearly promotion there, but 
there is also payment.
    The same with talk radio programs.
    Mr. Newberry also argues that in this economy radio can't 
afford the royalty fees prescribed by this bill. But as is 
clear in the bill, the royalty fees are assessed only on 
stations that make over $1.25 million in revenue. That is why 
the bill allows small broadcasters to pay a small flat annual 
fee, to ensure the viability of radio. If it's too high for 
some, let's hear alternatives.
    For other stations who reconsider a percentage of revenue 
royalty rate, that way during hard economic times you could pay 
less; during good times, you pay more. But let's not forget 
that this not a debate about economic impact. We can 
accommodate that in the structure.
    This is about a right of a creator to be able to negotiate 
and get paid for what they create.
    So I'd like to make it clear that I'm hopeful that we can 
work with the NBA to try and resolve any legitimate concerns it 
has with the bill. Continually saying ``no,'' as the Chairman 
mentioned in the beginning, is not a productive way to 
accommodate real issues.
    And I ask my fellow Committee Members, even those who 
oppose the current iteration of the bill, to call on the NAB to 
sit with the invested parties, to identify their issues and try 
to hammer out a mutual resolution. Without that, I believe the 
Committee may have no choice but to move forward without NAB's 
valuable input.
    Thank you, Mr. Chairman.
    Mr. Conyers. From Virginia, a senior Member of Judiciary, 
Bob Goodlatte.
    Mr. Goodlatte. Mr. Chairman, thank you. And I also want to 
thank Ranking Member Smith. We really appreciate your 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 allows terrestrial broadcasters to play 
copyrighted works without paying performance rights royalties 
is still justified in the Digital Age. 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 
and that consumers do not rely solely on terrestrial broadcast 
stations for their music anymore. Other media, like satellite 
radio and on-line broadcasters, also deliver promotional value 
to the recording artists, and they pay performance rights 
royalties. This way's in favor of lifting the exemption.
    On the other hand, I'm very concerned about maintaining 
local radio programming. Local radio programming is one of the 
best and least expensive ways that citizens can access 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 station.
    As such, I'm pleased that H.R. 848 contains provisions to 
grant relief to small radio operators who fall underneath the 
revenue threshold in the bill. However, I'm still concerned 
that the exemption does not strike the right balance and that 
some radio stations that provide excellent local programming 
and that may make enough money to just clear the revenue 
threshold in the bill will be on the fringe. It would be a 
shame if this legislation were the last straw that caused 
stations like these to make the decision to close their shops 
or sell out.
    Last year, during the Subcommittee markup of this 
legislation, I offered an amendment as an attempt to solve this 
problem. It is my hope that the Chairman will work with me to 
come up with language that addresses this local broadcasting 
concern.
    In addition, it seems that one of the same arguments that 
support a requirement that broadcasters pay a performance 
royalty, the argument that other technologies now compete with 
terrestrial radio and also provide promotional value, also 
weighs in favor of all these various music delivery 
technologies being subject to the same standard for determining 
what the royalties should be.
    I'm not commenting now on what that standard should be, 
just that perhaps the time is right for these rules to be 
uniform. I'm interested to hear what the witnesses today think 
about these ideas.
    And I thank you, Mr. Chairman, for holding this important 
hearing.
    Mr. Conyers. The former attorney general of Puerto Rico, 
Pedro Pierluisi.
    Mr. Pierluisi. Thank you, Mr. Chairman. I commend you for 
holding this hearing on your bill, H.R. 848, which would remove 
the exemption for paying performance royalties that over-the-
radio broadcasters but not other radio platforms have long been 
granted under Federal law. I know this issue is of vital 
importance to broadcasters, record labels and artists.
    I believe there are good arguments on both sides. And I 
have not yet made up my mind whether to support H.R. 848 or the 
competing resolution, H.Con.Res. 49, introduced by Mr. Green, 
which expresses support for the status quo. I'm hopeful, 
though, that today's distinguished panel will help crystallize 
the issues for this Committee.
    I would note that I have received letters from several 
broadcasters in Puerto Rico urging me to cosponsor Mr. Green's 
resolution. Along with other members of the congressional 
Hispanic Caucus, I have also received a letter from the Spanish 
Radio Association, a coalition representing several of Hispanic 
radio's top players. This association claims that H.R. 848 
would deal a financial blow to Hispanic radio from which it 
can't recover.
    Mr. Chairman, I do not believe for a moment that this is 
your intention. To the contrary, I believe your bill tries in 
good faith to strike a balance between competing interests. I 
also know you will not seek to move H.R. 848 until we 
understand the financial impact that this legislation might 
have on the broadcast industry. I know this hearing marks one 
step in an ongoing effort to craft a bill that addresses the 
legitimate concerns of all parties involved.
    In general, I subscribe to the view that artists should be 
compensated for their hard work. Puerto Rico, like so many of 
the districts represented on this Committee, has a rich and 
vibrant musical culture. Besides shortstops, rum and coffee, 
the island's musical talent may be its most renowned export, 
from Tito Puente to Luis Fonsi to Ricky Martin, and from 
Gilberto Santa Rosa to Don Omar.
    I tell you, although I expect this point to be vigorously 
disputed by other Members of this Committee, my extremely 
biased view is that Puerto Rico may produce as much good music 
per capita as any other U.S. Jurisdiction.
    So I believe--not Memphis. I'm correct.
    So I believe that any bill should treat artists in a fair 
and appropriate manner while acknowledging the fact that radio 
clearly provides artists with promotional value.
    I thank the Chairman and I look forward to listening to the 
panelists' testimony.
    Mr. Conyers. The distinguished gentleman from California, 
Darrell Issa.
    Mr. Issa. Thank you, Mr. Chairman. And thank you for 
holding the next in this series. And I certainly join with the 
gentleman from Puerto Rico in saying that not all great music 
comes from California, nor are all the artists in Memphis 
indigenous to Memphis.
    Having said that, Mr. Chairman, I think we are beginning to 
go down a road that is in the right direction, which is 
uncommon in Congress, and that is one where although many of us 
are on one bill or another and have a stake in them, we are 
beginning to realize that the balance between performance and 
the value of the copyright is, in fact, inherently unfair and 
that we must act, although we are not sure in which direction.
    In my case, I'm committed to see that the producers of 
intellectual property not always receive the exact same 
compensation for their work on terrestrial radio which 
currently is zero. But at the same time, I join with the 
Ranking Member, Mr. Smith, in saying that a study--and I would 
go one step further, a GAO study, should in fact be 
commissioned in order to move us in the direction of a neutral 
third-party, neither the broadcasters who seem to believe that 
it is always a privilege not to be charged for promoting your 
song by paying it nor, to be honest, my friends in the content 
community who cannot really decide which model, but they would 
like to have a model similar to terrestrial radio or satellite, 
the two of which are not consistent and neither one of which is 
necessarily the one that would be chosen if we were to come 
back again for broadcasters.
    So for that reason, Mr. Chairman, I will put the rest of my 
opening statement in the record. I certainly support what we 
are going to hear today. Hopefully, Mr. Chairman, what we're 
going to hear today, in addition to what we've heard in the 
past, is support for a high-level, independent study to get it 
right once and for all as to perhaps not just terrestrial, but 
perhaps also to our friends on the Internet and satellite radio 
who are currently paying because somehow their promotion value 
appears to be less.
    With that, I yield back.
    Mr. Conyers. A senior Member of the Committee, Zoe Lofgren 
from California.
    Ms. Lofgren. Thank you, Mr. Chairman. I appreciate this 
hearing today and wanted to just note that I have remained 
neutral on this legislation, in part, because I think while 
there is merit to the arguments made on both sides of the 
question, the arguments in favor of the artists really overlook 
the newest platform, which is Web radio. And I think if we are 
going to have a discussion of parity or fairness under our 
copyright law--and I think it is absolutely fair that we do 
so--we'll err if we do not also discuss the underlying platform 
inequality that exists with respect to Internet radio.
    I would just note that, to me, it makes little sense that 
while cable and satellite radio providers are paying 6 to 8 
percent of their total revenues in royalties under the 801(b) 
standard, some Internet radio stations are paying 60 to 80 
percent of their total revenues under the Copyright Royalty 
Board's decision.
    I don't understand why a terrestrial broadcaster with gross 
revenues of under $1.25 million has to pay $5,000 under this 
legislation, whereas an Internet radio broadcaster making the 
same amount would be forced to pay a sum just shy of $150,000.
    In short, it seems that in every possible way the smallest, 
newest and most innovative entities are the ones most 
disadvantaged by our current copyright laws. And I would hope 
that as we attempt to establish parity, as this legislation 
does, that we would not overlook the Internet providers as 
well. This is the opportunity to provide parity across all 
platforms, and I'm hopeful that as we move forward on this, 
that we can accomplish that as well.
    With that, Mr. Chairman, I thank you for recognizing me, 
and I will put the remainder of my statement in the record.
    [The prepared statement of Ms. Lofgren follows:]
 Prepared Statement of the Honorable Zoe Lofgren, a Representative in 
  Congress from the State of California, and Member, Committee on the 
                               Judiciary
    Thank you Chairman.
    I have remained neutral on this legislation in part because there 
is merit to the arguments made on both sides of this question.
    The broadcasters contend that an obligation to pay royalties 
overlooks the promotional benefits of free air play and will decimate 
local radio.
    For their part, the record labels feel that, particularly at a time 
when sales of physical CDs and vinyl are declining rapidly, the 
exemption enjoyed by terrestrial broadcasters is unsupportable.
    Another argument marshaled by the recording industry is that 
fairness and parity require this change in our copyright law.
    However, I think any discussion of parity or fairness under our 
copyright law is incomplete until we address the underlying platform 
inequality that exists with respect to internet radio.
    It makes little sense than while cable and satellite radio 
providers are paying 6 to 8 percent of their total revenues in 
royalties under the 801(b) standard, some internet radio stations must 
pay 40 to 80 percent of total revenues under the Copyright Royalty 
Board's decision.
    Similarly, I don't understand why a terrestrial broadcaster with 
gross revenues of under $1.25 million has to pay $5,000 under this 
legislation whereas an internet radio broadcaster making the same 
amount could be forced to pay a sum just shy of $150,000.
    In short, it seems that in every possible way, the smallest, 
newest, and most innovative entities are the ones most disadvantaged by 
our current copyright laws.
    I would hope that any good faith attempt to establish parity in our 
copyright laws would address this inequity.
                               __________
    Mr. Conyers. Our country and western expert, Ted Poe of 
Texas.
    Mr. Poe. Thank you, Mr. Chairman. I promise not to sing.
    I think, of course, in the long term, the best solution is 
for the parties to get involved and solve the problem rather 
than having the government swoop in and make decisions that 
usually--in many cases, I will say--both sides are disappointed 
with. I do see some concerns that might not have been addressed 
at this time, and I just want to mention those.
    Local radio stations has seen their revenues drop anywhere 
between 10 and 40 percent because of the current economic 
crisis. I'm also concerned about the new performance fee 
spreading well beyond the local radio stations. I understand 
that new artists trying to break into the music business and 
listeners, they rely on the radio to get their music out 
initially, and that may make it difficult for them to ever 
break into the group of country music singers or Puerto Rican 
singers or whoever.
    But--the one thing that hasn't been mentioned is that this 
is not really an issue between just the broadcasters and the 
artists, but you have the big record labels, label companies 
involved in this, too. If I understand this bill, 50 percent of 
the performance fee goes to the record labels, and I think we 
ought to have a discussion on whether that is a good idea or 
not.
    And many of those record companies, they are based all over 
the world; I don't know that they are based in Texas, but they 
are based all over the world. And I think that we should have 
that discussion as well.
    Of course, this has been before Congress, I think, three 
times, and each time Congress has rejected changing the system. 
So I look for some insight into the comments that I just made 
about how it will affect the industry overall in this downturn, 
how it will affect new performers coming in, whether they will 
be able to have their songs played. And why is 50 percent of 
the fee going to the big record companies who, I think, are 
getting quite a share of this new tax or fee?
    So, with that, I will submit the rest of it in the record, 
Mr. Chairman. I yield back. Thank you.
    Mr. Conyers. Our human rights expert on the Committee, 
Maxine Waters of California.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Today's hearing on the Performance Rights Act of 2009, H.R. 
848, is an important first step in finally addressing an issue 
that has remained unsolved for a number of years. Technological 
advancements that have brought us to a new digital age that has 
highlighted the fact that our copyright laws must be updated to 
reflect the reality on the ground and in cyberspace.
    Over the years, my congressional district in Los Angeles--
in my congressional district, I've spoken with many performers, 
artists and broadcasters about their concerns regarding the 
need to find a fair way to compensate everyone for their work. 
There is no doubt that the Committee must step up to the plate 
and update the copyright laws to reflect the fact that musical 
performances are shared today in ways that were never 
envisioned when the copyright laws were last updated.
    But in modernizing the statutes, I'm determined that we do 
not do so in a way that diminishes the voice of minority 
broadcasters. Corporate mergers have had a bad enough impact on 
small- to medium-sized minority broadcasters. I don't want to 
make that problem worse with a new law, but I believe we can 
come up with a solution that doesn't hurt small or minority 
broadcasters, including religious broadcasters.
    Mr. Chairman, I commend you and my colleagues, Mr. Berman 
and Mr. Issa and others, for your efforts to bring this 
bipartisan proposal before the Committee today. No bill is a 
perfect bill and rarely is a bill enacted exactly as it is 
introduced. But H.R. 848 provides us with a good starting 
point, and I'm looking forward to working with you and my 
colleagues to improve this bill in a way that will provide fair 
payments to performance and impose the least burden on 
broadcasters.
    Mr. Chairman, as I understand it--and I have to take a look 
at this bill in detail--there is some discussion about 
promotions and the value of promotions and whether or not there 
can be some kind of reconciling of the value of promotions and 
the cost to the performance. So I'm very much interested in 
that.
    I come from a district--part of my district is Inglewood, 
California, where I have Stevie Wonder, who owns one of our 
most prominent African American radio stations, and of course, 
he is one of the most prominent and well-known performers. So 
he has got a little bit on both sides of this.
    And, of course, I work very closely with Ms. Cathy Hughes, 
who has done so much to give us a voice where we don't have a 
voice. We don't have--African American legislators don't have 
access oftentimes to all of the Sunday TV stations and the big 
radio stations; our voices are mostly heard through these 
minority broadcasters. So we have to be concerned about them, 
and of course, the fairness to the performers. People must be 
paid for their work.
    So we've got a challenge to resolve here, and I'm up to the 
task of working to help resolve that difficult task.
    Mr. Conyers. I know Stevie Wonder.
    Howard Coble has long been a leader in the intellectual 
property issues from North Carolina, and he is still very 
concerned about this issue.
    Mr. Coble. Mr. Chairman, I thank you and Mr. Smith for 
having called this hearing.
    Mr. Chairman, you conferred the expert title on the 
distinguished gentleman from Texas. If you will pardon my 
immodesty, I'm fairly well versed on bluegrass and old time 
country; so may I share that title, Mr. Chairman?
    Not unlike many Members on this panel, I have friends on 
each side--broadcasters on the one hand, performers on the 
other. And when you have friends on each side and ultimately 
cast a vote, we can't in good conscious say, I'm former 
friends, because one group is going to be feel jilted.
    I would like to associate with the expert from Texas, when 
he said the best of all worlds would be for these folks at the 
table to come together. If you could hammer out some sort of 
resolution, that would, I think, benefit all of us favorably.
    I spoke to a Member, Mr. Chairman, who sits on this 
Committee, 10 minutes ago; and I said, Are you with the 
broadcasters or the performers? He replied, Yes. So I think 
that says it.
    But I look forward to the testimony today, Mr. Chairman, 
And again I thank you for calling the hearing. I yield back.
    Mr. Conyers. Steve Cohen from Nashville, Tennessee.
    Mr. Cohen. It's a big district. Thank you, Mr. Chairman. 
Thank you, Mr. Chairman.
    I have spent time on this Committee with this issue and 
indeed I understand where the broadcasters come from. For when 
I was young, in the 1950's, in Memphis, Tennessee, Dewey 
Phillips, a disc jockey on WHBQ radio, played Elvis Presley. 
And if it weren't for Dewey Phillips, the world would not have 
known Elvis.
    So no question about the fact that the broadcasters gave 
Elvis the opportunity to be heard and to be known; and it was 
Dewey Phillips' stepping out that did that.
    But today it is different. People would have learned about 
Elvis over the Internet. They would have learned about Elvis in 
the new technologies that come out where people really learn 
about new artists. So I think that as we look at what has 
happened over the years, the argument that the performers 
benefit as they did from the play on the radio and that that's 
their compensation has changed, and that technology has come 
about--this is an anachronism that needs to be corrected; if we 
were starting with this type of system today, we would not have 
this type of system and the performers would be paid.
    When I was young, I sang, ``Don't Be Cruel.'' Elvis sang, 
``Don't Be Cruel.'' Elvis did a lot better than me. The song 
writer was the same; the performer does make a difference, and 
it should be recognized and compensated. How you emote a song 
has a lot to do with how a song is perceived.
    The difference in what American artists receive in Europe 
and European artists is from something to nothing, and that's 
because of what we've done here. And we've heard our artists 
being compensated in Europe because of our system. So I think 
we need to recognize the performer's contribution.
    And while this meeting indeed is about and should be about 
performers' rights, Howard Berman brought up sports and sports 
is one of my favorite subjects, other than music. And it is 
interesting, in the discussion today, the Memphis Tigers 
started their season in Puerto Rico, and now they're on the way 
to Detroit, the Chairman's hometown. Last year we were on the 
way to the Ranking Member's hometown, San Antonio.
    And, Mr. Chairman, we'll see you in Detroit. Thank you.
    Mr. Conyers. And Marcia Blackburn from Nashville is coming 
over right away to correct the Chairman.
    Mr. Cohen. She also claims she is from Memphis and 
Knoxville and Kingsport.
    Mr. Conyers. Chairman Emeritus Jim Sensenbrenner.
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    I hadn't planned to make an opening statement, but since 
everybody else is, you know, let me disclaim the fact that 
country music got turned off in my house when I heard a ditty 
called, I Want My Woman to Be More Like My Dog; my wife turned 
off the radio or the TV player and that was the end of that.
    When I was Chairman of the Committee, we dealt with a lot 
of vexatious intellectual property issues. And one thing that 
came out and rose to the top is, to be successful in any 
amendment to the intellectual property law, you had to get all 
of the players at the table and at least all of the players not 
being opposed to the product of negotiation, which is not the 
same as all the players being in favor of the product of the 
negotiation.
    Now, it's my understanding that the broadcasters haven't 
wanted to come to the table. I may be wrong on that, but I 
think that most of the Members of the Committee have that 
impression, and I'm going to aim my cannon right between your 
eyes, Mr. Newberry.
    I hope you and your organization get to the table and get 
to the table ASAP. If you don't want to get to the table, can 
you please tell us why during your testimony? And if there is 
something that has to be done to get you to the table, like the 
Chair calling for a markup on this bill, then I will be happy 
to prod you along that way.
    So I want to make my message a lot more sharp, I want to 
make my message a lot more plain. And a lot of my other 
colleagues have. There is a problem with this law. You can 
either be a part of fixing the problem or you can be on the 
outside. And I think this Committee will be very happy to fix 
it for you.
    So I yield back the balance of my time.
    Mr. Conyers. Brad Sherman, California.
    Mr. Sherman. Thank you, Mr. Chairman. It is--I think 
everything I needed to know I learned in kindergarten; or I've 
been trying to understand the lessons of kindergarten, and you 
learn there what happens to a society when you don't pay the 
piper.
    I think that those who provide us with music are entitled 
to be paid for it. I look forward to the artists getting a 
performance right just as they do in most of the developed 
world, and I think it is particularly hard for anyone who 
benefits from intellectual property protections to argue 
against it. I can't imagine the broadcasters saying, Well, we 
produce all these programs and we don't want them stolen, but 
we don't want to pay a performance right to the musician.
    The intellectual property industry is what keeps Los 
Angeles afloat and functioning, and those who support 
intellectual property rights ought to be in favor of 
intellectual property rights for performers.
    And with that, I yield back.
    Mr. Conyers. Our last Member, Dan Lungren of California.
    Mr. Lungren. Thank you, Mr. Chairman. Even before we get to 
hear our panel, I'm learning things here. I knew Dewey Phillips 
was important, but I thought Ed Sullivan had something to do 
with Elvis Presley--and Steve Allen. I remember him being 
blacked out from the waist down, which just made him more 
intriguing as far as I was concerned.
    Mr. Chairman, this is an interesting hearing we are having, 
an interesting subject. The first time around in Congress I 
represented southern California, so I probably would have 
leaned toward the recording industry. Now I represent an area 
of northern California that has a number of small radio 
stations, so you might think I'd lean toward the radio 
stations. The problem is I don't think I have enough 
information, even with the testimony that has been presented 
here as to what the fair thing to do is.
    We are embarking upon a question as to whether or not we 
are going to make a fairly significant change in a law that 
dates back to 1909. And I just wonder if we would benefit, as 
Mr. Issa suggested, from an outside study. Maybe GAO could give 
us a study of the economic implications.
    Maybe I'm old fashioned. I mean, I'm attracted to buying 
what we used to call records and so forth, buy what I hear on 
the radio. That's where I am introduced to it and that's what 
attracts me to buy something or not buy something frankly. Or 
occasionally I might see it on television, but mostly it is 
when I'm in my car listening to the radio. And so I can see 
that argument very, very strongly, the promotional feature.
    On the other hand, we have the testimony of the artists who 
say it is unfair that we're not being compensated as we would 
be in other venues and the way the rest of the world is. But, 
Mr. Chairman, I don't know frankly what the true economic facts 
are. I don't know what the state of the small stations are, but 
I hear their pleas. I don't know what the proper cut would be 
if we were going to make a distinction between large, medium 
and small.
    I do know that, at least in my district, it appears that 
the radio stations are in some difficulty. They are not where 
they were 5 year, ago, 10 years ago, 15 years ago, 20 years 
ago. And if, in fact, what we did inadvertently had the impact 
of destroying the nature of some of the small, local radio 
stations, I think that is something we ought to keep in mind as 
we, at the same time, consider legitimate interests on the part 
of the recorders and the performers for their intellectual 
property.
    So I would just second what Mr. Issa suggested, which was, 
perhaps we could have some sort of neutral body like the GAO do 
a study that might assist us in terms of some of the economic 
questions here. That would be of great benefit to me in making 
a determination on this.
    And I thank the Chairman for allowing me this time.
    Mr. Conyers. Well, now that the witnesses have listened to 
all of us, it is time that we listen to you. We welcome Mitch 
Bainwol, Dr. Liebowitz, Steve Newberry, Lawrence Patrick, Paul 
Almeida.
    And we begin with Billy Corgan, who is not only a poet--and 
the Smashing Pumpkins have been reunited; they've come off a 
world tour.
    And we are delighted to have you begin your testimony. All 
witnesses' testimony will be entered fully into the record. And 
we welcome you here and thank you for your patience.

