[Senate Hearing 111-237]
[From the U.S. Government Publishing Office]



 
                                                        S. Hrg. 111-237

  THE PERFORMANCE RIGHTS ACT AND PARITY AMONG MUSIC DELIVERY PLATFORMS
=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION
                               __________

                             AUGUST 4, 2009
                               __________

                          Serial No. J-111-41
                               __________

         Printed for the use of the Committee on the Judiciary




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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          LINDSEY GRAHAM, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
                  Matt Miner, Republican Chief Counsel
                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................     1
    prepred statement............................................    39
Franken, Al, a U.S. Senator from the State of Minnesota, prepared 
  statement......................................................    41
Leahy, Hon. Patrick, a U. S. Senator from the State of Vermont...     3
    prepared statement...........................................    56

                               WITNESSES

Escovedo, Sheila, Grammy Award-Winning Artist, on behalf of the 
  MusicFIRST Coalition, Sherman Oaks, California.................     4
Kimball, Robert, Executive Vice President, RealNetworks, Inc., 
  Seattle, Washington............................................     7
Leighton-Levy, Marian, Owner, Rounder Records, Burlington, 
  Massachusetts..................................................     9
Newberry, Steve, Joint Board Chairman, National Association of 
  Broadcasters, and President and Chief Executive Officer, 
  Commonwealth Broadcasting Corporation, Glasgow, Kentucky.......    11
Oman, Ralph, Adjunct Professor, George Washington University Law 
  School, Washington, D.C........................................    13
Winston, James L., Executive Director and General Counsel, 
  National Association of Black Owned Broadcasters, Inc., 
  Washington, D.C................................................    15

                         QUESTIONS AND ANSWERS

Responses of Ralph Oman to questions submitted by Senator 
  Feinstein......................................................    31

                       SUBMISSIONS FOR THE RECORD

Digital Media Association, Washington, D.C., August 11, 2009, 
  letter.........................................................    32
Escovedo, Sheila, Grammy Award-Winning Artist, on behalf of the 
  MusicFIRST Coalition, Sherman Oaks, California, statement......    36
Kimball, Robert, Executive Vice President, RealNetworks, Inc., 
  Seattle, Washington, statement.................................    45
Leighton-Levy, Marian, Owner, Rounder Records, Burlington, 
  Massachusetts, statement.......................................    58
Moore, Joyce, Scottsdale, Arizona, August 10, 2009, letter.......    64
    Roger Friedman of Cox Radio, August 2, 2007, letter..........    69
    Sam Moore testimony before House Judiciary Committee, July 
      31, 2007...................................................    72
Newberry, Steve, Joint Board Chairman, National Association of 
  Broadcasters, and President and Chief Executive Officer, 
  Commonwealth Broadcasting Corporation, Glasgow, Kentucky, 
  statement......................................................    78
Oman, Ralph, Adjunct Professor, George Washington University Law 
  School, Washington, D.C., statement............................   108
Pandora Media, Inc., Oakland California, August 4, 2009, letter..   116
Peters, Marybeth, United States Copyright Office, Washington, 
  D.C., statement................................................   117
Songwriters Guild of America, New York, New York, August 11, 
  2009, letter...................................................   119
Winston, James L., Executive Director and General Counsel, 
  National Association of Black Owned Broadcasters, Inc., 
  Washington, D.C., statement....................................   120

 
  THE PERFORMANCE RIGHTS ACT AND PARITY AMONG MUSIC DELIVERY PLATFORMS

                              ----------                              


                        TUESDAY, AUGUST 4, 2009

                              United States Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 2:34 p.m., in 
room SD09226, Dirksen Senate Office Building, Hon. Dianne 
Feinstein, presiding.
    Present: Senators Leahy, Feinstein, Durbin, Klobuchar, 
Specter, Franken, and Cornyn.