            TESTIMONY OF BILLY CORGAN, VOCALIST AND 
             LEAD GUITARIST, THE SMASHING PUMPKINS

    Mr. Corgan. Thank you. I would like to thank you, Chairman 
Conyers, and the Committee for this opportunity to appear 
before you today about the Performance Rights Act. I'm here as 
a representative of the musicFIRST coalition, to give voice to 
fellow artists and musicians who join together to assert their 
right to be compensated for the airing of their musical 
performances on terrestrial radio.
    Because of my experiences in the music business for over 20 
years, I have a particular sensitivity when it comes to 
artists' rights and who controls the distribution and, 
therefore, the worth of those rights. Like many of my peers, I 
come from a working-class background, beginning my musical 
journey playing in dingy bars and college lunchrooms. Being a 
performer requires countless hours of dedication to your craft. 
It is not an easy business to undertake, and for every success 
story there are many that have not had the opportunities that I 
have had.
    I was able to find an audience in no small measure because 
of the long support of my music by terrestrial radio. I'm a big 
fan of radio and am very interested in its continued health and 
well-being. Terrestrial radio has helped me discover many of 
the artists that became influential to my life and artistic 
pursuits. I, by no means, see them as the bad guy.
    The change to the law we are here to discuss only redresses 
an outmoded, unfair practice that favors one participant's 
needs over another. This legislation is simply a form of 
restoration to artists long overdue.
    The rights of any artist are often rife with vague 
distinctions and contradictions, as the worth of a creative 
endeavor cannot be calculated by any science. Works of art are 
judged subjectively, and if deemed good enough, plugged into a 
vast system that attempts to establish their mettle and 
eventually capitalize on that value.
    The debate over what any piece of art should command in an 
open market is as old as time itself. As it stands currently, 
if you've written a song you have the good fortune of being 
played on terrestrial radio, then you, as the author, are 
entitled to a fixed form of compensation as established by 
Congress. This compensation, of course, recognizes the unique 
contribution the author has made to the creation of the song. 
Conversely, if you also happen to be a performer on that very 
same song, by law, terrestrial radio owes you no form of 
compensation at all.
    The decision behind this long-held inequity stems back to 
1909 when radio was in its infancy. And since sound recordings 
had only recently come onto the market, they were not included. 
The old-fashioned radio business has held on to this exemption 
for over 80 years, a law made in a bygone era for a set of 
reasons long past. This landmark exemption, however, stripped 
performers of their right to a free market evaluation of the 
value of their recorded works.
    From my perspective, this issue is one of fundamental 
fairness. If the performance of a song has value to a 
particular terrestrial radio station in its airing, I believe 
it is only right to compensate those performers who created the 
work. Simply put, if a station plays a song, both the author 
and the performer should be paid. These particular performances 
must have value to the stations or they wouldn't be playing 
them.
    Not every performer on a hit song is a big name, and they 
might not see the same windfall that a star might. One can't 
assume they participate in the merchandise or touring income 
that is linked to commercial radio success. Not everyone who 
hears a song on terrestrial radio buys a ticket or a T-shirt. 
Some listeners just listen, thereby rewarding only the station 
and their advertisers, and not the performers themselves.
    All areas in the modern music business are currently 
feeling the shifting tides as new models emerge and old ones 
are broken up. Ours is a business that always begins with the 
brilliance of the artists. Contrary to long-held myths, it does 
take money to create new music. As the traditional revenue 
streams have dried up, most notably in the overall decline of 
records sales, it has placed stress on who continues to benefit 
from the old models. The future demands new partnerships and a 
rethinking of long-held practices about how artists should be 
compensated for their music. The hallmark of any great 
entertainment career is sustainability. Recognizing both the 
significance of the author and performer in the music making 
process helps to create those future opportunities.
    In closing and with all due respect to those that oppose 
the passage of the Performance Rights Act, to classify this 
measure as a ``tax'' is an interesting choice of words, for who 
has been taxed more than the artists themselves? Artists have 
paid their dues, so to speak, to establish terrestrial radio as 
a great and dynamic medium. We must consider that for many 
artists, the difference between receiving these resources is 
the difference between a life in music and a life out of music. 
Few could deny that when a classic performance is captured, 
forever frozen as a musical snapshot in time, generation after 
generation returns to these moments, each finding something a 
little different. Whether we are talking about Motown, Stax, 
Elvis or Howling Wolf, when the public decides that a specific 
performance is worthy of their attention, then it seems only 
fitting that this little bit of magic as documented be 
recognized in the form of direct compensation for the artists 
and organizations that helped to create it.
    Thank you for your time.
    [The prepared statement of Mr. Corgan follows:]
                   Prepared Statement of Billy Corgan
    I'd like to thank Chairman Conyers and the Committee for this 
opportunity to appear before you today about the Performance Rights 
Act. I'm here as a representative of the musicFIRST coalition, to give 
voice to fellow artists and musicians who have joined together to 
assert their right to be compensated for the airing of their musical 
performances on terrestrial radio.
    Because of my experiences in the music business for over 20 years, 
I have a particular sensitivity when it comes to artists' rights, and 
who controls the distribution, and therefore, the worth of those 
rights. Like many of my peers, I come from a working-class background, 
beginning my musical journey playing in dingy bars and college 
lunchrooms. Being a performer requires countless hours of dedication to 
your craft. It is not an easy business to undertake, and for every 
success story, there are many who have not had the opportunities that 
I've had.
    I was able to find an audience, in no small measure, because of the 
long support of my music by terrestrial radio. I am a big fan of radio, 
and am very interested in its continued health and well-being. 
Terrestrial radio has helped me to discover many of the artists that 
became influential to my life and artistic pursuits. I by no means see 
them as the bad guy.
    The change to the law we are here to discuss only redresses an 
outmoded, unfair practice that favors one participant's needs over 
another. This legislation is simply a form of restoration to artists 
long overdue.
    The rights of any artist are often rife with vague distinctions and 
contradictions, as the worth of a creative endeavor cannot be 
calculated by any science. Works of art are judged subjectively, and if 
deemed good enough, plugged into a vast system that attempts to 
establish their mettle and eventually capitalize on that value. The 
debate over what any piece of art should command on an open market is 
as old as time itself.
    As it stands currently, if you have written a song and you have the 
good fortune of being played on terrestrial radio, then you, as the 
author, are entitled to a fixed form of compensation as established by 
Congress. This compensation, of course, recognizes the unique 
contribution that the author has made to the creation of the song. 
Conversely, if you also happen to be a performer on that very same 
song, by law, terrestrial radio owes you no form of compensation at 
all. The decision behind this long-held inequity stems back to 1909 
when radio was in its infancy, and since sound recordings had only 
recently come onto the market, they were not included. The old-
fashioned radio business has held onto this exemption for over 80 
years--a law made in a bygone era for a set of reasons long past.
    This landmark exemption however stripped performers of their right 
to a free market evaluation of the value of their recorded works. From 
my perspective, this issue is one of fundamental fairness. If the 
performance of a song has value to a particular terrestrial radio 
station in its airing, I believe it is only right to compensate those 
performers who have created this work. Simply put, if a station plays a 
song, both the author and the performer should be paid. These 
particular performances must have value to the stations or they 
wouldn't be playing them.
    Not every performer on a hit song is a big name, and they might not 
see the same windfall that a star might. One can't assume they 
participate in the merchandise or touring income that is linked to 
commercial radio success. Not everyone who hears a song on terrestrial 
radio buys a ticket or a t-shirt. Some listeners just listen, thereby 
rewarding only the station and their advertisers, and not performers 
themselves.
    All areas of the modern music business are currently feeling the 
shifting tides as new models emerge and old ones are broken up. Ours is 
a business that always begins with the brilliance of the artists. 
Contrary to long-held myths, it does take money to create new music. As 
the traditional revenue streams have dried up, most notably in the 
overall decline of record sales, it has placed stress on who continues 
to benefit from the old models. The future demands new partnerships and 
a rethinking of long-held practices about how artists should be 
compensated for their music. The hallmark of any great entertainment 
career is sustainability. Recognizing both the significance of the 
author and performer in the music making process helps to create those 
future opportunities.
    In closing, and with all due respect to those that oppose the 
passage of the Performance Rights Act, to classify this measure as a 
``tax'' is an interesting choice of words. For who has been taxed more 
than the artists themselves? Artists have paid their dues, so to speak, 
to establish terrestrial radio as a great and dynamic medium. We must 
consider that, for many artists, the difference between receiving these 
resources is the difference between a life in music and a life out of 
music. Few could deny that when a classic performance is captured, 
forever frozen as a musical snapshot in time, generation after 
generation returns to these moments, each finding something a little 
different. Whether we are talking about Motown, Stax, Elvis, or Howling 
Wolf, when the public decides that a specific performance is worthy of 
their attention, then it seems only fitting that this little bit of 
magic as documented be recognized in the form of direct compensation 
for the artists and organizations that helped to create it.
    I thank you for your time.
                               __________
    Mr. Conyers. Paul Almeida is the President of the AFL-CIO's 
Department For Professional Employees. They represent their 4 
million professional and technical workers. He is an engineer 
himself and was, for 7 years, president of the International 
Federation of Professional and Technical Engineers.
    Welcome to the hearing.

             TESTIMONY OF PAUL ALMEIDA, PRESIDENT, 
         DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO

    Mr. Almeida. Thank you, Chairman.
    Good morning, Chairman Conyers, Ranking Member Smith and 
distinguished Members of the Committee. My name is Paul 
Almeida, and I'm the President of the Department For 
Professional Employees of the AFL-CIO, a coalition of 24 
national unions representing some 4 million white-collar 
workers. I'm here today to support the hundreds of thousands of 
recording artists, singers and musicians who seek to secure a 
performance right so that they may finally be able to receive 
the fair compensation they deserve for the work they create.
    I am especially pleased to be able to deliver a letter to 
the Committee which has been signed by the presidents of the 
American Federation of Teachers, the Communication Workers of 
America, the United Steel Workers, the International 
Association of Firefighters, the American Federation of State, 
County and Municipal Employees and the Service Employees 
International Union in solidarity with the brothers and sisters 
in the music industry.
    I would ask that the letter be made part of the hearing 
record.
    Mr. Conyers. We'll accept it into the record.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                              ----------                              

    Mr. Almeida. Thank you.
    Like all professionals, singers and musicians spend years 
developing their musical talents and abilities and invest 
substantial resources in their careers. While a relatively 
small number of performers are able to attain, but not 
necessarily sustain, fame and fortune, the vast majority of 
recording artists, singers and musicians must work hard to 
patch together modest earnings from various sources in order to 
support their families.
    The most successful ones are able to build a middle-class 
career in music. Most performers, even those who appear to the 
outside world to be successful, have to work day jobs to pay 
the bills. In what other profession would you be required to 
give your work away for free? In all my years representing 
professionals, I have never encountered such a situation.
    Labor ardently supports the efforts of our brothers and 
sisters in the music profession to be fairly compensated for 
the music they have created and is played on the radio. 
Commercial radio stations earned over $16 billion in 
advertising revenue last year, yet they paid nothing to the 
performers whose music they played. AM/FM radio depends for its 
success on recordings created by great performers like the Four 
Tops, The Supremes, Miles Davis, Patsy Cline and so many other 
great artists and their equally talented session musicians and 
singers. What does it pay those artists? Not a penny.
    As union members, we believe that this is an issue of 
fairness. We believe in the principle that a fair day's work 
deserves a fair day's pay.
    The current system creates an unfair competitive advantage 
for AM/FM radio broadcasters over the new-medium radio 
platforms. All radio platforms, except AM/FM radio, including 
satellite, Internet and cable radio, pay for the music they 
play. Under current law, only the songwriters are entitled to 
compensation. While it is absolutely right that songwriters be 
paid for the broadcast of their songs, it follows their 
performers should also be paid for the broadcast of their 
recordings.
    We all know that that the musicians and singers play a 
crucial role in creating masterpieces we hum throughout the 
day, whether it is the National Symphony's version of Mozart or 
the Temptations singing My Girl written by Smokey Robinson and 
Ronald White. Performers, too, are creators who deserve and 
need to be paid.
    In this worsening economic crisis, we are also leaving $70 
to $100 million on the table each year because we do not have a 
performance right for artists here in the United States. 
Talented artists are denied the ability to recover what they 
erode from airplay of their music overseas. Does it really make 
sense for the U.S. to continue to allow millions of dollars to 
go no the French cultural fund every year instead of coming 
home to the U.S., where it can help performers make ends meet 
and help local economies?
    Under the--unless Congress enacts the Performance Rights 
Act, our artists in the U.S. will continue to be precluded from 
collecting these royalties from overseas.
    It is long past time that our brothers and sisters who 
belong to the affiliated unions, the American Federation of 
Musicians and the American Federation of Television and Radio 
Artists, are paid for the work that they create. We all benefit 
greatly from their wonderful music. We listen to it in our cars 
on our way to and from work, on the job or at home. And like 
many others, for many years I assumed they were being paid a 
little bit for each time I heard the grateful dead play Touch 
of Grey or Jefferson Airplane play White Rabbit.
    Now, I know that the broadcasters have prevented this for 
over 80 years. I know it has been a long-fought battle from 
Glenn Miller to Frank Sinatra to those like Sam Moore, Martha 
Reeves, Herbie Hancock and others who are leading the charge 
now. It is time. It is only fair that the talented artists be 
fairly compensated for what they create.
    Thank you for asking me to be part of the hearing today, 
and I will be happy to answer any questions.
    [The prepared statement of Mr. Almeida follows:]
                   Prepared Statement of Paul Almeida
    Good morning, Chairman Conyers, Ranking Member Smith, and 
distinguished Members of the Committee. My name is Paul Almeida. I am 
the President of the Department for Professional Employees (DPE), a 
coalition of 24 national unions affiliated with the AFL-CIO. I am 
honored to speak today on behalf of the more than four million 
professionals represented by our union affiliates, including the 
American Federation of Television and Radio Artists, the American 
Federation of Musicians, the Federation of Professional Athletes, the 
United American Nurses, the American Federation of Government 
Employees, and all of our other affiliates. I am here today to stand in 
support of the hundreds of thousands of recording artists, singers, and 
musicians who seek to secure a performance right so that they may 
finally be able to receive the fair compensation they deserve for the 
work they create.
    I am especially pleased to be able to deliver a letter today to the 
Committee which is signed by the Presidents of the Service Employee 
International Union, the American Federation of Teachers, the United 
Steelworkers, the International Association of Fire Fighters, the 
American Federation of State, County and Municipal Employees, and the 
Communications Workers of America, in solidarity with our brothers and 
sisters in the music industry. I would ask that this letter be made 
part of today's hearing record. We are joining this critical campaign 
as a united labor movement and we deeply appreciate the leadership of 
Chairman Conyers, Representatives Berman and Issa, and the other 
Members of this Committee who support this legislation.
    Like all professionals, singers and musicians spend years 
developing their musical talents and abilities and invest substantial 
resources in their careers. Just like other professionals, they make 
considerable sacrifices in an effort to succeed in their chosen field. 
And just like other professionals, recording artists, musicians and 
background singers deserve to be paid fairly for the work they do. In 
what other profession would you be required to give your work away for 
free without your permission? In all of my years representing 
professionals, I have never encountered such a situation. And while a 
relatively small number of performers are able to attain (but not 
necessarily sustain) fame and fortune, the vast majority of recording 
artists, singers and musicians must work hard to patch together modest 
earnings from various sources in order to support their families. The 
most successful ones are able to build middle-class careers in music. 
Most performers, even those who appear to the outside world to be 
successful, have to work ``day jobs'' to pay the bills. Labor ardently 
supports the efforts of our brothers and sisters in the music 
profession to be fairly compensated when the music they have created is 
played on the radio.
    The labor community is also concerned about the many, many 
hardworking singers and musicians who are now growing older and can no 
longer easily tour. Yet, their jazz hits, country tunes, and R & B 
melodies continue to be played over and over again on commercial radio 
stations. While these stations earned over $16 billion in advertising 
revenues last year, they paid nothing to the performers whose music 
they played. AM/FM radio depends for its success on the recordings 
created by great performers like the Four Tops, the Supremes, Miles 
Davis, Patsy Cline and so many other great artists and their equally 
talented session musicians and singers. What does it pay those artists? 
Not one penny. The radio stations have had a good gig for decades now, 
but it is time they start paying for the music they play.
    As union members, we believe that this is an issue of fairness. We 
believe in the principle that a fair day's work deserves a fair day's 
pay. Music broadcasters have fought hard over the years to avoid paying 
anything for the foundation of their business model--the music that 
they play 24 hours a day on a myriad of stations. Let's not kid 
ourselves--no one tunes into the local hard rock or oldies' station to 
listen to the commercials. We tune in for the music--to be entertained 
or energized or to reminisce.
    These same broadcasters pay their on air ``personalities'' and 
shock jocks millions each year to entertain their listening audience. 
And they pay millions more in licensing fees to broadcast baseball, 
football and basketball games. Yet, they refuse to pay anything at all 
to the artists and musicians who bring music to life. This is simply 
not fair.
    And, the current system creates an unfair competitive advantage for 
AM/FM radio broadcasters over the ``new media'' radio platforms. All 
radio platforms except AM/FM radio, including satellite, Internet, and 
cable radio, pay for the music they play--yet the AM/FM radio 
broadcasters continue to block artists' efforts to be paid when the 
same music is played over terrestrial radio. That is just not right!
    We believe that both songwriters and performers should be 
compensated when the music they have jointly created is played on the 
radio. Unfortunately, under current law, only songwriters are entitled 
to compensation. While it is absolutely right that songwriters be paid 
for the broadcast of their songs, it follows that performers also 
should be paid for the broadcast of their recordings. We all know that 
the musicians and singers play a crucial role in creating the 
masterpieces we hum throughout the day--whether it is the National 
Symphony Orchestra's version of a Mozart classic, or The Temptations 
singing ``My Girl'' written by Smokey Robinson and Ronald White. 
Performers, too, are creators who deserve and need to be paid.
    In this worsening economic crisis, we are leaving 70 to 100 million 
dollars on the table each year because we do not have a performance 
right for artists here in the United States. Talented artists are 
denied the ability to recover what they are owed from the airplay of 
their music overseas. Does it really make sense for the U.S. to 
continue to allow millions of dollars to go into a French cultural fund 
every year, instead of coming home to the U.S. where it can help 
performers make ends meet, and help our local economies? Unless 
Congress enacts this Performance Rights Act, artists in the U.S. will 
continue to be precluded from collecting these royalties from overseas. 
That too is unfair. The United States is the only developed country in 
the world that does not have a performance right in sound recordings. 
In our failure to provide a performance right we stand in the company 
of such countries as China, North Korea, Rwanda, and Iran. In so many 
other areas, we fight to ensure that the United States is a leader--
clearly we have fallen down on the job here.
    It is long past time that our brothers and sisters who belong to 
our affiliated unions, AFM and AFTRA, are paid for the work that they 
create. We all benefit greatly from their wonderful music--we listen to 
it in the car to and from work, on the job, and at home while relaxing 
with family and friends. And like many others, for many years I assumed 
that they were paid a little bit each time I heard The Grateful Dead 
play ``Touch of Grey'' or Jefferson Airplane perform ``White Rabbit.'' 
Now I know that the broadcasters have prevented that--for over 80 
years.
    I know this has been a long fought battle--from Glen Miller to 
Frank Sinatra to those like Sam Moore, Martha Reeves, Herbie Hancock 
and others who are leading the charge now--It is time. It is only fair 
that these talented artists be fairly compensated for what they create 
and the joy they bring into our lives.
    Thank you for asking me to be a part of this hearing today. I, and 
thousands of my union colleagues, are eager to help our brothers and 
sisters in the music industry earn a decent living from the craft that 
they have chosen--music.
    I would be happy to answer any questions you may have.
                               __________
    Mr. Conyers. Lawrence Patrick is a veteran in this 
business. He graduated from Georgetown Law School, Ph.D. From 
Ohio University. He heads Patrick Communications, owns a number 
of small market radio stations, has been head of Gilmore 
Broadcasting, senior vice president of National Association of 
Broadcasters and chairman of Ion Media Networks.
    And we are glad to have you here today. We welcome you to 
the Committee.