   OPENING STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR 
                  FROM THE STATE OF CALIFORNIA

    Senator Feinstein. This hearing will come to order.
    Today's hearing represents the continuation of work that 
Senator Leahy and I have been engaged in for some time aimed to 
protect and promote the work of musical performers, while at 
the same time resolving inequities that are currently created 
under copyright law.
    Copyright protection, as I think everybody in this room 
knows, has its foundation in our Constitution, and our 
copyright industries--music, movies, books, software--are a 
major contributor to our economy.
    A report released 2 weeks ago found some interesting 
things. One of them was that core copyright industries 
contributed over 22 percent of the United States economy's 
growth; and, secondly, copyright industries grew at twice the 
rate of the United States economy as a whole. I think that 
indicates how important these intellectual property areas are. 
But as the technology for delivering creative works has grown 
and evolved, especially so in the case of music, copyright law 
has become more and more complex.
    Music was once only available live at concerts or in small 
gatherings. Then, with the dawn of recordings and transmission, 
radios were born. But a radio used to be as large as a piece of 
furniture. Now music radio programs are provided in our autos, 
on MP3 players that are barely larger than a postage stamp, and 
we can access radio programming over the Internet, from cable, 
and from satellites.
    The availability of music in clear digital formats has 
grown from compact discs, to the Internet, and now to broadcast 
radio transmissions. As the availability and technical quality 
of music has increased, however, so has the ease of freely 
recording, copying, and sharing this music, without 
compensating the artist whose genius created the music to begin 
with. In fact, the United States is the only industrialized 
nation that does not provide performers a full performance 
right.
    Let me say that again. We are the only industrialized 
nation on Earth that does not provide performers with a full 
performance right.
    At the same time, the incremental evolution of music 
delivery technologies has led to a hodgepodge of different 
copyright royalty schemes and rates. Playing the same piece of 
music to the same listener and even in the same place, such as 
their home, workplace, or car, can lead to significantly 
different royalty payments, or none at all, depending upon 
whether the listener receives the music via a satellite 
transmission, via a high-definition digital radio broadcast, or 
via the Internet, which itself can be accessed by copper wire, 
by satellite transmission, or by fiberoptic cable.
    Thus, innovative new businesses, which often have the 
benefit of exposing consumers to a broader array of artists, 
benefiting both the listener and the artist, compete at a 
disadvantage with other music delivery services. So the 
challenge facing us as lawmakers is how to encourage 
innovation, growth, and competition while at the same time 
protecting artists, musicians, and authors.
    Last Congress, I introduced bipartisan legislation, The 
PERFORM Act, that tried to accomplish these goals, and chaired 
a hearing on the bill and the surrounding issues that I have 
just discussed.
    We have just been joined by the Chairman of the Committee, 
the distinguished Senator from Vermont, Pat Leahy, who asked me 
if I would chair this hearing, and I am very pleased to do so.
    But following the earlier hearing, my staff have been 
working with the interested parties in an effort to bring them 
together and to clarify the differences that still exist.
    It appears that some significant progress has been made 
during that period of time. Building upon the work begun by the 
staff here in the Senate, the House Judiciary Committee has 
reported out counterpart legislation that appears to represent 
a significant step forward.
    For example, I understand that the recording industry and 
the webcasting industry actually are in agreement on a new rate 
standard. This is terrific and mildly surprising. I look 
forward to discussing this with their representatives who are 
here today.
    The House Judiciary Committee also made a number of 
accommodations to broadcasters to address criticisms and 
concerns that they have raised. I also look forward to hearing 
the views of the witnesses today on those accommodations.
    As our Committee takes up this legislation, further changes 
or additions will be necessary, but today's hearing I hope will 
be a catalyst for clarifying and resolving what changes there 
may be.
    Music, I think, is an invaluable part of all our lives. New 
technologies and changing music platforms provide exciting new 
options for all consumers. As the industry continues to march 
forward into new frontiers, we have to ensure that our laws can 
stand the test of time and be fair to all.
    So I look forward to working with the Chairman and working 
with my colleagues to pass legislation and to hear the 
witnesses' thoughts on these issues.
    Now I am just delighted to recognize the distinguished 
Chairman of this Committee, Senator Leahy.

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

    Chairman Leahy. Well, I want to first thank Senator 
Feinstein both for chairing this hearing today--she is also the 
chair of one of the most critical committees in the Senate, the 
Senate Select Committee on Intelligence, which takes a great 
deal of her time--and I want to thank her for her leadership on 
content protection issues. There is no way I could have done 
this hearing today. We have a significant Judiciary nomination 
on the floor--that New England understatement--and I am going 
to be heading for that very soon.
    But I think the issue is very simple, even if the solution 
can be complicated. Broadcast radio stations use the work of 
recording artists, and they profit from it. But, unlike 
webcasters, broadcast stations do not compensate the artists. 
Maybe the broadcasters might not like this, but it appears that 
they are using somebody else's property without compensation. 
That may be okay in other countries, but it is not consistent 
with American property laws. It means that American artists do 
not receive millions of dollars each year that are collected in 
European allies' countries and other countries to pay for the 
use of their music on their broadcast radio stations. They can 
do it. I do not know why we cannot do it.
    We are hearing from hard-working musicians across the 
country. The president of the Vermont Musicians Association 
recently wrote in the Burlington Free Press: ``I am one of many 
hundreds of Vermonters employed in the music community. We are 
not celebrities; we are regular folks who work hard to help 
provide a decent living for our families, and we simply seek to 
be fairly compensated for our work.''
    I have also heard from radio stations in Vermont concerned 
about the impact of giving performing artists the same rights 
on broadcast radio that they have on the Internet. I would add 
that, unlike a State like Senator Feinstein's, one of the most 
magnificent States in this country, Vermont is a very small 
State. I actually know most of the performers, and I know most 
of the radio station owners. And so I am making sure that the 
Performance Rights Act protects smaller broadcasters while 
providing fair compensation to artists and musicians.
    The House Judiciary Committee approved companion 
legislation with an amendment that would permit small stations 
to use sound recordings for a flat rate of $500 a year. That is 
less than they have to pay in dues for lobbyists to lobby 
against this bill. We are going to need to consider similar 
amendments to address the legitimate concerns of smaller 
broadcasters when the Committee turns to the Performance Rights 
Act.
    I say this not to beat up on the National Association of 
Broadcasters, an organization that has done a great deal of 
good in this country. But I think they have got to finally sit 
down and work with us. We have invited them to work with us and 
work with those on the performer side to see if there is a way 
we can address the needs of both smaller broadcasters and 
performers. To date, that has not been done.
    This is legislation that is going to move. The time to sit 
down and talk is now. We have to ensure that songwriters remain 
protected. Songwriters are properly compensated by radio 
stations through private licensing agreements with ASCAP, BMI, 
and SESAC. A performance rights for recording artists should 
not come at the expense of songwriters, and we should establish 
parity across all music delivery platforms.
    I will put my whole statement in the record, but I think 
that it is time for the parties to sit down and talk because 
this is going to be legislation that will move. I appreciate 
that the Register of Copyrights submitted testimony today in 
support of ending the current inequity, but I cannot praise 
Senator Feinstein enough, who has talked to me considerably 
when we are not in the Committee about the importance of this, 
and I appreciate you holding this hearing.
    Senator Feinstein. Thank you very much. Thank you very 
much, Mr. Chairman, and I very much agree with your comments, 
and I do agree that the time is now and that we need to know 
what the concerns are, and we need, more importantly, to have 
people who are willing to reconcile those concerns so that we 
can move forward.
    So, with that, I will enter into the record the statement 
of Mary Beth Peters, the Register of Copyrights, and the 
statement of Pandora Media as well, without objection.
    [The statements appear as a submission for the record.]
    Senator Feinstein. The way I would like to proceed, ladies 
and gentlemen, is to ask each witness to confine your opening 
statement to 5 minutes, just state your point as clearly--you 
do not have to be fancy about it--and succinctly as you can, 
and that will provide more chance for us to answer questions. 
And I will go down the line and, beginning with Sheila, 
introduce each person prior to their 5 minutes.
    Let me begin with Sheila E. She hails from the San 
Francisco Bay Area. She is an award-winning singer, songwriter, 
and performing artist. She has recorded several top singles and 
has performed with some of the biggest names in music. She is 
also the president of Heaven Productions Music and a co-founder 
of the Elevate Hope Foundation, which is a charitable 
foundation that assists the needs of abused and abandoned 
children through music therapy. Sheila E has received the 
Imaging Foundation's Humanitarian Award, the Angels Across 
America Award, and the Prism Lifetime Achievement Award for her 
charitable and humanitarian work.
    Welcome, Sheila, and we will begin with you.