         TESTIMONY OF W. LAWRENCE PATRICK, PRESIDENT, 
                     PATRICK COMMUNICATIONS

    Mr. Patrick. Thank you very much. Good morning, Chairman 
Conyers, Ranking Member Smith and Members of the Committee. My 
name is Larry Patrick and I'm managing partner of Patrick 
Communications. We are a media brokerage firm based in 
Elkridge, Maryland.
    I am also a radio broadcaster. My company, Legend 
Communications, owns 14 small-market radio stations in Wyoming.
    In my capacity as managing partner of Patrick 
Communications, I have extensive media brokerage experience. My 
firm has negotiated or consulted on over 500 radio and 150 
television transactions in the past 15 years. I work with both 
publicly and privately held communication companies ranging 
from the largest group owners to many hundreds of mom-and-pop 
stations.
    I have been part of the radio industry for 40 years. I can 
tell you that over the course of my career, I have never seen 
what the radio industry is currently experiencing. The economic 
downturn is having a significant and devastating effect on 
local radio. But as bad as the current local radio landscape 
is, it will deteriorate even further and much more dramatically 
if H.R. 848 were to be enacted.
    Let me share with all of you where the radio industry is 
and what I believe a new performance fee will mean to the local 
radio stations.
    In 2008, radio revenues finished the year down 9 percent. 
2009 doesn't look much better. A recent Wells Fargo analyst's 
forecast said there would be a 13 percent drop in revenues for 
the industry in 2009, and she warned that the forecast may be 
far too optimistic. She painted a picture of an industry that 
is now in free fall with no chance of a turnaround until the 
economy recovers or credit markets improve. I personally know 
of radio stations that are seeing a 35 to as much as a 50 
percent revenue decline all across the country.
    Of course, radio, like virtually every other industry, is 
suffering the effects of the financial meltdown and the 
paralysis in the credit markets, which makes it difficult, if 
not impossible, to finance acquisitions. I know dozens of radio 
station owners--many of them in their 60's and even 70's--who 
want to sell their stations and retire, cannot find any buyer 
capable of financing a purchase in today's market. Almost every 
publicly traded radio company is in default with their lenders 
today, and many are facing delisting of their stock from the 
national exchanges.
    Right now, I'm advising lenders and investors on nearly a 
dozen workouts of radio companies involving over 300 radio 
stations. Salem Communications, based in California, the 
largest religious radio group; Saga Communications, based in 
your hometown of Detroit, Mr. Conyers; Radio One, the largest 
African American radio company; and others including Citadel, 
Cumulus, Entercom, Beasley, Emmis, Fisher--dozens of others--
have all had to lay off employees and reduce companywide 
compensation from 5 to 10 percent in the last few months.
    The radio industry is tightening its belt and moving 
forward into a world of financial uncertainty that none of us 
have ever experienced. We are facing an economic downturn that 
is sharper and steeper than anything I have ever witnessed.
    What I've described is the economic realities that the 
radio industry is facing right now. And having watched the 
industry for 40 years, I can sit here and tell you that the new 
fees that will be levied under H.R. 848 will do significant, 
long-term damage to the local radio stations across the 
country. Any further station costs will push even more stations 
into tripping their loan covenants with their banks and more 
workouts. Station owners will further reduce staffing and 
services, which will only hurt their local listeners while 
enriching the big music labels.
    The labels suggest that the provision for small market 
operators of an annual flat fee of $5,000 would not harm the 
small market operators. Well, I am a small market radio 
operator also and I know how much this will hurt. And I know 
hundreds of small market radio owners who barely make $25,000 a 
year from their stations. To pay this fee, even a $5,000 fee, 
stations could have to eliminate covering high school sports, 
give up more local origination and would reduce their staffing 
even further.
    Any additional fees also threaten their ability to provide 
emergency services that are so critical to the thousands of 
small towns across this country.
    The recording industry has also argued in the past that if 
a new performance fee were adapted, stations could simply raise 
their advertising rates to pay for that new fee. Nothing could 
be further from the truth. If radio broadcasters could actually 
get more money for their advertising spots, why wouldn't they 
be doing that already? The truth is that ad rates are dropping 
sharply; they are not increasing.
    At this time, stations are laying off employees, reducing 
wages by 5 to 10 percent; and a number of radio companies are 
literally teetering on the verge of bankruptcy.
    If this bill is enacted, it will put at risk an industry 
that employs nearly 106,000 people across America. I am not 
overstating the situation when I say that such extraordinary 
fees imposed on local radio stations, in light of the current 
economic plight of local radio, could be absolutely 
devastating. The recording industry is living in a fantasy 
world that is divorced from the critical, depressed financial 
position in which almost every radio station finds itself 
today.
    I strongly urge the Committee Members to oppose H.R. 848.
    Thank you very much, Mr. Chairman. And I look forward to 
answering any questions that you and the Committee Members may 
have.
    [The prepared statement of Mr. Patrick follows:]
               Prepared Statement of W. Lawrence Patrick

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                               __________

    Mr. Conyers. Dr. Stanley Liebowitz, economist, University 
of Texas at Dallas, trained at UCLA and Johns Hopkins. We 
welcome you.

 TESTIMONY OF STAN LIEBOWITZ, Ph.D., ASHBEL SMITH PROFESSOR OF 
      MANAGERIAL ECONOMICS, UNIVERSITY OF TEXAS AT DALLAS

    Mr. Liebowitz. Thank you.
    Thank you, ladies and gentlemen and Members of the 
Committee, for inviting me to express my views. I am an 
academic economist, and I have performed research on topics 
related to today's issue.
    My research has tended to focus on the impacts of new 
technologies, the creation of intellectual products. I have 
been involved with these topics since the Canadian Government 
asked me to investigate the impact of photocopying on 
publishers, which was a long time ago, as most of you know.
    I have written two academic papers that examined one of the 
key topics at issue today--whether or not radio play benefits 
the owners of sound recordings. The approaches that I used in 
these two papers are very different from one another. One is an 
historical examination of old events and the other is an 
econometric examination using recent data. My historical 
examination looked at two different episodes. First, I took a 
look at sound recording sales in the United States after the 
introduction of radio; second, I examined the introduction of 
youth-oriented radio in Britain in the 1970's.
    In the U.S., what I discovered was that record sales were 
more mature than most people realized when radio was introduced 
and that record sales dropped dramatically after radio was 
introduced. In Britain, the BBC was in charge of all the radio; 
they had a state monopoly. They did not play rock-and-roll 
music. Most of you may remember that there were pirate radio 
stations that Texans, among others, put off the coast of 
Britain in the 1960's. Those were shut down.
    The BBC agreed to start playing more rock-and-roll, and 
they started to allow private stations in Britain. After that 
occurred, record sales did not go up.
    So, from those two, I found no evidence to support a view 
that radio playing increases record sales.
    My econometric examination compared record sales in 99 U.S. 
cities, and it looked at how the cities differed in terms of 
radio listenership. What I found was that the cities that had 
the largest increase in radio listening had the biggest 
decreases in record sales. So, again, no evidence that radio 
increased sales and, in fact, the opposite; the evidence is 
that radio decreased it.
    My papers are attached to my written statement, and people 
can look at them if they are interested.
    Now, you should note that I am looking at the overall sales 
of sound recordings, not the impact of radio broadcasts on the 
sales of the individual records that are actually broadcast. 
This is an important point that I want to spend a few moments 
on.
    I fully agree with the claims made by the radio industry 
that radio airplay increases the sales of individual records, 
particularly when they are heavily played by the stations, but 
that in no way means that radio broadcasting increases the 
overall sales of sound recordings. The time that individuals 
spend listening to the radio is time that they could have spent 
listening to sound recordings; and they spend much more time 
listening to the radio than they do listening to sound 
recordings, according to the U.S. statistical abstract.
    Now let me give you a simple example. Imagine you are in 
your car. On average, people are supposed to spend an hour a 
day listening to radio in their cars. Let us assume for the 
moment that radio does not exist, okay? What will happen? Well, 
you can either listen to the sound of your car's tires on the 
pavement or you can put in a tape, a CD or an iPod. What is it 
you are going to do? We all know most people are going to wind 
up listening to prerecorded music in that circumstance, most of 
the people who had previously been listening to radio. Since 
people spend an hour a day in the car, this switch would triple 
the amount of time that people would spend listening to 
prerecorded music according to the statistics.
    If people were to spend that much more time listening to 
prerecorded music, it would almost certainly increase the sales 
of sound recordings. That is the way in which you need to think 
about what the real impact of radio is on sound recordings, not 
the fact that radio has an important influence on which sound 
recordings people actually buy.
    Now, it is also sometimes suggested that payola proves that 
radio is beneficial to record sales, but this is again an 
incorrect inference. By looking at a small sample of the data, 
that doesn't give you a complete picture. In the current legal 
regime, all we can see is a distorted view of the market; that 
is because the record companies cannot demand payment for the 
broadcast of the records because they do not own the rights of 
the broadcast of the records.
    By way of analogy, there are many people who publish their 
own books in this country. If that fact alone were the only 
fact that you saw when you took a look at book publishing, you 
might come to the conclusion that publishers do not need to pay 
authors, because there is a whole set of authors who are 
perfectly happy not to get paid, but we know that that is an 
incorrect inference because we look and see the entire 
publishing industry, because the authors actually have the 
right to get paid; and in that case, we know that successful 
authors get paid a very high amount.
    Now, I do not view it as my role here to argue for the 
proposed law or against the proposed law. I cannot say whether 
the proposal would be superior to just requiring radio stations 
to be required to acquire the rights to the broadcast sound 
recordings. But I can say that it seems far more logical, given 
what I know of the economic factors involved, to have a system 
where radio stations are required to pay for their usage of 
sound recordings as opposed to the current system where radio 
stations can take their primary economic input for free without 
the permission of the owners of that input.
    Thank you.
    [The prepared statement of Mr. Liebowitz follows:]
                  Prepared Statement of Stan Liebowitz

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                               __________

    Mr. Conyers. Mr. Steve Newberry has been here before. He is 
the president and CEO of Commonwealth Broadcasting, vice 
chairman of NAB's board of directors, and he has been in this 
business quite a while.
    We welcome you to the Committee.

    TESTIMONY OF STEVEN NEWBERRY, COMMONWEALTH BROADCASTING 
     CORPORATION, ON BEHALF OF THE NATIONAL ASSOCIATION OF 
                       BROADCASTERS (NAB)

    Mr. Newberry. Thank you, Mr. Chairman, Ranking Member Smith 
and Members of the Committee.
    My name is Steve Newberry. I am president and CEO of 
Commonwealth Broadcasting Corporation. We operate 23 stations 
in the State of Kentucky, but today I am testifying on behalf 
of the over 6,800 local radio members of the National 
Association of Broadcasters.
    Now, I am sure it comes as no surprise to any of you that I 
am here to express my opposition to H.R. 848, but I can tell 
you that since the last time I had the privilege to testify 
before this Committee, this sharp economic downturn has 
intensified my concerns about this bill and the impact that it 
will have on local radio stations across America.
    At its heart, this bill attempts to create a conflict 
between artists and radio stations where no conflict exists. In 
reality, local radio stations have been supporting the music 
industry for decades, which is why it boggles my mind that a 
bill that is supposed to be about benefiting artists takes 50 
percent of the performance fee and puts it into the pockets of 
the big record labels, predominantly the big four record 
labels, most of which are not even American companies. The 
record labels actually walk away with more money under this 
bill than do the featured artists.
    Let me be clear about that: The record labels walk away 
with more money in this bill than do the featured artists. The 
real problem, which this bill does not address, is between the 
artist and the mega record labels. Artists often find 
themselves in such difficult financial straits because of 
unfair, one-sided contracts they sign with their record labels. 
Toni Braxton, for example, received less than 35 cents per 
album of the $188 million in CDs that she sold.
    If these artists had had fair contracts with the labels 
that included fair royalty clauses, they would have benefited 
from the promotional value that radio airplay has brought to 
them and that they have enjoyed. Free radio airplay is the best 
friend of artists and of record labels.
    Herbie Hancock said it best just 2 weeks ago during his 
visit to Capitol Hill: ``Just as radio promotes music, music 
promotes radio.''
    I could not agree more. That is why the system has worked 
so well, to the benefit of all parties for the last 80 years. 
But let me put this in the most stark of terms.
    Under H.R. 848, your local radio stations will be forced to 
cut services or employees. They may be forced to move from a 
music format to a talk format or may be facing bankruptcy, but 
the damage resulting from H.R. 848 will run far beyond local 
radio stations. Who else will be hurt?
    Composers: This bill creates a financial disincentive to 
play music. If there is less music played on the radio, 
composer royalties will decrease.
    New artists: This bill makes a steep mountain even steeper 
for emerging young artists. H.R. 848 forces a radio station to 
turn playing music into a return-on-investment proposition. Why 
take a risk on a new, untested artist when you can play the 
known and recognized performer? Now, every time you play a 
song, it becomes a decision that potentially affects your 
bottom line.
    Music diversity: This bill will decrease the diversity of 
music on the radio. I can tell you that many niche stations 
that offer Latino and hip hop are already on shaky ground. For 
many, even what is called a ``small'' $5,000 fee will take them 
from barely getting by to unprofitable.
    Minority ownership: NAB has long worked with Congress to 
support minority tax certificates, to help women and minorities 
realize the dream of station ownership. What help will the 
minority tax certificate be if you can afford to buy the radio 
station, but you cannot afford to run it?
    Finally, radio listeners will be hurt: Stations that listen 
to and serve their local communities may, indeed, disappear. In 
many of these cases, the radio stations in peril, possibly 
going off the air, are serving very rural communities where 
they may be the only stations serving their local town.
    What I am saying is that H.R. 848 has significant 
unintended consequences that I do not believe this Committee 
has fully investigated. The funding for this new performance 
fee has to come from somewhere.
    So what are my options? Do I reduce the community affairs 
programming, including essential news and weather service in 
times of emergency, because I cannot reduce 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 nonmusic format which will have the effect of playing 
less music, which will ultimately harm the performers? That is 
the reason the National Religious Broadcasters, the National 
Association of Black Owned Broadcasters, the National 
Association of Farm Broadcasters, and the 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. I 
strongly encourage and urge the Committee to carefully consider 
these very real consequences of H.R. 848.
    Thank you, Mr. Chairman. I look forward to answering your 
questions today.
    [The prepared statement of Mr. Newberry follows:]
                 Prepared Statement of Steven Newberry

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                               __________

    Mr. Conyers. The chairman of the RIAA, Mitch Bainwol, has 
replaced Hilary Rosen--now, a number of years ago--and he 
serves on the board of several boards including leadership 
music in Nashville, is a graduate of Rice University, and of 
Georgetown University as well.

    TESTIMONY OF MITCH BAINWOL, CHAIRMAN AND CEO, RECORDING 
             INDUSTRY ASSOCIATION OF AMERICA (RIAA)

    Mr. Bainwol. My name is Mitch Bainwol. I am the CEO of the 
RIAA. Today, I am here as a member of the MusicFIRST coalition, 
which represents labels big and small, managers, musicians, and 
producers, all together, in supporting the performance right.
    This issue unites the creative community, property rights 
advocates and labor. I am pleased to be sitting here today with 
the incomparable Billy Corgan--my 10-year-old son is a huge 
fan, Billy--and Paul Almeida from the AFL-CIO. I am delighted 
to submit for the record a letter from the Property Rights 
Alliance in support of this bill.
    [The information referred to follows:]

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    Mr. Bainwol. I would like to focus your attention on five 
key points. The first point: The issue is not as complicated as 
the broadcasters suggest. On the contrary, this year, radio 
will spin almost a billion songs in the United States, making 
billions of dollars in advertising from our music. The payment 
to artists and labels for those recordings will not amount to 
even a penny, not a penny. As George Carlin famously said, 
``What a ratio.''
    I am not aware of any business elsewhere in the American 
economy where the primary input is not compensated. The 
broadcasters brandish diversionary rhetoric. We have heard it 
today; they call this a tax. You know better than I that a tax 
is what government collects, not a payment between private 
parties for private property.
    No, what is going on here is entirely different. It is a 
taking. When broadcasters use our music to build their business 
for investors, but performers and musicians don't get paid when 
our music is played and we cannot tell radio not to use our 
music, that's a taking.
    The second point: The U.S. in the case of terrestrial radio 
is unique. We're the only Nation in the OECD that does not 
provide the creator compensation for radio play; and 
ironically, the most economically secure platform that 
broadcasts music, over-the-air radio, dominated by big 
corporations, is the only platform in the United States that 
does not pay.
    Satellite does. Internet companies do. Cable does. 
Terrestrial radio is an anomaly. The competitive landscape, 
thus, is biased in favor of the old establishment players 
against new start-ups and innovative technologies.
    Third point: While this has always been a taking, the so-
called logic behind the taking has totally collapsed. You hear 
broadcasters talk about promotions and the symbiotic 
relationship that exists between our industries.
    Here are the facts: More than half of what big radio plays 
on the air are oldies. I love oldies, and I know you guys do, 
too. Older artists do not tour, and they should not have to.
    The promotional value for playing oldies is hollow. We are 
no longer in a world in which listeners turn on the radio, hear 
a song and run down to Tower Records to buy that song. We are 
increasingly moving to a world where consumers get their music 
through the performance of it--through standard radio, through 
niche programming or on-demand access. We are not saying there 
is no promotional value. There is, but it has diminished.
    Sales have fallen from almost $15 billion to $9 billion 
since 1999, including digital, and hits are not what they once 
were. In 2000, the Top 10 song albums in the country sold 60 
million units. Last year, the Top 10 song albums sold about 19 
million units.
    Grammy-award-winning artist Herbie Hancock said it best, 
and you are right, ``While there is no question that radio 
promotes music, it is also clear that music promotes radio.'' 
The fact is that whatever value promotion represents should be 
made a factor for determining the appropriate rate. That's what 
this bill does.
    Fourth point: This bill focuses on big corporate radio, and 
we are anxious to roll up our sleeves to work with smaller 
stations, like those of Mr. Newberry's, to find responsible 
ways to address their concerns. As it is, almost 80 percent of 
the stations in the country are accommodated. Stations under 
$1.25 million in revenue enjoy a flat fee amounting to about 
$400 a month. Public stations pay less than $100 a month. Talk 
radio will not pay for music; neither will religious services.
    We are prepared to work with the smaller stations to build 
phase-in ramps, given the economic downturn. We just can't find 
anyone to sit down with. Despite the call last year from 
Members from this Committee for us to sit down and negotiate, 
Mr. Rehr, who runs the NAB, said he would rather slit his 
throat than talk. I have got to tell you that it makes it hard 
to negotiate with that kind of player.
    But to be clear, the issue in the end is not about small 
station owners; it is about whether big, consolidated radio can 
continue to flex its muscle to perpetuate this taking. As for 
Administrations of both parties, the Bush administration and 
the Clinton administration before it, Administrations of both 
parties stipulated there is no legal or policy rationale for 
the sweetheart deal that broadcasters enjoy.
    The fifth and final point: This issue is not merely about 
transferring revenue from one company to another, far from it. 
Half of the payments will go directly to the performers, by 
statute--radio stations, to Sound Exchange, to the artists, 
period. Many of the recipients are artists and musicians who 
are struggling.
    Additionally, due to international reciprocity, the law 
will return millions of dollars each and every year, dollars 
that are locked up now overseas. Broadcasters receive a 
government handout, corporate welfare in the form of free 
broadcast spectrum and a rigged economic advantage over every 
other radio platform.
    It is no mystery why they are fighting so hard to maintain 
the special exemption. What business would not love to avoid 
paying for their key input? Imagine Morton's not paying for 
beef or car manufacturers alleging economic hardship to suggest 
they should get free steel. Preposterous.
    Once again, we thank you for your attention to this matter. 
We look forward to working with you to get this right.
    [The prepared statement of Mr. Bainwol follows:]
                  Prepared Statement of Mitch Bainwol

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                               __________

    Mr. Conyers. The Committee is pleased to welcome Marsha 
Blackburn of Tennessee to our Committee hearings. We think she 
is from Nashville, but some think that there are other parts of 
Tennessee she might be from.
    Mrs. Blackburn. Thank you, Mr. Chairman. I appreciate the 
opportunity to step in. I have a little bit of Memphis and a 
little bit of Nashville. I go all the way to the Kentucky 
border.
    Mr. Watt. Mr. Chairman, I ask unanimous consent to allow 
the gentlelady to make an opening statement.
    Mr. Conyers. Without objection.
    Mr. Smith. Mr. Chairman, I am afraid I have to object.
    Mr. Conyers. All right.
    Mr. Smith. If the Chairman would yield or maybe the 
gentleman from North Carolina, I will be happy to explain why 
to my good friend and colleague.
    Mr. Watt. Are you reserving the right to object or are you 
objecting?
    Mr. Smith. I am objecting.
    Mr. Watt. Well, if you are objecting, then that is the end 
of the conversation.
    Mr. Smith. Well, in that case, I will reserve the right to 
object.
    Mr. Watt. All right. In that case, I will listen to you. If 
you have already objected, I do not know why we are having the 
discussion, but go ahead.
    Mr. Conyers. Why are you so controversial, Mrs. Blackburn?
    Mrs. Blackburn. I will just say thank you, Mr. Chairman. I 
appreciate the opportunity to sit in. I did not want to make a 
statement, but I appreciate the opportunity to clarify all of 
the good people that I do represent in my little bit country/
little bit rock-and-roll district.
    Mr. Smith. Mr. Chairman, I would like to explain, just so 
that our colleagues and so, perhaps, those in the audience 
understand why I objected.
    It has been a longstanding policy on this Committee--that I 
thought the gentleman from North Carolina was aware of, and 
that I know the Chairman is aware of--that we do not have 
Members who are not Members of the Judiciary Committee make 
opening statements.
    If we were to set that precedent, as much as I might like 
to do so today, we might be inundated with dozens of Members 
who would appear at every hearing and who would have reason to 
make opening statements.
    Mr. Watt. Will the gentleman yield?
    Mr. Smith. Just a minute.
    So, at least in this Congress and in the last Congress, the 
Chairman and I have had an agreement that we would not have 
opening statements by other Members.
    I will be happy to yield.
    Mr. Watt. I thought I was being bipartisan in making this 
motion, and I thought I was the appropriate person to make it, 
since I was one of only two people who did not make an opening 
statement myself. But if the gentleman does not want his 
colleague to make an opening statement, that is fine with me.
    Mr. Smith. I yield back, Mr. Chairman.
    Mr. Conyers. I would like to ask any of the distinguished 
witnesses if they have any opening remarks that they would like 
to exchange about anything that they have heard from the other 
witnesses before we begin.
    Oh, yes, Mr. Almeida.
    Mr. Almeida. I understand the difficult times the small 
radio stations are in and the burden it would be on them. 
However, even more so are the musicians and the background 
singers who are further, if you want to call it, ``down the 
food chain.''
    So they should be further penalized? I think it is a major 
injustice to those workers who do their work.
    I think that we have this common misconception of 
performers. We kind of hold them on a plateau in what we take 
for our personal enjoyment. I think we often do not connect 
that they are working people, trying to put bread on the table. 
So I think we take advantage of that often by the position that 
we put them in in society.
    Mr. Patrick. Mr. Chairman, we understand where they are--
the musicians, the background singers, all of those types of 
people. I want to make sure the Committee understands. We are 
not just talking about the small market stations.
    I was just recently in your home State 2 weekends ago, 
trying to help a family who owns an AM/FM radio station up in 
central Michigan. At the end of last year, the total money that 
they had made off that station was $33,000, and there is no 
doubt, at $5,000 a clip, they lost a third of their income 
almost. This is a husband and wife who work 50 to 60 hours a 
week.
    When I go through Intercom and Citadel and all of the big 
companies, and Radio One, that have been delisted from the 
exchanges, this is not just a small market radio problem; this 
is a radio problem. While $16 billion sounds like a lot, there 
are 13,000 radio stations, and the reality is, we have been 
down $5 billion in the last 2 or 3 years.
    So it is everywhere in radio, and we are hurting, and we 
are going to the same stations, working hard, and doing all of 
the things that we have to do to try to survive, and it is very 
tough.
    I will tell you that I am helping a couple of African 
American companies right now, and I am helping a Spanish 
company in Texas right now. If this bill were to pass, that 
Spanish radio operator, who is already losing money on an 
operational basis, would pay about a $1.8 million to $2 million 
more. They are already in trouble; that will absolutely push 
them into bankruptcy.
    Mr. Conyers. Yes, Mr. Bainwol.
    Mr. Bainwol. If I could, I think it is important to 
separate the conversation between the question of a right and 
the question of a rate, and that really is the core question 
here.
    We are not going to be in a down economy forever. 
Parenthetically, nobody has a monopoly on pain. We were both 
$15 billion industries about 10 years ago. They have gone up 
and we have gone down, but that is not the point.
    The question here really is, should there be a right? Is it 
acceptable for a taking to occur in this country with this one 
platform when it does not exist as a taking in any other 
industrialized nation in the world or in any other platform in 
the U.S.?
    There ought to be some compensation. There ought to be a 
right. Then the question is: Okay, if you say there is a right, 
then what should the rate be? We hear a lot of scare chat about 
how damaging this would be.
    Again, we are not going to be in a down economy forever. 
The question is, maybe this is done as a percentage of revenue. 
Right now, the composition side is about 3 percent. The typical 
ratio between the composition side and the sound recording side 
is that there is some plus-up. Whatever that might be, would 
the broadcasters at the table be comfortable with 6 percent or 
7 percent?
    We are not talking about something that would be, you know, 
as draconian as the suggestions that you all have made to fight 
this back. We are talking about something modest and that 
represents a very modest payment for the cost of goods, in your 
case, sold. You know, Ford and General Motors, they pay 90 
percent in cost of goods sold. Your cost of goods sold for 
music is 3 percent right now.
    Mr. Conyers. Howard Berman.
    Mr. Newberry. Mr. Chairman, may I ask for an opportunity to 
respond to that?
    Mr. Conyers. Of course you can.
    Mr. Newberry. There are two things that I would like to 
address. The first one is the word ``taking.'' These are not 
robber barons who show up in the middle of the night with a gun 
and take the music. We have one station in Salt Lake City that 
received 3,800 phone calls from record labels asking that their 
songs be played in a 6-month period.
    I have with me a trade magazine that is filled with ads of 
record labels, saying, ``Thank you for playing our songs. Thank 
you for making this happen for us.'' So this is not a 
transaction where the record labels and the artists are saying, 
``Please do not take our music. Please do not play it.''
    The second thing I want to do is draw a delineation. Radio 
does not equal music. Music is part of the radio industry, but 
we have talk stations; we have sports stations; we have many, 
many stations that contribute to that $15 billion industry. So 
for us to say that we are talking about an industry as a whole, 
when we are talking about a segment of the industry, I think it 
is a little bit contradictory.
    I want to make sure. I will be glad to answer questions 
from the Committee, but I wanted to make sure and draw the line 
there.
    Mr. Bainwol. The music is about 80 percent of radio 
revenue, isn't it?
    Mr. Conyers. Howard Berman.
    Mr. Berman. Thank you, Mr. Chairman.
    I hear that you actually pay the sports teams for the right 
to broadcast the sports radio, and I hear that you pay the talk 
radio hosts for the talk radio show, but--that was rhetorical, 
not to be answered.
    There are a couple of points that I would like to make, and 
then I would like to ask Mr. Newberry a question.
    Again, we have the issue of the right, which this bill 
seeks, to remove the exception for, and accord in this country 
that right which is recognized almost everywhere else in the 
world. Then we have the structure.
    My guess is, when radio stations have lost $5 billion, the 
payment for the musical compositions that go to the songwriters 
and composers goes down by a proportional number because there 
is a percentage of revenues. The system can adapt to the good 
times and to the bad times.
    When we talk about a GAO study in terms of the impact, I am 
fine with that, but that should not be the condition precedent 
to moving a bill ahead which establishes the right. We can get 
the GAO study; we can get into discussions about appropriate 
rates.
    And that leads me to my question, if I can just find it.
    Here it is: Again, Mr. Newberry, I would love to go to your 
testimony. You said for a small market operator of an AM 
station or a small FM station that may be dealing with less 
than $100,000 a year, with a profit margin of 10 percent or 
less--and a profit margin, in most of these cases, defines what 
the owner takes home. This is not after they have been paid; it 
is their take-home pay. So $5,000 is a significant amount.
    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--Mr. Coble was asking the 
question--now you have $10,000 of obligations to pay. I think 
the amount is something that would be an economic burden on 
those who find it most difficult to find probability in our 
industry.
    That was an exchange from last year's hearings, and I have 
been giving that exchange a lot of thought.
    What if we graduated the fee for the smaller stations? What 
if we said that, for those who make $100,000, instead of 
$5,000, they pay $500? Less than $100,000 could pay $250. There 
are so many different ways to deal with the accommodations for 
people within the small broadcaster situation.
    Would you support a provision which took care of that 
situation which you laid out in response to Mr. Coble's 
question?
    Mr. Newberry. I will make the same delineation Mr. Bainwol 
did. We are discussing the right, then we are discussing the 
rate. I think your question addresses the rate.
    Let me say two things very quickly.
    Mr. Berman. Does that concede the right?
    Mr. Newberry. No, sir. It addresses it; it does not concede 
it. There are two issues that I would make from that very 
quickly.
    The broadcasters understand the concept of intellectual 
property. We get that. For it to be said that we have provided 
no value, that we have provided no remuneration, that we have 
provided no equity for the performances that we have had, it 
gets to the rate issue.
    I think that we have to understand that our industry has 
been built--we talk about the streaming; we talk about the 
satellite radio. Certainly, satellite radio and cable and 
several of the Web casters are fee based. It is an entirely 
different business model. So, when we do start talking about 
potential rates, whether it be for a small market or the 
largest market, I will tell you that the amount of promotional 
value that is provided by the larger stations is proportional; 
and I have grave concerns with the argument of principle before 
you get into the rate.
    Now, going back to the suggestion of the GAO study, we have 
a saying in Kentucky, ``Measure twice, cut once.'' I think that 
we are desperately lacking in information on this, and I think 
for you to move legislation before you have an opportunity to 
fully study it--it could cause irreparable damage to our 
industry. And we would certainly be comfortable with that 
independent, third-party study.
    Mr. Berman. How about two things at the same time, where we 
start the GAO study, and you start negotiating rather than 
slitting throats?
    Mr. Newberry. Yes, sir.
    Mr. Berman. Okay.
    Mr. Conyers. Did he agree?
    Mr. Newberry. No, sir. If I might say, I took that as 
another rhetorical statement.
    Mr. Conyers. Lamar Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Watt. Mr. Chairman, I think the record should show that 
he at least did not slit his throat.
    Mr. Smith. Thank you, Mr. Chairman.
    I did propose in my opening statement something that Mr. 
Newberry has just anticipated and that maybe Mr. Berman has 
just followed up on. That is the idea of the independent, 
third-party study that would be conducted to evaluate the 
economic impact of royalty payments on both the artists and the 
radio stations themselves.
    Let me say, while I consider the idea as being specific in 
talking about a GAO study, most GAO studies that I am aware of 
take more than a year to complete. If that were the case, I do 
not know that that would be that helpful to us in this 
Congress, so that is why I specifically kept that question open 
as to the outside entity.
    Mr. Newberry, I am glad you agree with that.
    Mr. Bainwol, what do you think of the idea of an outside 
entity's conducting that kind of study, that might well be the 
first step to the next step, which is wider negotiations?
    Specifically, I think it would be helpful myself, 
obviously. What do you think?
    Mr. Bainwol. Our preference would be to dual-track this, 
per suggestion by Mr. Berman. I think studying the issue has 
got great value.
    We are in favor of an informed process. I will note that in 
1976, when we punted on this back then, we did a study as well.
    That said, if the study is done in the context of moving a 
right to make sure that the right is appropriately framed and 
structured, then we are absolutely for it. We think the concept 
of a quick shot clock is a good addition.
    Mr. Smith. Great. I am glad to hear that. I think it 
represents real progress.
    I might also add that I would expect all parties to have 
input as to what that study evaluated, so you all would be able 
to contribute the issues of the subject matter to be studied. 
So I would hope that that would be achievable in the next few 
months.
    Perhaps, if I can suggest it, why don't you all work with 
the Chairman and me to try to accomplish that in the next 
couple of weeks as far as designating the outside entity and 
coming up with issues that we would like that outside entity to 
study? Is that agreeable to you all?
    Mr. Bainwol. Yes, sir.
    Mr. Smith. Great.
    I do not mean to put you on the spot, but I do at the same 
time. This is a question for both Mr. Newberry and Mr. Bainwol.
    Would you all support an amendment to this bill that would 
designate that all royalty payments go to the recording 
artists? Mr. Newberry? Mr. Bainwol?
    Mr. Bainwol. The simple answer is no. Under Federal law 
now, in the context of the digital performance rights that we 
do enjoy, there is a 50-50 split. And there is a reason for the 
50-50 split; it is 50 percent to the copyright holder--which is 
typically, but not always, a label--and 50 percent to the 
performer and the musician.
    We believe--we, my association and American philosophy--
when it comes to the economy, that it is a good thing to do to 
invest. In order to make an investment, you have to have a 
return. Our return in today's world is primarily from sales.
    Our return in the evolving economy will be based on income 
related to performance and income related to access. So to take 
out the income related to performance would simply dry up the 
ability of investors to support emerging new artists.
    We spend probably anywhere between $1 billion and $4 
billion a year supporting artists, breaking acts--a couple 
hundred new acts a year--and that is predicated on the ability 
to earn a return, so taking that return out, I think, would be 
penny wise and pound foolish.
    Mr. Smith. Thank you, Mr. Bainwol.
    Mr. Newberry, I realize this question is a little bit 
theoretical since you do not support the concept necessarily of 
the royalty payments, but what do you think of the idea?
    Mr. Newberry. First, I would like to echo what Mr. Bainwol 
said. An investment without a return is not much of an 
investment, and that is what the entire broadcast industry is 
struggling with now. That is evident by what is happening to 
us.
    Moody's came out with a report yesterday that, of the 
sectors of the economy that are most damaged by the downturn of 
the economy, radio and television are two of the top five in 
the country. So we are struggling very much with the same 
economic investment and return concerns that cause them to want 
the money, that cause us to say, ``Wait a second. Why are you 
taking the money?''
    I think the bill, with all due respect, Mr. Chairman, is 
not the appropriate time, and I do not agree with the 
legislation, obviously. But certainly I am very proud of the 
broadcasters I do business with. I would not support an 
amendment to the bill because I am not thrilled with the bill, 
but certainly taking the record companies out seems to be much 
more on target with what the Members want.
    Mr. Smith. Thank you, Mr. Newberry.
    Mr. Chairman, let me end on a positive note.
    Thank you both for agreeing to the outside study and for 
getting that initiated in the next couple of weeks.
    Mr. Conyers. Subcommittee Chairman Bobby Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    This is complicated. Let me just get some understanding 
here.
    Mr. Bainwol, do radio stations pay somebody for the use of 
their intellectual property when they play a song?
    Mr. Bainwol. The radio stations pay, through SESAC, ASCAP 
and BMI, the songwriter, but they do not pay for the sound 
recording.
    Mr. Scott. And they do not pay for the recording. They pay 
the writers?
    Mr. Bainwol. They pay the writers, correct.
    Mr. Scott. How did that come about?
    Mr. Bainwol. This goes back 100 years.
    Mr. Scott. To congressional action?
    Mr. Bainwol. The writer has a copyright. When we got our 
copyright in 1972, an exemption was put into place that we 
would not have a performance right.
    Mr. Scott. Does the owner of the intellectual property have 
a choice on whether the radio can play their property or not?
    Mr. Bainwol. No, we do not. That is why we phrase it as a 
``taking.'' They build their businesses on the backs of our 
sound recordings, and we cannot say ``no.''
    Mr. Scott. Now, does the performer have an opportunity to 
negotiate anywhere to get rights for what is played on the 
radio?
    Mr. Bainwol. No.
    Mr. Scott. Terrestrial radio is unique. How do the 
performers get rights in the other platforms?
    Mr. Bainwol. By congressional passage in the mid-1990's.
    Mr. Scott. Do any other countries have performance rights?
    Mr. Bainwol. Virtually all industrialized nations in the 
world do.
    Mr. Scott. So, if you are a British performer on a British 
radio, you get performance rights/royalties?
    Mr. Bainwol. Correct.
    Mr. Scott. Do United States performers get any royalties 
from the foreign radio stations?
    Mr. Bainwol. No. There is a lack of reciprocity because we 
do not have the right.
    Mr. Scott. If they could get performance rights or 
royalties, would any performers negotiate and sell their 
revenue stream for the future? This is, pay me twice as much 
now, and the publisher could have the royalties?
    Mr. Bainwol. You know, I am not an attorney, but I presume 
that that is a basket of rights that they could sell.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Conyers. Howard Coble, North Carolina.
    Mr. Coble. Thank you, Mr. Chairman.
    It is good to have you all with us, I say to the panelists.
    Mr. Newberry, as you know, section 3 of H.R. 848 provides 
special treatment for small, noncommercial, education, and 
religious stations. I am interested in knowing what stations in 
my district would be covered by that. Could you have someone 
from NAB provide that for me?
    Mr. Newberry. Certainly.
    Mr. Coble. I would appreciate that.
    Mr. Newberry. Let me qualify that, sir. As much as people 
are willing to share their personal and private information, 
but we will make every effort to do that for you.
    Mr. Coble. I understand that.
    That said, Mr. Newberry, there inevitably will be some 
stations that will not be covered.
    How will H.R. 848 financially impact those stations?
    Mr. Newberry. You are asking about the stations that are 
above the 1.25 threshold?
    Mr. Coble. Yes.
    Mr. Newberry. I think one of the real issues that people 
may not understand about the broadcasting business is that we 
are a fixed-cost business. Our business does not have input. We 
are not a hardware store. If we do not sell a hammer today, it 
remains on the shelf tomorrow like at a hardware store.
    We sell time. It costs basically the same amount for us to 
produce an hour of programming whether we have sold commercials 
in that or whether we have not sold commercials in that. As a 
result of that, it is critical that broadcasters try to 
maintain their cost. If you do not maintain that cost, you can 
lose money very quickly, very rapidly.
    So one would think that a station that was billing more 
than $1.25 million might have adequate funds, but when you 
factor in the royalty rates that you are paying to the 
composers at this point in time, when you factor in the cost of 
talent and the employees that you have, the rising cost of 
health care, the lease that you have to pay, all those fixed 
costs, I cannot answer that question directly.
    Mr. Coble. Okay. I thank you, sir.
    Mr. Almeida, in your testimony, you mentioned that millions 
of dollars go into a French culture fund every year instead of 
coming to the United States because of the lack of reciprocity 
in the law.
    What assurances are there, if the Congress amends the law 
as proposed here, that the French would, in fact, be compelled 
to direct those funds to you as performers?
    Mr. Almeida. I am not sure, exactly. Right now, there is 
reciprocity, and we assume that they would send the funds 
according to how it works in the other platforms.
    Mr. Coble. Well, that would be my conclusion, too, but I do 
not know that it is cast in iron.
    Nonetheless, thank you for that.
    Mr. Corgan, I am concerned, as are my colleagues, about the 
decline in the music industry's revenues. A, what is your 
belief as to what has caused that? B, how will H.R. 848 help 
the industry as a whole?
    Mr. Corgan. To answer the first part of your question, it 
is a very complex answer.
    The main reason that most people point to is the rise of 
the Internet culture and what is commonly known as ``free 
downloading'' or people transferring files. The record business 
kind of dug in their heels and tried to slow the whole thing 
down, and it actually kind of ended up working in reverse and 
creating a whole culture of, especially young people, who do 
not see music as something that they buy.
    Then, of course, you have got all of these different 
platforms now where people can listen to music, so you do not 
have that same sort of causal effect of ``I am going to go to 
the store and buy it because I want to listen to it.'' They 
have access to it. They can have it on their computer.
    It is complicated, and you could talk to 50 people and get 
50 different answers on that.
    Mr. Coble. I thank you, sir.
    Mr. Patrick, let me alter my track here. A, do radio 
stations currently broadcast over the Internet? B, do they pay 
a performance royalty for those broadcasts?
    Mr. Patrick. Some do stream, and they do, in fact, pay for 
some streaming. It is a different situation than over the air.
    I also think that the Committee needs to understand--I 
mean, there are 235 million people a week who listen to over-
the-air radio. When we start talking about satellite Internet 
as if they are all equal, we are talking about toy soldiers 
versus big armies. There are very few people. I mean, you can 
look at Sirius XM; their total audience in the morning on any 
one of their channels does not equal one station in New York 
City or in Los Angeles.
    So the answer is, these are not equal platforms, and 
because some came into the world with the idea that they would 
have to pay, we do.
    I can just tell you, sir, that I have run radio stations in 
Miami and Dallas and in lots of other middle-sized markets. Not 
a day goes by that the record companies and the promoters are 
not begging stations to play. I think Mr. Newberry has an 
example from Salt Lake City, but the reality is, radio play 
still drives record sales, concerts, tickets, merchandise, and 
all sorts of other things.
    There is a Tuzo study that was produced, I think, last year 
that indicates that 61 percent of all people who hear about new 
music hear about it on radio. Radio is still viable, and it's 
huge. That is why we think there is a value proposition there.