 STATEMENT OF SHEILA ESCOVEDO, GRAMMY AWARD-WINNING ARTIST, ON 
  BEHALF OF THE MUSICFIRST COALITION, SHERMAN OAKS, CALIFORNIA

    Ms. Escovedo. Thank you, Chairman Leahy and Senator 
Feinstein. I am really, really honored to be here to today to 
represent the hundreds of thousands of working musicians who 
seek one simple right--that is, to be compensated for their 
labor.
    My name is Sheila E., and I am here today on behalf of the 
MusicFIRST Coalition. I am also a member of AFTRA and AFM, as 
well as a board member of the Los Angeles Chapter of The 
Recording Academy, which represents thousands of music creators 
across the State of California.
    I want to talk about music and radio but, first, let's talk 
about music.
    I was born into a musical family, the daughter of the 
legendary band leader Pete Escovedo, so music is truly my 
destiny. I started playing an instrument at age 3, and once I 
made my concert debut--a seasoned 5-year-old--I knew I wanted 
to be a musician.
    As I matured as a musician, I had many wonderful musical 
experiences, from earning multi Grammy nominations for my solo 
work, to performing with such artists as Lionel Richie, Gloria 
Estefan, Beyonce, Ringo Starr, and, of course, Prince. And 
speaking of Prince, the other Senators from Minnesota who are 
not here right now, I am sure that they know that the 
``Minneapolis Sound'' is still very influential today.
    During that time, I began to discover much about the music 
business itself, and I was always at a loss to explain why one 
industry--traditional broadcast radio--is allowed to profit 
from the artists' work without compensation to those artists.
    As I toured around the globe and I saw that broadcasters in 
every other developed nation in the world compensate their 
artists, the lack of payment in America became more puzzling to 
me. As Internet radio developed and recognized their obligation 
to pay artists, the lack of terrestrial radio's payment became 
unacceptable.
    For all of the complex legal and legislative discussions 
that have taken place around this topic over the decades, the 
issue for musicians is really quite simple. We believe that 
being paid for one's work is a basic American right. Whether 
your workplace is an office, a classroom, a factory, or a 
recording studio, every American worker deserves to be 
compensated for his or her labor. And any business that profits 
from another's work should share some of that profit.
    All right. So let's talk about radio. Artists love for 
their records to be played on the radio. That is a given, but 
that is not the point.
    Artists love to get bookings for live gigs, but we get paid 
for those live gigs. Artists love to get songs placed in movies 
and TV shows, and we get paid for those uses. Artists love to 
sell records, and we get paid for those sales. Radio is the 
only part of the music business where our work is used without 
permission or compensation. So when the National Association of 
Broadcasters tells us that they are a true friend of artists, 
we respond by saying, ``Friends don't let friends work without 
compensation.''
    Radio's argument that a ``promotional effect'' exempts them 
from payment is a tired argument that will not hold water in 
any other context. Imagine the radio industry withholding 
payment from popular talk radio hosts claiming that they 
promote their book sales and TV ratings. Imagine the radio 
industry withholding payment from sports teams because airing 
the games promotes ticket sales. The talk show hosts and the 
sports teams will simply say, ``No broadcasting without fair 
payment.'' But until the Performance Rights Act is passed, 
artists have no such right.
    Radio's other arguments are just as worn out. The House 
version of the bill addresses the concerns of broadcasters, and 
we support the adoption of these provisions in the Senate bill. 