    The reality is, yes, we do pay for streaming. Mr. Newberry 
was on the Committee that just negotiated that. Perhaps he can 
answer it in more detail.
    Mr. Coble. Well, Mr. Chairman, I see that intimidating red 
light.
    Mr. Newberry, do you want to weigh in on it?
    Mr. Newberry. The broadcasters and the recording industry 
have entered into an agreement as a result of the laws that 
were passed by Congress. Certainly, we understand that the 
value of promotion that is provided by our Web stream is 
nowhere near what it is on the over-the-air, and there was a 
compensation made there and reached by both parties.
    Mr. Coble. I thank you, Mr. Chairman. I yield back.
    Mr. Conyers. Mr. Corgan, did you want to add to that 
comment?
    Mr. Corgan. I cannot speak for every artist, but I can 
speak for a lot of artists. The inability for the artists to 
have any leverage in this situation makes it very difficult in 
the changing markets to create our business models to make 
great music. At the end of the day, while everybody over here 
is talking about the turf wars between who gets what in the 
pie, if you do not have great music, you are not going to be 
able to have great radio.
    I think--my personal opinion is the reason that musical 
accomplishment has diminished over the last 15 years partially 
is due to the changing in the revenue streams, but you also 
have sort of a narrowing of the business models, and the 
artists are not able to invest in their careers in the same 
way, so this puts stresses on these things.
    No one is arguing that radio does not promote. Radio is a 
great tool for promotion, and nobody in the music business 
wants to see terrestrial radio go down. We are talking about 
the ability to negotiate and to find the right water level for 
everybody involved.
    In my particular case, I am a songwriter, I am a performer, 
and I am also a copyright owner, so in this particular 
instance, I have no leverage. I cannot go to anybody and say 
anything; it had been taken away long before I entered the 
music business.
    Mr. Conyers. Professor Liebowitz.
    Mr. Liebowitz. Yes, I just wanted to make this point again 
that everyone is talking about promotion.
    The nature of radio promotion is deciding which song gets 
the biggest piece of the pie. The question as to whether or not 
radio is beneficial to record sales overall is whether radio is 
making the pie bigger or not. The evidence on that is that it 
is not, even though it is clear that it determines which 
individual songs get the biggest piece of the pie.
    But if people are listening to radio as opposed to 
listening to prerecorded music, radio could very well be making 
the total pie smaller even when it is increasing the size of 
the pie for individual songs. I will give you a simple example 
with movies and television.
    Movie companies still advertise the movies on TV, and the 
big stars go around when the premieres come out, and they go on 
all of the late-night talk shows, and they do it virtually for 
free. If you were to look at that, you would say, Wow, 
television really helps promote movies, and it does, but if you 
take a look at the history of television and movies, television 
killed the movie industry. Back before TV came along, people 
went to see the movies 30 times a year, every other week. Now 
they see it 5 times, and it is exactly in the 1950's, when 
television started, that movies dropped like crazy.
    So, yes, television helps decide which movies get biggest, 
and that is why they are willing to advertise them and send 
their stars, but it had a terrible negative effect overall on 
the total size of the market.
    Mr. Conyers. The distinguished gentleman from North 
Carolina, Mel Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    I have been trying to figure out one of the economic 
factors here. Maybe I am missing something because one of the 
arguments I have heard consistently is, if we ran a performance 
right--and I think a couple of you may have made this point--it 
is going to make stations not play music, but go more to talk 
formats.
    The last thing I want to do--because I hate talk radio, and 
I actually do not listen to it, so it is fine with me. When you 
have talk radio, it seems to me you have got somebody on the 
station, talking, who has to be paid. Even if I assume that 
that person who is doing the talking is getting paid the 
minimum wage over a month's period, that would be more than you 
would pay for the small station, the $5,000-a-year thing.
    So somebody explain to me why I am missing something. Maybe 
I am missing something here, and you all are anxious to explain 
it, so maybe there is an explanation.
    Mr. Patrick, and then Mr. Newberry.
    Mr. Patrick. Well, I think if you look at talk radio, you 
will understand that much of talk radio is satellite delivered.
    Mr. Watt. But you are paying somebody.
    Mr. Patrick. We are not necessarily paying those people. I 
mean, I can get talk radio right now for no money a month for a 
particular talent.
    Mr. Watt. Why don't you just go to that format instead?
    Mr. Newberry. We have in many cases.
    Mr. Patrick. We have in many cases.
    Mr. Watt. So what is the big deal? I do not understand how 
that militates against the performance right. I mean, I think 
you have got the option to do whatever you want to on your 
stations. You can talk and not pay somebody if you can find 
somebody who will work for free, although there are minimum 
wage standards in this country.
    I just do not understand what that has to do with the 
notion that you can just take somebody's commercial property 
and use it. I do not understand that.
    Mr. Newberry, maybe you can shed some light on this.
    Mr. Newberry. Sure.
    For instance, at many of our stations, we carry ESPN 
programming. So we have sports talk that is on 24 hours a day, 
7 days a week. It is provided at no cost to us.
    Mr. Watt. But does somebody pay Rush Limbaugh?
    Mr. Newberry. I do not carry Rush Limbaugh on any of my 
stations.
    Mr. Watt. But somebody is carrying him as an option, and 
they have decided that there is some value there.
    Mr. Newberry. They are getting an exclusive right for that 
product in that market.
    Mr. Watt. I am not against your negotiating.
    Let me back up and approach this a different way. What if 
we just recognized on this Committee the right, and left it to 
individuals to enforce that right without a framework? I mean, 
you know, you all are into how much you get paid, how much is 
this fee format. If you then use my music and I am the artist, 
then I have got the right to come and find you and make you 
account for it.
    Does anybody think that is a terrible idea? I mean, that is 
the way our legal system is set up, isn't it?
    Mr. Patrick. This is not just the artists who are coming. 
This goes back to Mr. Smith's question. This is not just the 
artists who are coming and asking. This is the record label 
saying, We want half of the money.
    Mr. Watt. Don't they own something, too? Don't they own 
something? If you played the music, then wouldn't they have the 
right to come and enforce that just like the performer over 
here did?
    Mr. Corgan. I am not the biggest fan of the record labels. 
I have had my battles with them through the years. I, as an 
artist, negotiated in good faith with the labels over my 
rights. So, from my end and from the label's end, it is just a 
rights issue.
    If you go to a free market free-for-all, it probably would 
not work because it would be very hard to get everybody to 
agree, so I think that is why everyone is looking for some sort 
of framework by which to negotiate.
    Mr. Watt. People would not agree. I am not trying to make 
litigation, but if you all think that we ought not to be 
setting up a structure here to work this out, as we have in 
other entertainment settings, then the option is that we 
recognize the right and let the market and the individuals work 
it out.
    Mr. Corgan. So to answer a question you did not ask, they 
would not play the music if it were not worth something. It 
would just go to something else that would give their stations 
more value.
    They are playing the music, whether it is Motown or my 
group, because it adds value to the station. No one is arguing 
that they do not add value. Everybody just wants to work 
together, but if you do not establish the right, what can you 
do? There is no conversation.
    Mr. Watt. Mr. Newberry, you do not think there is a right. 
Everybody else has a right except the person who performed it?
    Mr. Newberry. I think we have a system that is not perfect, 
but I think we have a system that, if tinkered with, can become 
much more imperfect. I think we----
    Mr. Watt. Are you going in the room to talk to people now?
    Mr. Newberry. May I finish my statement? Then I will answer 
your question.
    Mr. Watt. Okay.
    Mr. Newberry. I think we have a system where, if we go to 
where it is a business transaction, as proposed, the most 
recognized artists are going to get more play and the least 
recognized artists are going to get less play. I mean, we can 
find examples, and we can talk about big record companies, but 
Madonna bought a $38 million condo in New York; and that is 
more than the market cap of many of our largest companies right 
now.
    Mr. Watt. Mr. Newberry, this is not about Madonna. This is 
about whether individual artists have any rights. Madonna's 
right is more valuable because she has----
    Mr. Newberry. She is played a lot on the radio.
    Mr. Watt [continuing]. She has made a lot of money, that's 
right. That is not a reason not to recognize a right that Joe 
Blow or Joe the Plumber has if he makes a record.
    I mean, you can still decide whether to play that music or 
not to play it; I am not trying to take that right away from 
you. But it just seems to me that for you all to say there is 
no ownership right here that ought not be enforced in some kind 
of way--under some framework or individually case by case by 
case--I do not understand that.
    Mr. Newberry. I understand your point, sir.
    Mr. Watt. Okay. I yield back.
    Mr. Conyers. Our first attorney general, Dan Lungren.
    Mr. Lungren. Mr. Chairman, I just say for my friend from 
North Carolina, I think if you want to hear Joe the Plumber, it 
will probably be on talk radio rather than singing radio.
    Mr. Watt. No, if they want to play him on music radio, it 
is fine with me. I mean, I don't listen--I won't listen----
    Mr. Lungren. You won't listen in either event I'll bet.
    Mr. Watt. That's right, that's right.
    Mr. Lungren. If I can go back to why we are all here, as I 
read the Constitution, we are here because it says in Article 1 
Section 8 that Congress has the power to promote the progress 
of science and useful arts by securing for limited times to 
authors and inventors the exclusive right to their respected 
writings and discoveries. In other words, it was to promote 
ingenuity, creativity and so forth.
    So I was very interested, Mr. Corgan, your comment that 
musical--I believe these are your words--musical accomplishment 
has diminished over the past few years, which would suggest 
that there is less creativity in the American musical industry 
today than there was before. Can you elaborate on that?
    Mr. Corgan. Well, it starts with the erosion of the revenue 
base. And like in any business, people get more conservative, 
and so you see a conservatism creep into the mainstream musical 
formats, and----
    Mr. Lungren. I guess my question is, what is the 
quantifiable proof to that, that there is less musical 
accomplishment or it has diminished over the past few years?
    Mr. Corgan. It is a generally held opinion that I am 
voicing, and people would agree with me. But we, as a musical 
culture, and I'm talking about all genres of music, feel that 
music has been sort of hijacked by kind of corporate interests. 
And you see less of that leading-edge artist that you used to 
see. And as someone--I work with Mr. Azoff who was here 
recently said, we're not creating new stars. And I think that 
is the best quantifiable thing I can say. You're not seeing as 
many new stars per generation. If you think back to, say, the 
'60's and you look at the amount of stars that came out of that 
generation and the stars that are coming out of this 
generation, it is very different. And I don't mean different in 
style. I mean different in just sheer numbers.
    Mr. Lungren. Would that also mean that there are less new 
bands, less new performers?
    Mr. Corgan. No, there are actually more. There's more 
artists than ever.
    Mr. Lungren. But there's fewer stars?
    Mr. Corgan. Exactly. So if you want to try to make a math 
proposition out of it, there must be something going on that is 
creating less stars because they must be out there. I mean, 
just sheer numbers, you would say more people playing more 
music would equal more stars.
    Mr. Lungren. Okay. Let me ask you the question that has 
been raised by a couple of comments here, which is if, in fact, 
this proposal were to go into effect unamended, the suggestion 
by the operators is that since it is a business decision to run 
a radio station, that the bottom line is very important. So 
that would, if in fact they would continue to play music, mean 
that they would be most likely to play those performers who are 
already established stars as opposed to taking a chance on the 
cutting-edge, as you suggest, which is a manifestation of the 
fact that there has been a diminishment of creativity. How do 
you respond to that?
    Mr. Corgan. I would argue the flip side that you need the 
capital revenue to invest in the artists' careers. In my case, 
my band didn't really hit the top of the charts until really 
our third album. And now it is commonly understood you have one 
album when you are entering as a new artist. A lot of artists 
that are now established as big names--Bruce Springsteen is a 
classic example--he didn't become the Bruce Springsteen that we 
know on the first record. It took until the fourth or fifth 
record. Artists' careers aren't given the time to develop 
because the labels aren't willing to make the capital 
investment over the long term.
    Mr. Lungren. So your argument would be that the capital 
investment has been diminished; therefore, on that side of the 
equation, there would be fewer opportunities for emerging 
artists to become stars. On the other hand, what we've heard 
from the radio stations is that they would not take the chance 
on those. And I guess that would go to the question----
    Mr. Corgan. I don't----
    Mr. Lungren. Mr. Liebowitz, that somehow, as I understand 
what you are saying, actual exposure on the radio stations 
doesn't really increase the universe of artists that are 
getting played. If you accept that argument, then it seems to 
me to be somewhat of a self-defeating proposition, is what--I'm 
just trying to figure out----
    Mr. Corgan. I would say it is like a sports franchise. 
Stars drive the business. The NFL is a huge business now 
because stars drive the business. They finally realized that 
seeing behind guys' helmets made for bigger revenues at the 
gates and more merchandise and stuff like that. Stars still 
drive the business.
    Mr. Lungren. So your definition of a star is someone who 
makes a lot of money?
    Mr. Corgan. My generation of a star is somebody who changes 
the musical culture and, through the change of musical culture, 
enacts an interest in the field. You know, like somebody 
mentioned Madonna. Well, when Madonna came in, suddenly there 
was a whole interest in people like Madonna. So, you know, it 
has a kind of a sweeping effect behind the star.
    Mr. Lungren. If you had more stars but fewer emerging--if 
you had more stars but fewer people actually going out there 
and trying out, that would still, by your definition, be an 
increase in creativity?
    Mr. Corgan. Again, sir, I would argue that the revenue base 
is necessary for the capital investment. It is like any 
business. If you don't have the capital investment, people get 
really conservative in their choice-making.
    Mr. Lungren. But if the capital investment is based in part 
on what the radio stations do, and the radio stations are 
telling you, in terms of their capital investment, they are 
more likely to continue to play already-established stars----
    Mr. Corgan. I don't buy that, sir.
    Mr. Lungren. You don't buy that.
    Mr. Corgan. I think that is a fake argument, in all due 
respect.
    Mr. Newberry. This is one of the things that frustrates me 
as a broadcaster because for years, the recording industry--I 
have played Mr. Corgan's songs on your stations, big fan of his 
group. The radio and the recording industry should partner 
together to find ways to solve the business and the model 
moving forward instead of taking guns and knives to one 
another.
    Mr. Lungren. Well, that's the negotiations we're talking 
about----
    Mr. Newberry. We are, as an industry--we as an industry are 
more than willing to find ways to promote the music, to find 
ways to take what we have, which is promotional value, and help 
the recording industry monetize that, for both the benefit of 
the performers and the labels.
    But instead, what we find in this legislation is it is 
being turned back on us and saying, wait, we are going to bite 
the hand that has fed us these years, because our business 
model is disrupted as a result of the Internet.
    Mr. Bainwol. For us to have an expectation--may I? May I, 
Mr. Chairman?
    Mr. Conyers. Yes.
    Mr. Bainwol. For us to be characterized that we're taking 
knives when all we want is to have a right and to be paid for 
our product is kind of a distortion. We----
    Mr. Newberry. I would say both industries are doing it to 
each other.
    Mr. Bainwol. Well, the reality here is we need to work on 
this together. We do have a symbiotic relationship, but that 
shouldn't be one way. And we can figure out moving into the 
future, if we sit down and talk and you recognize that there 
ought to be a right.
    The world has changed dramatically. It is no longer a 
single platform world. And that is where this whole question of 
creativity really comes into question. I mean, you're as likely 
to break an act on YouTube now as you are on Clear Channel. And 
that is the reality.
    They are spending half of their air play on oldies. So they 
are not really breaking acts with that, and we're not getting 
paid for that because there is no promotional value in effect. 
So this is a very complicated question, but we can't get to the 
bottom of it until we sit down, and they recognize that we 
ought to have a right.
    Mr. Newberry. I would say that I think YouTube is very 
effective for babies crying and people falling down and some 
pratfalls, but I don't know any artist that has become a 
superstar because they were broken on YouTube.
    Mr. Conyers. The Chair recognizes the Constitutional 
Committee Chairman, Jerry Nadler of New York.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Newberry, I missed the beginning of the hearing. I was 
at an economic hearing. So if I repeat any question or concept, 
forgive me.
    As we have discussed, one of your primary--I have 
difficulty, I must say, with the idea that someone shouldn't 
get paid because someone else decides that the exposure is 
enough. One of your primary arguments is just that; it is that 
artists receive a tremendous benefit from their recordings 
being played, the promotional value should be enough to obviate 
the need for royalty payments. That is essentially the 
argument, correct?
    Mr. Newberry. It is an argument based on history, yes, sir.
    Mr. Nadler. All right. How much value is enough to take the 
place of royalty payments? How does one decide how much 
professional or other value is enough to obviate the need for 
royalty payments? How would you judge that?
    Mr. Newberry. I think that is the purpose of a suggested 
study that has been offered earlier that we had a discussion 
on, that there is not enough information at this point in time 
to identify a lot of this. I would argue that our promotional 
value is more than the value of the air play. I'm sure the 
recording industry would argue the other side. But we certainly 
would support a study to learn more information on that.
    Mr. Nadler. Should such a principle be extended to other 
industries?
    Mr. Newberry. Sir?
    Mr. Nadler. Would the same principle be valid in any other 
industry in your opinion?
    Mr. Newberry. I think it is risky to make a blanket 
statement because the metrics and the way that each business 
operates is different.
    Mr. Nadler. Can you think of any other industry where this 
might be a valid principle?
    Mr. Newberry. I'm sure I could. I haven't given any time to 
think of it in that context.
    Mr. Nadler. You cite a study by Dr. James Dertouzos in your 
written testimony that regular air play increases music sales.
    Mr. Newberry. Yes, sir.
    Mr. Nadler. According to another of our witnesses, 
Professor Liebowitz, Dr. Dertouzos was hired by the NAB, a fact 
not included in your prepared statement; is that correct?
    Mr. Newberry. Yes, sir, he was.
    Mr. Nadler. Now, Professor Liebowitz conducted an economic 
study and concluded that not only did radio not increase music 
sales but caused them to drop. The NAB called the study--you 
called the study bogus. But according to Professor Liebowitz, 
the methodologies employed by him and Dr. Dertouzos, who came 
out with the conclusions you liked, were similar methodologies. 
How would you differentiate their methodologies? And if you 
can't, why would you consider one bogus and one valid?
    Mr. Newberry. Well, Professor Liebowitz' testimony that he 
had earlier today is basically making the argument that there 
are 24 hours in a day.
    Mr. Nadler. Do you doubt that argument?
    Mr. Newberry. No, sir, I don't deny that. It is a very 
valid argument. But he also makes--goes back and says, if radio 
were to not be there. And he talks about, what would happen--
that is the reality of where we were. If TV were not there, if 
movie theaters were not there, if schools were not there, our 
children would have a lot more time for physical education. 
That does not necessarily mean it is a valid argument of why 
you should do away with schools. So we have----
    Mr. Nadler. I'm sorry. You lost me. You went too fast.
    Mr. Newberry. There is X amount of time in a given day for 
someone to listen to recorded material or for them to listen to 
the radio or for them to go out and buy. That is the point of 
his study. You can make that same argument by saying there are 
only X number of hours in the day for a child. If we have them 
going to school, they can't exercise as much. That doesn't mean 
that school is a bad thing. And I'm saying--I stand by my 
point. There is a limited amount of time. There is a limited 
amount of inventory. I think that the study does not take into 
account the value of the promotional ad--promotional incentives 
radio play brings to the recording industry. And for him to say 
that radio has dropped the amount of record sales based on what 
occurred in 1930, I don't disagree with that. But I think it is 
out of connection with what is occurring in today's society.
    Mr. Nadler. Would you comment, Professor Liebowitz, please?
    Mr. Liebowitz. Yeah, thank you. I suspect--and I don't 
blame Mr. Newberry--that he hasn't read my paper or Professor 
Dertouzos' because it is very hard to understand what is in 
those papers if you're not an economist.
    In fact, we used a similar methodology. We looked at 100 
different cities. I have two papers. This is the econometrics 
paper. I looked at 100 different cities and looked from 1998 to 
2003 to see how record sales changed and radio listening 
changed. He took the period 2004 to 2006, took the same 100 
cities, did a very similar thing with some slightly different 
variables in terms of how he measured radio usage basically. We 
got completely opposite results from one another, even when he 
said he was trying to emulate as closely as possible exactly 
how I did mine.
    Now, when you have differences that are that great, it is 
very unlikely that the slight years that we used that were 
different would be the cause. My guess is that one of us has 
made a mistake, that there is a problem with the data. Because 
you don't get results so black and white unless there is an 
error usually. So I suggested to him that we exchange the data 
to see if we could figure out who has made the mistake. He said 
he would be happy to do that, but the NAB wouldn't allow him to 
do that.
    Mr. Newberry. I will be glad to do that----
    Mr. Liebowitz. That's where we are with that.
    Mr. Nadler. Mr. Newberry, Professor Liebowitz is saying in 
effect that the NAB wouldn't allow Professor--Dr. Dertouzos to 
share the data; is that correct?
    Mr. Newberry. The data belongs to the Arbitron Company. Our 
license did not allow us to distribute that. It is available if 
anyone--if the professor would like to get it, it is readily 
available from the Arbitron Company.
    Mr. Nadler. Professor?
    Mr. Liebowitz. Yeah, that is conceivable. See, I have data 
from the Arbitron Company as well. I don't have a time 
restriction. They say they do. I don't deny--doubt that. But 
you don't recreate someone's study from scratch if you just 
want to find out where the error is. What you do is you take 
what they have, and actually, a methodology that is relatively 
recent that the profession has come up with to try to be able 
to check the work of different scholars in leading journals 
now. You have to provide the data and you have to say how you 
created the data and you have to give all the formulas that you 
used in the statistical package to show how you got your 
results because otherwise there would be so much work for 
someone to recreate someone--effort that nobody would ever 
bother doing it. So to say, oh, yeah, I could go and get all 
the data from scratch for the years he did and redo it----
    Mr. Nadler. What I don't understand is, if you can get the 
data from Arbitron and if Mr. Newberry--the NAB's objection is 
that the data is from Arbitron, I don't understand why there is 
a problem with allowing--first of all, I'm missing something. 
You can get the same data from Arbitron that he won't give you?
    Mr. Liebowitz. I'm not sure it is exactly the same. I had 
it for different years that he does.
    Mr. Nadler. If Arbitron doesn't mind their data being given 
out, though, Mr. Newberry, why can't you give or the NAB allow 
Dr. Dertouzos to show his data and so everybody can compare it? 
That is a normal scientific method.
    Mr. Newberry. We bought the data for a specific use, and 
that's what our license of the data was. I don't know what 
Arbitron----
    Mr. Nadler. Would you ask them?
    Mr. Newberry. I can certainly inquire on that, certainly.
    Mr. Nadler. Because presumably if they are willing to give 
their data--we have got a conflict here that ought to be 
easily--normally if you can't reproduce results or if you get 
different results in any scientific experiment, you go back to 
the data, and the data is openly available and the peer-
reviewed literature looks at it and so forth. It ought to be 
the same here.
    Mr. Patrick. Arbitron is a company based up in Columbia, 
Maryland. They are a research company. They would rather sell 
the same data to two different people. They are not giving NAB 
the right to allow anybody else to see it, other than the Dr. 
Dertouzos, who has been doing performance rights analysis for 
almost 20, almost 30 years now.
    Mr. Weiner. Will they give me the data?
    Mr. Patrick. If you want to buy it.
    Mr. Nadler. Let me just suggest----
    Mr. Liebowitz. He doesn't have acces to it anymore.
    Mr. Nadler. Let me just suggest, because my time is up, I 
would just suggest that if the NAB wants anybody or Congress to 
rely on this--I mean, if you want to cite Dr. Dertouzos' study, 
you have to do whatever you have to do with Arbitron to make 
that data available so that people can look at its validity.
    Thank you. I yield back.
    Mr. Conyers. The gentleman from Virginia, Bob Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman. Let me ask a 
question of all the panelists and perhaps, starting with Mr. 
Bainwol and just move to the--proponents of the Performance 
Rights Act point to the arguments that other technologies, such 
as Webcasters and satellite radio and others, compete with 
terrestrial broadcasters and provide promotional value and thus 
that the exemption for terrestrial broadcasters does not make 
sense to them. Don't these same arguments also weigh in favor 
of all music-delivery technologies being subject to the same 
standard for determining the appropriate royalty to pay the 
recording artist? And if so, what should the standard be?
    Mr. Bainwol. We think the concept of parity on rate 
standard makes sense and feel like that is the direction we are 
moving in, yes, sir.
    Mr. Goodlatte. Any guidance on what that standard ought to 
be?
    Mr. Bainwol. It ought to mimic as close as possible the 
free market.
    Mr. Goodlatte. Mr. Newberry?
    Mr. Newberry. Congressman, I hate to ask you to repeat 
that, but I want to make sure that I understand the question 
completely.
    Mr. Goodlatte. Sure. I noted that there are other forms of 
music being delivered, through satellite and the Internet and 
so on, that do pay broadcast--they pay royalties, and so the 
question is, going beyond the issue that you're here today 
about, which is, should you be paying something at all; if you 
do, do you think it should be standard across all the different 
technologies?
    Mr. Newberry. That's a big assumption, so I will say, 
assuming that if we were to have to, which I would not agree 
with, but I think that the business model of each of those 
enterprises is entirely different. Webcasters don't have any of 
the public service obligations that a broadcaster does. 
Satellite radio is a subscription service. Cable is a 
subscription service. So I think for you to say that an equal 
rate creates an equal platform is an incorrect statement.
    Mr. Goodlatte. Okay.
    Professor Liebowitz.
    Mr. Liebowitz. In a general way, when I heard the term 
market, there would be a way to answer actually some of the 
general questions here about whether the promotional value is 
sufficiently high that the payment would be zero or not. And 
that would be better than a study, because studies are very 
hard to come to good definitive conclusions about that.
    Provide the right so that radio can't broadcast the music 
without the permission of the copyright owner and see what the 
price is. If the broadcaster is correct, the price would be 
zero. If the broadcasters aren't correct, the price would be 
positive and the performers will get the money that they feel 
they deserve. And that is a way that one would like the market 
to work.
    The reason it started might not being able to work properly 
in these circumstances is because there are 10,000 radio 
stations and there are hundreds and hundreds of thousands of 
songs and keeping track of what is going on at all the stations 
might be too difficult for that to occur.
    Mr. Goodlatte. I have to cut you off because I have got----
    Mr. Patrick. I would agree with Mr. Newberry.
    Congressman, these are very different platforms. These 
are--I think you were out of the room for a moment. But these 
are very different sized businesses. And they were built on 
different assumptions, some subscription, some advertiser 
supported, and some that deliver huge promotional impact; 
others don't. And I don't think that the rate is necessarily 
the same in all cases.
    Mr. Goodlatte. True, but that is the same amongst radio 
stations as well, is it not? The size is different. The local 
contribution that they make is----
    Mr. Patrick. There is no doubt. There is no doubt that the 
different sized companies and different stations and different 
markets deliver different value to the artists.
    Mr. Goodlatte. Mr. Almeida.
    Mr. Almeida. I think there are two points. One is, why do 
the other platforms have a performance right that go to the 
artist? And I think that is the inequity. And I think, from our 
vantage point, we've been willing to sit down and negotiate 
over this, and what the right position is as far as that is 
concerned. We have been more than willing to sit down and 
negotiate over that. And many of your colleagues have said that 
is what the parties should be doing.
    Mr. Goodlatte. Mr. Corgan.
    Mr. Corgan. From my end, artistic end and somewhat label 
representative, free market determines value, you know. And if 
you can create a system that encourages hard work, which is 
what the free market system is supposed to do, then innovation, 
better programming, better stars, everybody should profit from 
the idea of everybody pursuing a bigger piece of the pie. It is 
doing the opposite. It is creating almost, like, a negative 
return.
    Mr. Goodlatte. Let me--Mr. Chairman, if I might, the 
legislation currently establishes a threshold that protects 
many small broadcasters from much of the uncertainty concerning 
the level of royalties they will be required to pay. However, 
I'm still not convinced that the bill strikes the right 
balance, and I'm particularly worried about local broadcasters 
who may own multiple stations and who have decided to provide 
robust local news and information, one of the points that has 
just been made, sometimes at a loss to the owner's bottom-line 
for that station. My concern is that these broadcasters could 
be forced to eliminate that robust local coverage of news in 
order to make ends meet with the new obligation to pay royalty 
fees. And I'm asking if you would agree to work with those of 
us who have this concern, to find a solution to this concern 
before the full Committee markup on this legislation?
    Mr. Conyers. I think it would be very important to do that.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    And with that I yield back.
    Mr. Conyers. All right.
    The gentlelady from Texas, Sheila Jackson Lee.
    Ms. Jackson Lee. Thank you, Mr. Chairman. I think this is a 
vitally important hearing, and I thank all of the panelists for 
their participation here today.
    And I would like to follow up with a line of questioning 
that some of my colleagues who preceded me engaged in. But 
first I'd like to suggest that a companion body of law, patent 
law, that provides copyrights, I think has already laid the 
precedent for establishing that songs and performance, 
performance artists have in fact a property right. Otherwise, 
we would not be asking them to rush to copyright or to insist 
that the particular talent or the particular property be 
registered to be protected.
    So, gentlemen, I think that we have a separate body of law, 
a separate process that establishes the fact that there is a 
property right. But saying that, I believe that we should be 
attempting to follow that great philosopher out in California, 
Brother Rodney, who said, can we all get along?
    And I do think there is a common ground. And I want to 
compliment the Chairman because we went through this last year, 
Mr. Chairman.
    And when we wrote this legislation, we provided--my 
colleague just mentioned it, Section 3, special treatment for 
small, noncommercial educational and religious stations because 
we were concerned about the group that you were speaking of, 
Mr. Patrick, and that we wanted to be open minded.
    Let me ask, Professor--let me ask Professor Liebowitz, on 
the economic analysis, can we find a balance to respect the 
property right of performing artists but answer the questions 
of our good friend, Steve Newberry?
    Mr. Liebowitz. Well, it is always going to be the case if 
you have to pay for something that you didn't have to pay for 
before, that you're going to be worse off because you have less 
money than you did before.
    The question is twofold. One is, should you have been 
paying, or is it something you should be paying regardless? And 
I think they have been using the property without any 
requirement that they get the permission of the owner, and that 
is very unusual.
    Can you----
    Ms. Jackson Lee. You accept the premise that it is 
property? Go ahead.
    Mr. Liebowitz. Yes. When I first came across this 
particular market, I was astounded because I had known about 
the movie market, and I knew television broadcasters always had 
to pay to get a movie, except for that Christmas movie which 
apparently had the copyright expire on it. But then when I 
found out from radio that they didn't have to get anyone's 
permission, I thought that was very odd.
    The payment, if it is one that is run by either the 
government or some sort of organization and not the market, you 
can certainly manage it or massage it so that certain types of 
broadcasters pay much less. So I have dealt with, in Canada, 
where I've worked with performing rights for the composers, and 
I know that up there, they have multiple tiers of what the 
payment would be for the radio broadcasters, and the various 
smaller broadcasters pay almost nothing. And if you're in a 
different classification, if you're a nonprofit broadcaster, 
you pay almost nothing. And then, when you get above a certain 
level, then you start paying the full rate.
    Ms. Jackson Lee. If I could refer you to Section 3, we 
attempted to craft that language. And I know that all of us, as 
we proceed to markup, will look at that to refine it even more. 
Let me thank you.
    Let me go to Billy Corgan and thank you for your testimony. 
How do you answer the question--you own a property right. 
You've been hearing from the broadcasters that this is going to 
undermine their economic scheme. What is your response to that? 
What balance do you think this bill or the idea presents itself 
in terms of compensating the performing artists because you 
have a property right and balancing their needs?
    Mr. Corgan. I don't think anybody on the artistic side of 
the music business wants to see terrestrial radio go out of 
business. I can't think of anybody who would want that. I think 
the promotional value, the significance in the culture, the 
local cultures, is all recognized. I don't think that is at the 
base of the argument. It is simply a rights issue, and then 
when you have--establish the rights issue, then everybody 
should be able to negotiate in good faith in the value of the 
things.
    As I said before, if these--what is interesting is that it 
is particular performances. There is only one version of ``My 
Girl'' that people want to hear. They don't want to hear 
necessarily someone else's version. They want to hear that 
version. So----
    Ms. Jackson Lee. I think that is a good point that you're 
making, That there is refinement in the type of versions that 
belong to that particular artist.
    Mr. Corgan. So you're recognizing an accomplishment. And 
that accomplishment continues to have value. So if you're 
talking about a 40-year-old song that continues to be played, 
it has value.
    Ms. Jackson Lee. And so would you be accepting of a stair 
step--if we had to look at stair step payments based upon how 
long or what level, you would be open to that?
    Mr. Corgan. Yes, ma'am. Absolutely. But you just have to 
establish the right to be able to figure out the formulas. 
Nobody wants to see anybody go out of business. That would be 
the last thing anybody would want.
    Ms. Jackson Lee. Mr. Newberry, very quickly, do you pay for 
Rush Limbaugh programming?
    Mr. Newberry. No, ma'am.
    Ms. Jackson Lee. So is his programming free?
    Mr. Newberry. I don't carry Rush Limbaugh.
    Ms. Jackson Lee. No, that is not the question I'm asking. 
When he is played on radio stations, do the we have--do the 
owners pay for it?
    Mr. Newberry. It will vary. In some cases, it will be on a 
barter basis. In other cases, it will be a compensated basis. 
They are buying the exclusive rights to that program in their 
market.
    Ms. Jackson Lee. And someone considers that--whatever our 
disparate tastes may be, some of us may turn that programming 
off. It is still the property right that goes to Mr. Limbaugh; 
is that correct? He is assessed as a property right?
    Mr. Newberry. It is a product. It is a negotiation, and 
stations do make compensation.
    Ms. Jackson Lee. With that in mind, inasmuch as I said, 
there will be stations that won't have to pay for him, knowing 
their audience would be happy that they did not. But with 
respect to the music, then it equates to the similar context, 
can you find a compromise for us? And how do we act to protect 
the property right of a performing musical artist and also work 
with your constituents in which you have been eloquent in 
protecting their rights? Can you see the need, an opportunity 
for balance?
    Mr. Newberry. For me to immediately say no to you sounds as 
if I'm digging in and trying to be obstinate. And, Congressman, 
I do not mean that at all.
    But I will go back to the fundamental issue that we have 
had an institution that has existed for years. And I certainly 
recognize that there are artists whose music we are playing 
decades after they were original hits. But many of those 
artists are still having the opportunity to monetize from that. 
And if they are not able to do that, I would tell you that I 
think that is a flaw in the original recording contract that 
they have with their record label. So it is an imperfect 
system. But changing it as proposed in this particular piece of 
legislation I think could really upend the system that much 
more.
    Ms. Jackson Lee. Mr. Chairman, let me--Mr.--if you'd just 
finish on my last question, Mr. Bainwol. We appreciate you 
being here. And I'm not trying to cast dispersions, but the 
record industry has been mentioned quite frequently. I think 
both of us would be dishonest not to admit the treatment that 
African-American artists got in the old days, barely a nickel 
on profit. We can call their names, call the rolls. How do you 
respond to the fact that this is generated from the 
miscontracting that the record industry engaged in?
    Mr. Bainwol. I understand the long history here and your 
particular assertion about the way African-American artists 
were treated in the past.
    I was a very good friend of Isaac Hayes, and I heard 
stories. And without pinning the blame on any one institution, 
I understand that what you are suggesting is something that we 
need to recognize.
    What we are talking about now, though, is a bill about 
moving forward, and the artist community, the label community, 
big labels, small labels, small businesses all over this Nation 
are seeking just compensation for the property that we 
generate. And we are joined at the hip together as a creative 
community. Again, the labels, the artists and the musicians, 
and this is with an equity moving forward where there will be 
direct payment to the artists and to the performers.
    Ms. Jackson Lee. And that's what I want to end on. You will 
be not--you will allow a pure direct payment to the artist and 
the performer?
    Mr. Bainwol. That is stipulated in the statute, yes, ma'am.
    Ms. Jackson Lee. Do you mean the bill we have before us?
    Mr. Bainwol. Yes.
    Ms. Jackson Lee. I just want to make that clear for the 
record. And there will be no intervening or intervention on 
behalf of the company.
    Mr. Bainwol. The revenues would flow from the radio 
stations to Sound Exchange, direct to the performer.
    Ms. Jackson Lee. Let me thank the Chairman, and I'm happy 
to yield back.
    Mr. Conyers. Former judge, Ted Poe.
    Mr. Poe. Thank you, Mr. Chairman.
    I appreciate all of you being here, especially appreciate 
the passion with which you try to educate us on this Committee.
    Clay Walker and Tracy Byrd are both from my district, very 
good friends of mine. And I like them because they sing songs I 
understand.
    But I'm also concerned about small town radio stations. I 
have several of those, not near as many as there used to be. 
And I know that they're operating on a shoestring. And when 
they quit operating, they go out of business or they get 
bought.
    And I'm also concerned about the big conglomerates that are 
buying up all of the radio stations in the country, and we 
don't have the local flavor. We have somebody from New York 
City down there in Baytown, Texas, talking on the radio.
    Be that as it may, I would hope there would be a study on 
this to see what the bottom line is. And also I would also hope 
that this could be worked out among the people involved rather 
than getting Congress involved in this. I really think that 
could happen. It reminds me of a divorce case I once saw or 
heard. After hearing the passionate pleas from both sides, I 
denied the divorce and told them they deserve each other and 
figure out how to stay together.
    And without being harsh, I think maybe that is something 
that ought to happen in this situation.
    I would like to know how much--I write a song, how much do 
I get paid to be on a radio station? How does that work 
mechanically? And how much do I get each time my song is played 
that I wrote?
    Mr. Newberry. Congressman, I can't tell you specifically 
what--I can tell you how we compensate. I can't tell you 
specifically how that is delineated to the individual composer.
    We pay one of three rights organizations, the ASCAP, BMI 
and SESAC organizations are the three that we are involved 
with. For many years, it was a percentage of revenue. In the 
current license term, it is a flat fee. So that is adding 
further stress on the broadcast industry----
    Mr. Poe. What is the fee?
    Mr. Newberry. It will vary by market size.
    Mr. Poe. Give me some idea. Give me something I can 
understand.
    Mr. Newberry. Four or 5 percent generally is an 
approximation of what the income of the station is, but it is 
not based on revenue right now. I don't have the fee at the top 
of my head. I can certainly provide it.
    Mr. Poe. So 4 or 5 percent goes to the writers of the songs 
you play on the radio station? Approximately.
    Mr. Newberry. Yes, sir.
    Mr. Poe. Is that right, Mr. Patrick.
    Mr. Patrick. It goes to the music licensing organizations 
who then split it, but how each----
    Mr. Poe. You'll have to turn the microphone on.
    Mr. Patrick. I'm sorry. Billy may be able to explain more. 
Each song writer has some leverage in negotiating with how much 
they are going to get. It is also based on number of spins or 
the number of plays, and it is not just radio, BMI, SESAC--
ASCAP, BMI and ASCAP are the big ones. They are pulling money 
from the people that have stereos in their businesses, from 
jukeboxes, to live performance from any number of things. And 
at end of the day, they ask--on the radio side, they ask us to 
tell them basically what songs we played in a sample week, and 
they go across the country and use different weeks. And at the 
end of the year, it is a compilation of saying it is--you know, 
Billy's, you know, group played X number of millions of times 
and that represents .9 percent of the total. And he gets--you 
know, they scrape off a little bit for administration, and he 
gets the rest of it. Now, the other issue obviously----
    Mr. Poe. Let me interrupt you. I want to go on to another 
subject since my time is limited.
    Thank you, Mr. Patrick.
    It seems to me that there is value in the radio station 
playing music. But there is also value to the performer for the 
music being played on the radio station. So there is value each 
way. And if we are talking about compensation, why aren't we 
talking about compensation for both? It seems like this 
legislation automatically devalues the value of playing it on 
the radio to the performer.
    Would you like to comment on that, Mr. Patrick?
    Mr. Patrick. Okay----
    Mr. Poe. I get to pick who I want to answer the question.
    Mr. Corgan. I understand.
    Mr. Patrick. There is no doubt there is value to the artist 
and value to the record company when we play a song, and it is 
why there are--I think, in Salt Lake City, one of the stations 
said they have got 3,800 calls in 1 month asking--from a record 
company asking them to play a particular song or to play a 
particular artist. It happens all the time. It is why they want 
radio stations, why they take full page ads out in the trade 
press constantly, begging the radio stations to basically play 
music.
    Mr. Poe. Do they have an agent or someone that contacts the 
radio station, saying, hey, play Bubba's music this Friday or 
whatever?
    Mr. Patrick. There are independent producers that in fact--
independent promotion people that in fact call the radio 
stations all the time. I've run radio stations where I have had 
to say, you can only call on Tuesday or only on Thursday 
because we're overwhelmed with how many calls are coming in.
    Mr. Poe. Mr. Newberry, let me ask you this question 
regarding value. Have you ever--has the industry ever put a 
price on the value to the performer when the song is played on 
radio stations?
    Mr. Newberry. Not that I'm aware of. And just one thing 
just for clarity, Mr. Patrick. We heard 3,800 in 1 month. I 
have since learned it is in 6 months. So I want to make sure 
that he is aware of that. It is a 6-month period. It is still a 
lot of calls.
    No, sir, I'm not aware of any placement of value. You could 
probably do an extrapolation, but it would be--it would be an 
unscientific method certainly for a broadcaster from Kentucky. 
I'm sure there are people qualified to do that, but I'm not 
aware of one.
    Mr. Poe. Maybe the GAO study will solve that for us.
    Mr. Newberry. That might be a good point.
    Mr. Poe. Let me ask you another question, Mr. Newberry.
    If what you say and Mr. Patrick say occurs and it hurts 
radio stations and they have to go to syndicated talk shows or 
whatever, would that--I mean, would that--what would happen, 
otherwise go out of business, you would go to a talk format 
where it may or may not appeal to the public?
    Mr. Newberry. I think what would happen is, and we talked 
about this when I had the opportunity to appear here earlier 
this year or last year, I don't think it is a case that every 
radio station that is playing music would disappear. But the 
number of stations playing music would dramatically decrease as 
alternative programming was introduced.
    Most of that programming is not going to originate nature 
from a local community. It is going to be brought in by 
satellite because of the economic question Mr. Watt raised 
earlier. So you're going to have local programming that is 
disappearing. You're going to have the amount of diversity of 
music that disappears, and you're going to have the most 
familiar artists that are getting played because of the 