``Worried about small broadcasters? '' The bill lets them play 
all the music they want for as little as $1.37 a day. ``Not the 
right time in the economy? '' The bill defers payment for up to 
3 years. ``Concerned about public service announcements? '' To 
use public airwaves for free, the stations must air them and 
that won't change.
    One new argument I have heard has caused me particular 
disappointment: that the Performance Rights Act will hurt 
minority broadcasters. As a Latin artist, I want minority 
stations and minority artists to be able to thrive in this 
business. Many minority-owned stations are small and would 
rightly receive a special accommodation for the lower payments 
in the bill. And at the same time, the bill would allow 
Hispanic and African American artists their due payment for 
their important contributions to our American music mosaic. It 
is a sad irony that artists living throughout Latin America 
benefit from a radio performance right while their counterparts 
in the U.S.--the leader in intellectual property--do not. It is 
time to bring the U.S. in step with the rest of the developed 
world.
    So we have talked about music. We have talked about radio. 
Let me close by talking a little bit about the past and the 
future.
    First, the past. Last month my father, Pete Escovedo, 
turned a youthful, handsome 74. In addition to his own 
legendary band Azteca, he was a member of the group Santana and 
performed on a number of their records as well as other artists 
still heard on radio today. One of the most gratifying aspects 
of this legislation is that it will compensate so many great 
artists of my father's generation and those who have 
contributed so much to our musical heritage. Every single 
participant--featured artists, background singers, session 
musicians, and producers alike--will all benefit from this 
bill.
    But this bill is just as much about the future.
    One of the great honors in my life was to co-found a 
charity called Elevate Hope Foundation, and we provide abused 
and abandoned children an alternative method of therapy through 
music and the arts. The magnitude of music becomes such a 
inspiring force in the lives of these children that I have seen 
firsthand--and I get emotional because I see what music does 
for these kids. And they say that I cannot get emotional up 
here, but I will, because music is my life. And it is not fair. 
It is not fair what is happening.
    We must encourage our youth through music and the arts. 
Through music, they learn how to respect themselves, and I 
teach them that they deserve respect as individuals and as 
budding music creators. What I ask of you today, distinguished 
Senators, is to ensure that the next generation of musicians 
will enjoy the respect that they deserve by simply being 
compensated by the businesses that use their creations for 
profit. Through the passage of the Performance Rights Act, 
musicians and broadcasters will enjoy a relationship of mutual 
respect that will allow both to flourish.
    Thank you.
    [The prepared statement of Ms. Escovedo appears as a 
submission for the record.]
    Senator Feinstein. Thank you very much, Sheila.
    Our next speaker is Bob Kimball, and he is the Executive 
Vice President for Corporate Development, the General Counsel, 
and Corporate Secretary of RealNetworks, Inc. Mr. Kimball 
currently serves on the boards of directors of the Digital 
Media Association and the European Committee for Interoperable 
Software. Prior to joining RealNetworks, Mr. Kimball was a 
senior attorney and manager of business relations for IBM 
Global Services and an attorney with the law firm of Sidley and 
Austin in Senator Durbin's country, Chicago, Illinois. And we 
welcome Senator Durbin to these hearings.
    Mr. Kimball, would you proceed? Five minutes, please.