business reality of the transaction, again, the unintended 
consequences that I spoke to in my opening testimony.
    Mr. Poe. Last comment, question. If we're talking about the 
free market. This industry is not a free market. It is 
regulated by Congress. And so this bill regulates the free 
market even more. In a true free market, there would be no--
there would be a contract between the broadcasters, the radio 
labels, the performers, with the broadcasters. There would be a 
contract, and they would figure out who pays who rather than 
Congress saying, you pay this person every time, or in this 
legislation, we are flipping the legislation where we pay the 
opposite person. What do you think about a free market 
industry?
    Mr. Patrick, I'll ask you, and that will be my last 
question.
    Mr. Patrick. We always like free market industries, and to 
some extent, what you are describing is some of what we have 
with BMI and ASCAP. We have regular, every couple of years, 
negotiating on behalf of the industry with them as to what the 
rates are going to be. And in essence, we take into account 
what the value that they bring and the value they bring to us.
    Mr. Poe. My time has expired.
    Thank you, Mr. Chairman. I yield back.
    Mr. Conyers. The distinguished lady from California, Maxine 
Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Let me just say that this has been a very beneficial 
discussion here today. And I think that all of us have learned 
an awful lot about what is happening in this industry. Let me 
just cite a few of my thoughts.
    Mr. Liebowitz, I don't think that, despite the fact that we 
respect your work, I don't think anybody here is going to 
believe that there is no promotional value that the performers 
enjoy that causes the purchase of records. Most of us believe 
that, when these radio stations play this music, that there are 
people that still go out and buy records, despite the other 
platforms that are being discussed here today. But to indicate 
that there is really no real promotional value is just hard for 
us to--most of us to digest.
    Let me also say, to Mr. Newberry, I think you have made an 
excellent case here today, but none of us, I think, believe 
that performance artists don't deserve to be paid. We believe 
that they deserve to be paid. So what we have here is basically 
an impasse.
    And Members of Congress at some point will make some 
decisions. Whatever the decisions are, somebody is going to 
benefit. I think there is a possibility that both sides could 
benefit, but the best way that both sides can benefit is that 
if both sides get together and work it out and then bring the 
solution to us. That would be the best of all worlds.
    Let me just say to Mr. Mitch Bainwol, why--why--why should 
the record companies get 50 percent of the performance fees?
    Mr. Bainwol. The record companies are the investors who put 
money into new artists and existing artists to help make their 
careers go.
    Ms. Waters. Don't they charge them for that? Isn't that 
what some of the young artists don't understand, that all of 
the production, all of the clothing, all of the what have you 
is being charged to them and they've got to pay it? Isn't that 
what happens?
    Mr. Bainwol. First of all, we are talking about--when we 
use the phrase labels, we're really talking about copyright 
holders. They can be major labels. They can be small mom-and-
pop individual labels. And there are thousands of those around 
the country. Or they can be artists who have their own--artist-
owned labels. So, in this case, what we are saying is the 
copyright holder gets 50 percent for making the investment that 
sets a career in motion.
    Ms. Waters. All of those that you just described, 50 
percent across the board?
    Mr. Bainwol. Fifty percent of the performance royalty, 
correct.
    Ms. Waters. And my question is, whether you describe that 
as small, individual copyright holders or the big conglomerate, 
they should all be treated the same, with 50 percent?
    Mr. Bainwol. The objective, both behind the language and 
the Constitution and behind any kind of exercise that is 
venture capital, is to produce more of the product. And in 
order to produce product, you have to be able to get a return. 
And in today's marketplace, where sales have diminished so 
much, the future of the market is in fact in performance and in 
access. So it is important for the folks who invest capital, 
whether they are big or they're small or they are the artists 
themselves, to develop a return on that investment so you can 
have more creativity.
    Ms. Waters. Am I to understand that, say, the big copyright 
holders who invest and who promote and who charge the artists 
for every aspect of the promotion and whatever they do, they 
are not getting a return on investment?
    Mr. Bainwol. I can tell you that sales have gone from $15 
billion in 1999 to about $6 billion physical last year. When 
you throw in digital, it is about $9 billion. So the investment 
in creativity is not realizing the same return. The marketplace 
is fundamentally different today than it was----
    Ms. Waters. So they're not deducting this from the artists' 
earnings at all?
    Mr. Bainwol. No. No, ma'am.
    You make an investment in an artist, and there is an 
advance and you pay royalties on sales. Okay? When sales 
diminish, there are fewer royalties to pay, and there is also 
less of an investment basis to invest in the next Bruce 
Springsteen, the next Billy Corgan.
    Ms. Waters. Well----
    Mr. Liebowitz. Can I respond to the question that you had 
about whether or not there is promotion?
    Ms. Waters. Yes.
    Mr. Liebowitz. I don't want you to misunderstand. I'm not 
saying radio doesn't promote music. It does. What I am saying 
is----
    Ms. Waters. You are saying that it doesn't cause the 
purchase of records.
    Mr. Liebowitz. Oh, no. What I said is the net effect 
overall of radio is that it causes people to spend more time 
listening to radio than they otherwise would and therefore less 
time listening to music, and therefore, the net effect is to 
actually hurt the sales of sound recordings. But that is 
because there are two effects. There is a promotional effect, 
which is positive, which is being used these days to determine 
which songs are getting the biggest sales. But then there is 
also the substitution effect because when you're listening to 
radio, you're not listening to prerecorded music. And they 
conflict with one another, and the question is which one is 
stronger----
    Ms. Waters. We are really interested in the bottom line 
here. There's some information that shows us that the 
companies, the industry solicit still radios to play their 
artists' recordings; is that correct?
    Mr. Liebowitz. That's correct.
    Ms. Waters. And they do that simply because they like to 
hear it or it has a bottom line for them?
    Mr. Liebowitz. They want to have increased sales of 
particular artists that they have.
    Ms. Waters. Do you think that they would continue to do 
that if, in fact, they did not see that the bottom line was 
being affected by the----
    Mr. Liebowitz. They can't control whether or not radio is 
playing records. They can't reduce the amount of time radio is 
on there substituting for music, substituting for prerecorded 
music. Because they have no control, because they don't have a 
property right, all they can do is say, music is going to do 
what it is going to do, the radio is going to substitute the 
way it is going to substitute and we can't control that, we 
want to at least have our songs, the ones that have the biggest 
market.
    Ms. Waters. I'm old enough to have lived through payola.
    Mr. Liebowitz. Yes.
    Ms. Waters. What was Payola all about?
    Mr. Liebowitz. Payola was all about the fact that radio 
stations are willing to--record companies are willing to pay 
radio stations----
    Ms. Waters. Why were they willing to pay them?
    Mr. Liebowitz. Because it helps the sales of individual 
songs.
    But there is nothing they can do to stop the substitution 
effect. So they can control the size of the piece of the pie, 
but the record companies have no control over the size of the 
pie because they can't keep radio from being the size it is.
    Ms. Waters. Well, still, the bottom line is that there is 
value in promotions. What that value is, I don't know. I am not 
saying that artists should not be paid because of the 
promotions. I'm saying that it just should be recognized as 
value.
    And having said that, let me just say to Mr. Corgan that 
your testimony here today was perhaps the best that I have 
heard in helping us to understand from so many vantage points 
that you have been able to share with us today. And so, again, 
I would like to see this worked out so that the artists are 
paid and the broadcasters are--the problems of broadcasters are 
recognized in some fashion.
    My bottom line on the broadcasting is this, I do not want 
to see small broadcasters, minority broadcasters, out of 
business. I think it is good for our communities. It is good 
for this democracy, and we must have that kind of interplay, 
otherwise we are at the mercy of the conglomerates who don't 
give a darn about some the issues that we care about. So I'm 
hopeful that you guys can work it out and not just leave it to 
us to try and figure it out.
    And I yield back the balance of my time.
    Mr. Sherman. [presiding.] Thank you.
    Mr. Gohmert.
    Oh, you're next? Oh.
    Mr. King. Thank you, Mr. Chair. Am I recognized?
    Mr. Sherman. Yes, you're recognized.
    Mr. King. Thank you. I have been patiently sitting here, 
and I'm sure Mr. Gohmert understands--we've had our 
conservations, and we are both very interested in this, and we 
have I think shown as much interest as anyone in the Judiciary 
Committee today by at least the length of our presence and our 
attention.
    I picked up a lot here. It is curious to me that we have 
been at this for several hours now, and the room is still full. 
That tells me not just that this is an important issue to this 
country, but there is an important broad constituency that 
supports each of your arguments that are before this Committee 
today.
    I tend to revert to the Constitution and try to determine 
the foundation that we are acting upon here in this Judiciary 
Committee especially. And I know that Mr. Lungren focused on 
the Constitution as well.
    I think there is a bit of an irony here. Article I, Section 
8, the subject of our discussion here, to promote--it reads as, 
quote, to promote the progress of science and useful arts by 
securing for limited times to authors and inventors the 
exclusive right to their respective writings and discoveries, 
closed quote.
    It is interesting to me that that is in our Constitution, 
Article I Section 8, just slightly above to define and punish 
piracies. There is a certain irony there, and it happens to be 
right above the power to declare war. So we know the Founders 
put high value on property rights, on intellectual property.
    They put a couple caveats in there that we haven't 
discussed to much length here. One of them is the term--and I 
would have to look at it here--the useful--the useful arts. And 
that tells me that, then, that Congress has the authority to 
determine what is useful in the process of making a 
determination on what is going to be done with property rights. 
That is part of our subject here today, even though it has not 
been any part significantly that I've heard of the testimony. 
And I don't intend to go there. I just make that point.
    And another component of this is for limited times. And 
that is something that didn't come clear to me.
    But I wanted to follow up on the gentlelady from 
California's statement, and starting on my left. And that is 
that I expected to hear the testimony of an artist today, Mr. 
Corgan. And I heard the testimony of a businessman, I think, 
who has significant clarity in this. So I want to ask you in 
this way: If you write the lyrics of a song, you can copyright 
those lyrics and receive compensation?
    Mr. Corgan. Yes, sir.
    Mr. King. And if you write the musical, the instrumental 
for a song, you can copyright the instrumental and receive 
compensation?
    Mr. Corgan. As an author? Or in the performance----
    Mr. King. As an author.
    Mr. Corgan. Yes, sir.
    Mr. King. And then if you write the lyrics and your base 
player writes the instrumental, which would be actually 
probably the opposite of what is likely to happen, I think, 
then you can join together and negotiate with a record label 
those copyrights to the lyrics and the instrumental that 
comprises a song that you have not yet performed?
    Mr. Corgan. Normally, those are internal agreements with 
the group or between the writers. They are not necessarily 
happening through the label.
    Mr. King. Fair enough. And I think you ought to have that 
right of contract to negotiate with whomever you're doing 
business with and package that up because it is more marketable 
as a package.
    Then when you perform that song that you and your base 
player have written, both the lyrics and the music, and have 
copyrighted, well, then you receive a payment on that if you 
perform in concert?
    Mr. Corgan. Yes, sir.
    Mr. King. And the label markets and you get royalties off 
the sales of anything that might be downloaded and paid for and 
anything that might be a CD or a DVD?
    Mr. Corgan. That's the concept.
    Mr. King. Yes, and I did mention----
    Mr. Corgan. That is another tangent, but, yeah, that is the 
concept.
    Mr. King. I want to let you know, I have let the Chinese 
know about this.
    Mr. Corgan. Thank you. I appreciate that.
    Mr. King. And I think that it is a cost of business for 
them to continue to talk this thing to death. Sometime I'll 
take up another subject there.
    So that takes us down this other way, this other thought, 
the other side of the right to property. Now, Mr. Patrick said 
that his record labels calling him on Tuesdays and Thursdays; 
that is the days that are allowed. And I understand that. Do 
they ever--and again, I turn to Mr. Patrick. Do they then ever 
offer to pay you to play their songs?
    Mr. Patrick. Yes. But it is illegal for us to take it 
unless we disclose that to the FCC. And 99 percent of all 
stations say they will not allow an employee to ever do that. 
But that is Payola.
    Mr. King. But what about the company? If you own a radio 
station that is grossing $1.249 million and you decide that 
part of your revenue stream could be to negotiate with the 
record label created by Mr. Corgan, who might offer to pay you 
to play that, today is anybody doing that?
    Mr. Patrick. Nobody--to my knowledge, nobody is doing that, 
sir. I think they are all scared of the Payola rules.
    Mr. King. But isn't that--aren't you talking about disc 
jockeys on Payola rules? And isn't it a different equation when 
it comes to a radio station management transaction?
    Mr. Patrick. It doesn't matter. It is the station or the 
individual that does it.
    And could there be a world in which there was free market 
where Billy comes to a company and says, I've got a new release 
and I actually would like to buy my way on to make sure it gets 
enough spins, theoretically, it could.
    Mr. King. I'd just like unanimous consent to complete this 
line of questioning. I know my red light is up, and I'll make 
it brief, Mr. Chairman.
    Mr. Sherman. Sure.
    Mr. King. Thank you. Then I just make this observation, and 
that is that there is value to playing songs to the emerging 
artist who has not yet emerged on the stage. At some point--I 
mean, say, if I write a song and I play it as--then there would 
be value in me being able to pay the radio station to play 
that, so that we could get to the point where it got to the 
other side of the equation where I could collect payment on the 
other side. Wouldn't it be appropriate to allow for--if we are 
going to pay the artists copyright or the artists who perform 
this and require that that be paid over the radio stations that 
play it, who are promoting it, shouldn't we allow stations then 
to collect from those that want to promote before they become a 
marketable commodity?
    And I would ask Mr. Newberry.
    Mr. Newberry. What is good for the goose is good for the 
gander, but I don't think that is the appropriate model for 
anything that is based on artistic creativity and merit of the 
music as opposed to music that goes to the highest bidder.
    I think that our industry has always operated--there are 
always bad apples within any sector, and we've had issues, as 
Congresswoman Waters mentioned earlier with Payola. I'm 
absolutely against anything that even hints of that. And going 
to the highest bidder wins in terms of who gets played I think 
is a very slippery slope for our industry, for the recording 
industry, for the artist.
    Mr. Sherman. Thank you.
    And I think just the one answer.
    Mr. King. That will be the last word. Thank you.
    Mr. Sherman. Without objection, I'd like to enter into the 
record some letters the Committee has received from musicians 
supporting the bill, including Paul McCartney, Gloria Estefan, 
Brian Wilson, Ricky Martin, Celine Dion and John Legend.
    Without objection, those will be part of the record.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
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    Mr. Sherman. I will now recognize myself for 5 minutes.
    Mr. Corgan, first, thank you for your excellent testimony, 
and also thank you for the effect you have had on American 
culture because now when people see a bald guy, they think rock 
star.
    Mr. Corgan. But, sir, you're not completely bald. You're 
not there yet.
    Mr. Sherman. I'm not completely a rock star?
    Mr. Corgan. No, sir. No, you're not.
    But we need new stars. We need new stars.
    Mr. Sherman. Bainwol, we'll talk.
    There has been some discussion as to whether the bill 
reflects a fair compromise between the artists and the label. 
It is my understanding that the artists and the labels are both 
behind this bill and this division; is that correct?
    Mr. Corgan. Yeah. That is the basic idea.
    Mr. Sherman. So the attempt by those that don't want to pay 
anything to create a fight as between the labels and the 
artists or to attack the bill for being unfairly artist or 
unfairly label, is that--you come here as a united front?
    Mr. Corgan. Yes, sir. But can I make one comment? In the 
mechanical rights issue with songwriters, which was, you know, 
was enacted by Congress, labels have been really wishy-washy on 
paying the full mechanical rate. And they have used that as a 
negotiating tool, so if you're going to do this, if you are 
actually going to say it is the right thing to divide this pie 
50/50, make it 50/50, don't let the labels then exert pressure 
on the artists to whittle down their share, which they've done 
in the mechanical rights issue. That is something that is very 
irritating to me as an artist.
    Mr. Bainwol. If I can clarify----
    Mr. Sherman. Mr. Almedia, do you also agree that the bill 
has the right division between the artists and the labels?
    Mr. Almeida. Yes, we have come together and----
    Mr. Sherman. Mr. Bainwol, do you agree with the bill as it 
is drafted and you are going to pay the full 50 percent, or are 
you going to be negotiating the artist down?
    Mr. Bainwol. Yes, yes, and no.
    Mr. Sherman. So no to negotiating the artist down.
    Let me move on in the questioning.
    Mr. Newberry, you point out that the stations do public 
service. You didn't mention that you get tens of billions of 
dollars worth of free spectrum. And while almost all the 
businesses in this country perform important public service 
when they can, very few of them get that kind of valuable 
right. So the two go hand in hand.
    I'd like you to imagine a big rock band entourage that goes 
crashing into a restaurant, eats well, and then refuses to pay. 
And when they refuse to pay, when they steal the food, they 
say, well, our business model was created on the assumption 
that we'd always steal food. Or times are tough; we've got to 
steal the food now. Or this band performs a lot of good public 
service, so we should be able to steal the food. Or our band is 
so popular, we are providing promotion to this restaurant, it 
is going to be the hot restaurant because we were seen here. Or 
our band is a small local business, so we should be able to 
steal food. Or we need to do a study to determine whether or 
not we should steal the, food and until such time as that study 
is completed and agreed to by everyone as being an accurate 
study, we should steal the food.
    In this society, do we usually allow theft on the theory 
that the thief is struggling or the thief is public-spirited or 
that somehow the victim unwillingly and without their consent 
benefits from the theft?
    Mr. Newberry. Would you like for me to answer that?
    Mr. Sherman. Quickly.
    Mr. Newberry. If the restaurant went to the band 3,800 
times in the course of 6 months and said, please come eat our 
food; we would like for you----
    Mr. Sherman. Sir, I think that Mr. Liebowitz has well 
illustrated the fact that, obviously, each individual band, 
record label, and record has it in their interest to be played 
more, but in total, the industry suffers. And we've seen--I 
mean, I think he has illustrated that rather well.
    But to say that because you get 3,800 flyers saying, come 
eat at the restaurant, that you get to go for free, seems a bit 
absurd. But I do want to shift to Mr. Liebowitz.
    Mr. Newberry. Well, I would also like to go on record that 
the assertion that it is stealing and thievery is somewhat a 
mischaracterization. It is an industry that has worked jointly 
with the radio and recording industry over the years to 
promote----
    Mr. Sherman. Sir, if one of your members produces a 
station--produces the Limbaugh show, which I know you don't 
air--and I put it on my station and I run it for free, but not 
with the barter, I just put only my own commercials in, and I 
say, wait a minute, I'm helping Limbaugh become popular in my 
area, and he wanted to be on my show, and I'm helping his book 
sales, therefore I don't have to pay or provide any barter for 
the show, I think you would be here asking the government to 
enforce the rights of the station involved.
    But Mr. Liebowitz, two rival studies, one is yours and one 
is the other's side.
    They won't share the data with you. Have you shared your 
data with them? And have they found any holes in it?
    Mr. Liebowitz. Well, I offered to exchange data, and they 
basically said----
    Mr. Sherman. When you say ``exchange,'' is your willingness 
to share your data contingent on them providing their data?
    Mr. Liebowitz. Well, I wasn't sure exactly what my answer 
would be if they said, ``Well, we will take your data, but we 
are not going to give you ours.''
    Mr. Sherman. I am asking the question, so tell us the 
answer.
    Mr. Liebowitz. So it never actually came up.
    Mr. Sherman. Okay. Now it is coming up.
    Mr. Liebowitz. I am not sure what my answer would be.
    Mr. Sherman. What would your answer be, Mr. Liebowitz?
    Mr. Liebowitz. I am a little reluctant to, sort of, let 
them make the final decision as to who is right and who is 
wrong. But if there was a third party, I certainly would be 
willing to----
    Mr. Sherman. Maybe you would want to give the Committee 
your data. That would be the solution to this.
    Mr. Liebowitz. Excuse me?
    Mr. Sherman. What?
    Mr. Liebowitz. I am sorry, I missed what you said. I didn't 
catch it.
    Mr. Sherman. Maybe you would want to furnish to this 
Committee for this hearing the data----
    Mr. Liebowitz. Sure, I can do that.
    Mr. Sherman [continuing]. So that everyone could then see 
whether either of these studies could withstand scrutiny. If 
your data is furnished and withstands scrutiny and their data 
remains hidden for reasons that have been previously talked 
about, then we will know which study we can rely on.
    My time has expired. I believe we have Mr. Gohmert.
    Mr. Gohmert. Does that mean I am recognized?
    Mr. Sherman. Yes, it does, for 5 minutes.
    Mr. Gohmert. Thank you, Mr. Chairman.
    Of course, Rush Limbaugh has been mentioned a few times, 
and I guess his radio show and Al Franken's show are not 
exactly analogous since, you know, like, Rush's show goes on 
for 3 hours--and that is right--Mr. Franken's doesn't go on at 
all anymore. But with a 3-minute song compared to a 3-hour 
program, I am not sure how analogous those are.
    You may have heard Howard Coble say earlier that he asked 
one of our Members of the Committee if that Member supported 
the performers or the radio stations, and the response was 
``yes.'' Well, that was me.
    And I have been struggling with this a great deal. On the 
one hand, I represent east Texas. Most of our radio stations 
are very rural, and a lot of them are combined, so they might 
end up getting hammered for a couple of fees if this goes into 
effect. And they say their profit margin is so thin, especially 
these days with advertisers pulling out, it might just be what 
undoes them or sends them completely to talk radio.
    And I know, in deference to my friend Ms. Waters from 
California, I mean, I am living proof. I have bought two albums 
in the last couple of months. I am one of the old guys who--I 
may hear it on the radio and then go to the Web site to hear a 
little part--``Ooh, I like that''--and then I actually go 
physically buy the CD. But both of them I have heard on the 
radio and go, ``Ooh, I like that,'' and so I go buy it. So I 
know there is value in hearing things on the radio. I know 
there is. I hear that. And whether we can whitewash that and 
say that it is all a wash and that it doesn't really matter or 
that maybe it is costing, I don't know. But I would like to get 
to the bottom of it.
    I was shocked when I found out that performers didn't get 
any cut of the royalties that were paid, because that just 
seemed inherently unfair. It seemed fair that the writers got 
that. But then I come back to--and I have been trying to do 
research. And, as somebody who has written songs for my 
wedding, for my kids and stuff, I know it is a lot of work, and 
especially if you are going to make it as good a product as 
something that people will actually buy.
    But, Mr. Corgan, I go back to the record companies again. 
And I heard the comment that, you know, 50 percent may go to 
the record companies for setting a career in motion and its 
investment in creativity, but, as I understand it now, the 
artists have to go online and create their own career and get 
enough hits to their own Web sites and their own music, and so 
they have set their own career in motion. Finally, somebody 
says, ``Okay, I will help you. I will make 3,800 calls to radio 
stations and try to get them to play your music,'' or 
something, ``try to set you in motion.''
    But I am wondering, I know what we have heard from people 
coming to our offices is that performers have really been cut 
in their income. But it sounds more like the record companies 
are suffering the biggest cut. And I am curious. I don't know 
who your label is, but what kind of cut does a record company 
normally get from a group as well established as Smashing 
Pumpkins?
    Mr. Corgan. Well, in our case, we are now an independent 
entity. We have actually decided to go without labels. So 
something like this----
    Mr. Gohmert. Wait. You are saying that they no longer have 
all this help to give you as a performer?
    Mr. Corgan. Well, we have posthumous work--oh, I didn't 
understand. Sorry.
    Mr. Gohmert. I am sorry. I shouldn't be sarcastic. I am 
sorry.
    Mr. Corgan. We are without a label now. We are completely 
independent. Although we----
    Mr. Gohmert. Has that devastated your sales now that you 
don't have a label?
    Mr. Corgan. Well, it is a new model that we are trying to 
arrange. And, you know, again----
    Mr. Gohmert. The fact is more performers are going with 
this model; isn't that correct?
    Mr. Corgan. Well, because of what I was saying to the other 
Congressman before, because you have less capital available to 
the labels and then you have less investment, what is happening 
now is they are putting the onus on the artists to develop 
their own careers and then they just cherry-pick.
    Mr. Gohmert. Right. So, as an independent now, if you put 
your songs on iTunes--and I haven't looked. I assume you have 
songs available on iTunes, right?
    Mr. Corgan. Yes, sir.
    Mr. Gohmert. What cut of that do you get?
    Mr. Corgan. Well, we actually renegotiated our contract, 
our old contract, if you are talking about, like, say, my old 
music. So we have a 50-50 cut with our old record company. But 
that is very novel. We had to negotiate that.
    Mr. Gohmert. As I understand it, you may be lucky to get 
30, 40 percent.
    Mr. Corgan. Most artists are probably in the 20 percentile 
range.
    Mr. Gohmert. And then if you sign with a record label, I 
have been told that perhaps the record label can negotiate 60 
or 70 percent for them and 30 percent for iTunes, but then the 
artist still gets a small cut of that, after deductions for 
expenses.
    Mr. Corgan. Yes, sir. But, again, in a free-market 
situation, the artist has the right to say no. They decide, 
``Well, do I want to enter into this system of opportunity?'' 
And I think what is being argued here is, there isn't that same 
system of opportunity. You know, you get the straight ``no,'' 
and then there is nothing to negotiate.
    Mr. Gohmert. Okay. Well, I see my time has expired, and I 
am obviously not going to get 10 minutes, like my other friend 
from Texas. So my time has expired.
    But let me just say I really appreciate everybody's input. 
You know, I was a judge, and we would get evidence from all 
sides. And I am still struggling with this issue, you know, 
what is fair. And so I really appreciate you all making the 
effort to be here and to participate. Thank you very much.
    Mr. Sherman. I thank the gentleman from Texas and recognize 
the gentleman from New York.
    Mr. Weiner. Thank you, Mr. Chairman.
    You know, I think in this, if we divide the issue between 
the right and the rate, I think that the equities of the right 
are almost agreed to. I mean, I didn't hear too many people on 
this panel who didn't believe that the performers have a right 
to something. So I think that issue is done. So then it becomes 
a conversation of rate, and I think that it is much better 
resolved, frankly, with guidance from Congress but, frankly, 
letting you all work out some of these things.
    I think, for example, a smart record company would probably 
negotiate a lower rate for an unknown artist, you know, one 
that they want to try to promote. I think that you might even 
have artists who say, ``Listen, I will take a discount because 
I am one of the 46,000 calls to get on the air.''
    But if I could drill a little bit into this thing that we 
have glossed over, Mr. Newberry, do you believe that if you 
have a radio station that features Glenn Beck, do you believe 
you should have to pay for his programming? I mean, he, too, is 
benefiting from the promotion. He, too, is benefiting with his 
books and the marketing that he is getting for his things that 
are non-radio-related. As a matter of philosophy, do you 
believe that you should have to pay for his programming?
    Mr. Newberry. I don't believe I should have to pay for his 
programming. I believe I have the right to decide whether that 
is an investment or not.
    Mr. Weiner. Yeah, but do you believe that he should have a 
right that, if you play it, he should be compensated? Do you 
believe that right that exists on his part?
    Mr. Newberry. I think that is dependent on how each model 
is established. So I can't say whether he has a right to do it, 
but if that is how he wants to set up his business, that is his 
problem.
    Mr. Weiner. No, I am asking a different question. I am not 
asking about his motivation. I am asking about from your 
perspective. You have described that you believe--and forgive 
me for summarizing your position--that, since you provide such 
a value to performers by promoting their product, that they 
should not have a right to be compensated for that. Do you have 
the same belief about people who engage in another performance 
art, say, the spoken word?
    Mr. Newberry. I am saying that we have provided 
compensation to the recording artist through the promotion. I 
am not saying they don't have a right to compensation. I am 
saying we are providing compensation.
    Mr. Weiner. Do you believe the same thing exists for 
someone--I mean, I don't if you really don't understand my 
question or you are just dancing around it. But do you believe 
that the same circumstance exists with people like Glenn Beck, 
who, frankly, I believe, when I hear him on the radio, he 
should have to pay me, but that is a different story.
    Mr. Newberry. I would concur.
    Mr. Weiner. But I am just asking whether you have the 
same--you seem to have a philosophical position that, since you 
provide a promotion right to the performers, that that should 
be in lieu of any payment you give. Do you have the same 
philosophical sense about the spoken word? This has come up a 
couple of times here. I just want to hear what your position 
is.
    Mr. Newberry. Okay, let me address it then in something--I 
don't carry Glenn Beck, so let me address it because Chairman 
Berman earlier mentioned sports. We carry sports teams that we 
do not provide any compensation for the broadcast. Do they have 
a right to that compensation? No. They come to us and say, 
``Listen, we have a struggling team. We have a team that would 
benefit from the exposure. We have a university that would 
benefit from the promotional value of having their games on 
your radio station.'' And they don't pay us. We make a 
decision, is that a programming decision, and is that something 
that is beneficial to our listeners.
    Mr. Weiner. And so do they.
    Mr. Newberry. Right.
    Mr. Weiner. They make that decision. But in the 
relationship you have with performance artists, you want to be 
able to decide that it is a no-compensation thing for the 
performers. That is the difference there.
    I agree with you, Mr. Newberry. I think, as a result of 
this legislation, which there now seems to be emerging 
consensus that performers have this right, as a result of this 
legislation, you could well find yourself having people come to 
you and say, ``You know what? I don't want a dime to be on your 
radio, so you don't have to compensate me at all, because it 
would be so good for me if I am going to catch up with--my 
artist is going to catch up with the Smashing Pumpkins that, 
you know what? You don't have to pay me a dime. I am going to 
negotiate that with you.''
    But the question is different that I am asking you. The New 
York Mets have a right to negotiate that. The Glenn Becks of 
the world have a right to negotiate that. The performers, in 
your view, just to make sure I understand, should not have that 
same right. Is that just a fair explanation of your position?
    Mr. Newberry. The system that we have under the current 
circumstance is not perfect. I am opposed to changing it under 
the proposed legislation because I think it causes unintended 
consequences. So, to say should that right be introduced now 
after 80 years of a balanced relationship, yes, sir, I disagree 
with your position.
    Mr. Weiner. Mr. Newberry, I understand that that is the 
question you would like to answer. I am asking you a 
philosophical question, you and me, that we are not talking 
about 80 years of this. And I would stipulate, to what the 
gentleman says, that these are tough economic times, I would 
stipulate to Mr. Liebowitz--I mean, God bless you, but I think 
it is the least newsworthy research ever, that it helps some 
people but basically it doesn't help other people. Like, that 
was interesting, but it doesn't really get to this point, which 
is: On a philosophical level, do you believe, today, that there 
is inequity there?
    I mean, I think there is no doubt that all legislation 
involves a balance of equities and a balance of the politics. 
And, yes, clearly, you have a good hand you are holding, being 
someone who represents broadcasters from around the country. 
But on the equities of it, it seems that there is no really 
good argument except you don't want to change something for 80 
years.
    Mr. Newberry. Would you like me to answer that?
    Mr. Weiner. I would, except the gentleman two seats to your 
right has been gesturing that he wants to.
    Mr. Patrick. One other thing is, when you are talking about 
Glenn Beck or anybody else, you are talking about exclusivity, 
and that may be what you are paying for. You may not like him, 
I may not like him, but you are getting that, and 10 other 
stations or 50 other stations in your market don't get that. Or 
sports rights--only one person gets the Mets in New York, not 
all of the other stations.
    Mr. Weiner. But, Mr. Patrick, you are right about those 
details, but you are missing the premise. The premise is the 
equity of the Mets or Glenn Beck being able to negotiate for 
themselves what that value terms and condition is of the 
performance that they are having.
    You are right, there are plenty different combinations of 
permutations, which is why, at the end of the day when we are 
about to pass this, you are going to get into a room and say, 
``Please don't. We have worked out a deal.'' That is what is 
going to wind up happening.
    Mr. Sherman. I think the gentleman's time has expired.
    Mr. Weiner. Thank you, sir.
    Mr. Sherman. The Chair will now recognize the gentleman 
from New York.
    Mr. Maffei. Thank you, Mr. Chairman.
    I do want to clarify some of the stuff that came up in Ms. 
Jackson Lee, the gentlewoman from Texas's testimony. And I 
think she was talking to Mr. Corgan, so I want to address a 
similar question to Mr. Bainwol.
    I understand this legislation has accommodations for small 
commercial and noncommercial broadcasters, which would allow 
them to pay a lower rate than what would likely be set by the 
Copyright Royalty Board for large commercial stations. This is 
really good for districts like mine. I have a mixed district. 
It has a small city, it has rural areas, and we do have very 
small stations in my district. And even the accommodations 
provided in the bill might be too burdensome for them.
    For instance, if a small rural station makes only about 
$50,000 in revenue, that might be difficult for them to afford 
even $5,000. And, similarly, if you look at a tiny, 
noncommercial station, for instance a small college radio 
station, that makes no money at all, $1,000 might be a little 
unworkable to them.
    So would you be willing to consider some sort of a sliding 
scale that would allow even really the smallest stations--the 
student-run stations, the rural stations--to pay a rate that is 
commensurate with their actual income and ability to pay?
    Mr. Bainwol. The short answer is yes. We have been 
literally begging to get into a room to negotiate for a year, 
and we haven't found a partner with whom to negotiate.
    But this is not about the small stations. We are prepared 
to be perfectly rational and reasonable about how this gets 
crafted and make any adjustments. This is about whether or not 
big corporate radio that is consolidated is going to make 
payment for the property they use to build their businesses.
    Mr. Maffei. Okay. Mr. Newberry and Mr. Patrick, is there 
anything here that you could live with? Is that true?
    Mr. Patrick. I think you have hit on one thing that we had 
talked about earlier. The non-com stations, the little 
religious stations, the minority stations, and the very rural 
stations like Steve owns and I own----
    Mr. Maffei. Don't forget the college stations. I used to 
work for one.
    Mr. Patrick. Yes--$5,000 is way too high. And I appreciate 
the fact that they would like to carve out a sliding scale, and 
what that is, who knows? That presupposes there is a right. And 
so far, broadcasters are not quite there yet, if they are ever 
going to get there.
    But on the rate issue, I think you are correct. There has 
to be much more flexibility on that concept.
    Mr. Maffei. Do you want to add something, Mr. Newberry?
    Mr. Newberry. I think it goes back--and I am not sure, 
Congressman, if you were here when we had the earlier 
discussions, but it is perplexing, as a broadcaster, the 
sliding scale. Is $5 better than $5,000? Sure, that is common 
sense, and I am not going to sit here and argue that. But there 
is basically a principle argument here, that if the effort is 
to protect the performers, if the effort is to improve the 
status of persons like Mr. Corgan.
    There was a panel discussion that occurred just this past 
Friday out in Nashville. And if I could take 30 seconds to read 
this, because this summarizes it. It is between Blake Shelton, 
who is a country music performer; Heidi Newfield, who is a 
country music performer; and Mike Dugan, who is the president 
and CEO of Capitol Records in Nashville.
    Mr. Shelton, talking about the performance rights debate: 
``I think it is a terrible idea for now. I think it is a 
terrible time to be even going there.'' Heidi Newfield: ``I 
agree.'' Blake Shelton: ``But, I mean, I am really rich,'' to 
which the room laughs. Mike Dugan: ``There is no question that 
the timing of this is horrible. This would have been a much 
healthier conversation a couple of years ago.''
    Then Ms. Newfield says: ``I think it also needs to start--
stems from the building of a record contract. I think the 
artists and management and their record companies need to sit 
down and get real about when it comes to the bottom line of 
what we are actually making. There is a huge misconception of 
what we are making. I am $100,000 in debt, but that is the cost 
of doing business. It was worth that to start over again. We 
need to talk about this more with our people.'' This is an 
artist saying this.
    Then the president of the record label says: ``There is no 
question that we get so much promotional value from radio. And 
I will tell you that, if it wasn't for radio, we would not be 
here.'' Radio also gets value from music.
    Mr. Maffei. Okay. No, actually, I appreciate those 
comments. I think my problem with that is that it just doesn't 
seem that only the radio station should decide the promotional 
value of radio. It seems that that should be something that----
    Mr. Newberry. Well, that is from the president of a record 
label.
    Mr. Maffei. Maybe so, but I might disagree with it, and 
other Members of this Committee might disagree with it----
    Mr. Newberry. I understand.
    Mr. Maffei [continuing]. Even though he is the president of 
a record label. So a lot of us, I think, would just like to see 
both sides get together and try to decide a little bit more 
what the promotional value is, rather than just one side of it.
    What my question is trying to get at is: Obviously, the 
promotional value is much less if you run a tiny college 
station or a station that doesn't bring in more than $25,000 or 
$30,000 a year, so trying to get to a sliding scale would seem 
fair on both sides of that.
    My time has expired, but I do want to make the point, 
though, that what we are looking for here is some sort of a way 
to find something that both sides can live with. And, you know, 
clearly, as has been said before, folks deserve to be 
compensated for their work. On the other hand, there might be a 
promotional value here. I just don't know if only one side of 
the debate should decide what that promotional value is.
    Thank you, Mr. Chairman.
    Mr. Sherman. I thank the gentleman from New York.
    And there, for a while, I thought the joy would end, but 
the music goes on. The gentleman from Texas is recognized, 
should he wish to be.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. I rushed 
back. I am sure you think I have the most exciting question to 
pose, but not really. I think everything has been said in one 
form or another.
    But the concern and the difficulty we all have, especially 
on this Committee, with so many lawyers, is that we recognize a 
right, but it may be a right without rights or an unprotectable 
right. And that is a very foreign concept to us. That is why we 
are having such difficulty here.
    Then the question comes in the marketplace: How does that 
unprotectable right or the right without rights for so many 
years become protectable? And there is some sort of 
compensation for that particular right or for the 
acknowledgment of it.
    And I apologize. I had to run up here.
    The only way that you can justify the continuation--because 
you lose on the fairness argument, but you would have to say 
that the promotional value is the compensation, that the 
promotional value is the subsidy. Conceptually, you have to 
meet that first argument. And it is going to be very difficult, 
because I have, obviously, a difference of opinion as to 
whether that is true or not. And that jury is still out, are we 
going to have an independent study, and so on? At the end of 
this whole process, who knows? But I am not really certain 
where we are today, despite the testimony of Professor 
Liebowitz.
    The fallback position, to continue the status quo, is to 
say it will be the demise of radio station using the public 
airwaves. And I find great value in--whether it is television 
or whether it is radio, it is the only direct link that 
government has when it comes to communication out there, 
because of the use of the public airwaves. To diminish it in 
any capacity diminishes the ability for us to represent the 
best interests of our constituents. And I really look at it 
that way. I have made this argument before on Energy and 
Commerce when it comes to telecommunications, the Internet and 
so on, cable, satellite and such, as opposed to over-the-air 
broadcasters. So the real question is, where are we today?
    There is one aspect--and I am not sure, Mr. Chairman, 
whether it was covered in my absence--there is one school of 
thought of, why this now? I recognize that I think the 
performers and artists should be compensated. It really is a 
foreign concept to me that they are not and have not been, but 
I am willing to listen to that argument that has been advanced 
in the past and that was advanced here today.
    There is another argument--and I am not sure if this is 
true or not, maybe the professor and Mr. Patrick and others can 
enlighten me on it--and that is that maybe there is greater 
emphasis on it today because there is no single platform, Mr. 
Bainwol, as you had pointed out. And because of that, it is a 
whole new dynamic out there. So if you download, if you share, 
if you are part of all the tremendous piracy that goes on out 
there, where does the performer then realize just compensation? 
And that now, because it is not just one platform and because 
of technology, they have to make up that revenue stream 
elsewhere and maybe look to the radio stations.
    Can I have any comments regarding that particular thought 
that is out there and is being expressed? And I think I will 
start with Mr. Newberry.
    Mr. Newberry. I concur. I think that the record labels and 
the performers have been dealing with a very unfortunate 
circumstance of business that has occurred since the Internet 
and since downloading. I am sure that there are thousands of 
people who would like to say, ``Man, we really wish we could go 
back and change the way we handled the digital transition and 
the way we handled the whole issue of downloads.'' The model 
did not work.
    Our industry is absolutely against piracy. We want to do 
everything that we can to protect the integrity of those works. 
But it is a feeling of, ``Look, the model has collapsed around, 
so we are going to turn and go back toward the one source of 
consistent revenue where we know where it is, instead of 
finding ways to adapt to an expanding platform.''
    Mr. Gonzalez. Well, Mr. Bainwol--and, of course, I sense 
that you are going to disagree with Mr. Newberry--but what 
about the argument simply that, if you can' control it in 
another delivery system--I don't know what we want to call 
everything that is out there--that you have to go to that which 
maybe is more accessible? At this point, it would be 
compensation from the radio stations.
    Mr. Bainwol. This issue is not about piracy. This issue is 
about a fundamental change in the nature of consumption of 
music. And in the old days--and I think our friends, the 
broadcasters, are nostalgically clinging to an American-pie 
past. We are not in the old days where you turn on the radio 
and you buy a piece of plastic. Today's model is entirely 
different. It is multiple platforms broadcasting music, with 
consumers, instead of buying music, accessing music and 
listening to performances, whether it is on YouTube, whether it 
is on Pandora, whether it is on cable TV, whether it is on 
their iPod. It is all about access and listening to 
performance.
    If we care about creativity and we care about creating an 
investment basis for the next generation of art, then we have 
to find a way to make sure that we connect to the emerging 
model. That means performance. In that context, having the 
single biggest platform enjoy a benefit relative to Pandora, 
relative to Real Networks, relative to any of the other DiMA 
companies, makes absolutely no sense to the integrity of the 
marketplace or to fairness for creators.
    Mr. Gonzalez. Well, do you think we would be here today had 
it not been for these new platforms?
    Mr. Bainwol. I think the new platforms dramatize why this 
is so outrageous as a matter of equity.
    And the other point here that I think is critical is the 
argument that this is symbiotic gets totally blown away with 
the question that Mr. Weiner was going through, where we don't 
get to participate in this question of balance. They get to 
take our property, use it, and we can't say no. They call it 
symbiotic; I call that a taking.
    Mr. Gonzalez. My time is up, Mr. Chairman.
    Mr. Sherman. I thank the gentleman from Texas.
    At the request of the Committee counsel, I have one 
clarifying question.
    Mr. Newberry and Mr. Bainwol, are you folks willing to sit 
down and negotiate, yes or no?
    Mr. Bainwol. I would like to have lunch first, but yes.
    Mr. Newberry. No, sir. We remain opposed to this 
legislation. To negotiate on that we think is counter to the 
interests of our industry and service to the public.
    Mr. Sherman. Don't slit your throat, but don't do it here. 
Thank you.
    [Whereupon, at 1:34 p.m., the Committee was adjourned.]

                                 
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