    STATEMENT OF ROBERT KIMBALL, EXECUTIVE VICE PRESIDENT, 
            REALNETWORKS, INC., SEATTLE, WASHINGTON

    Mr. Kimball. Thank you. Chairman Leahy, Senator Feinstein, 
Senator Durbin, thank you for the opportunity to speak today. I 
am Bob Kimball, and I currently serve as Executive Vice 
President at RealNetworks.
    As the creator of the streaming technology that made 
Internet radio possible and as the operator of one of the 
largest Internet music services, RealNetworks is deeply 
interested in sound recording performance rights and royalty 
parity.
    First, I want to thank you, Chairman Leahy and Senator 
Feinstein, for championing royalty parity and fair competition, 
both of which will foster innovation and provide greater 
benefits to music fans and recording artists alike. Parity 
would mean that royalties for cable, satellite, Internet, and 
even broadcast radio would be established for the first time by 
using a single, uniform standard. Parity would establish 
royalties that do not discriminate against or favor competing 
technologies or business models. Parity would also have 
Congress provide small webcasters similar discounted royalty 
caps that the Performance Rights Act provides small 
broadcasters.
    As part of establishing a uniform standard, there should be 
one consolidated rate proceeding that includes all radio 
services. This would create substantial efficiencies and ensure 
fair application of the standard.
    Mr. Chairman, today a single device like the radio I have 
here--not quite the size of a piece of furniture but, still, it 
weighs a ton--this can play the same music program on FM radio, 
satellite radio, and Internet radio. How this works is 
invisible to the user. I simply push a button, and the radio 
plays.
    But, inexplicably, the current system imposes dramatically 
different sound recording royalties, or none at all, based 
solely on which button I happen to push on the device or what 
technology delivers the song. This makes no sense. The 
Copyright Act should not decide technology winners and losers.
    The most difficult question you face, I think, is deciding 
what uniform standard will ensure royalties that fairly balance 
the interests of copyright owners, licensees, and the general 
public. For two reasons, I suggest using the royalty 
arbitration standard in Section 801(b)(1) of the Copyright Act, 
which was carefully calibrated by Congress when it was enacted 
in 1976.
    Most importantly, the four objectives outlined in Section 
801(b)(1) equally balance the interests of copyright owners, 
licensees, and the general public. As a result, the royalty 
determinations that applied this standard have been fair and 
have avoided above-market pricing that characterizes the 
current Internet radio standard.
    I think the Committee will agree that the benefits of a 
statutory license almost disappear if the rate-setting standard 
actually drives companies out of the market rather than 
empowering the rate setter to protect against that very harm by 
balancing all interests.
    Second, 801(b)(1) is the right standard because on each 
occasion that Congress has introduced a new standard, such as 
the willing buyer/willing seller or fair market value standards 
that have applied to webcasters and satellite television 
services, the resulting royalties have threatened or actually 
forced companies out of business, requiring remedial 
congressional action.
    My final point concerns Section 5 of the Performance Rights 
Act, which is intended to protect songwriters from harms that 
could result from the imposition of sound recording royalties.
    Section 114(i) of the Copyright Act already establishes a 
complete evidentiary bar against the use of sound recording 
royalty information to set rates for musical works. This bar 
applies equally to composition licensors and licensees, meaning 
songwriters cannot use this information to argue for high rates 
and radio services cannot use this information to argue for low 
rates.
    Unfortunately, Section 5 may convert this evenhanded 
evidentiary shield into a unilateral litigation weapon for 
music licensors. One interpretation of Section 5 would allow 
the use of sound recording royalties to argue for increasing 
musical works royalty, but forbidding consideration of the same 
information to argue for lower royalties. Turning this balanced 
shield into a one-way sword is fundamentally unfair and certain 
to lead to irrational royalty results.
    A related issue is the Webcasters Settlement Act's 
provisions allowing SoundExchange to cherrypick licenses that 
can be used as evidence before the Copyright Royalty Board. 
When SoundExchange negotiates a deal it likes, it shows the 
deal to the CRB. When the deal is less favorable, SoundExchange 
makes the deal confidential, and the board cannot consider it. 
Congress should no longer condone this practice and should 
require the copyright royalty judges to consider all relevant 
deals when setting royalties.
    In closing, I am sincerely grateful for the invitation to 
participate today, and I am encouraged that a level playing 
field might be in sight for Internet radio. I would be happy to 
answer any questions you may have. Thank you.
    [The prepared statement of Mr. Kimball appears as a 
submission for the record.]
    Senator Feinstein. Thank you very much, Mr. Kimball. And I 
assume when you refer to Section 5, the section you are 
referring to is Section 5(b).
    Mr. Kimball. Yes. I believe that is correct.
    Senator Feinstein. Thank you.
    The next person is Marian Leighton-Levy. Marian Leighton-
Levy is the co-founder and co-owner of Rounder Records in 
Burlington, Massachusetts. Her areas of specialty include 
publicity, promotion, and artist relations. She has served on 
the board of the Blues Foundation, the Advisory Board of the 
Rhythm and Blues Foundation, and is presently on the board of 
the International Bluegrass Music Museum in Owensboro, 
Kentucky. She is a graduate of Clark University in Worcester, 
Massachusetts, and we welcome you today.

  STATEMENT OF MARIAN LEIGHTON-LEVY, OWNER, ROUNDER RECORDS, 
                   BURLINGTON, MASSACHUSETTS

    Ms. Leighton-Levy. Thank you. Senator Feinstein, Chairman 
Leahy, and other distinguished members of the Committee, I am 
pleased to be here today to speak on behalf of so many talented 
and hard-working people in the music industry, and to voice the 
support of thousands of us who have waited so long for the fair 
treatment embodied in the Performance Rights Act. My name is 
Marian Leighton-Levy, and 39 years ago, two college friends and 
I founded Rounder Records, one of America's largest independent 
labels.
    We at Rounder are extremely proud of the breadth and depth 
of our catalog because so much of it embodies our country's 
cultural and musical heritage, from Alan Lomax's seminal field 
recordings from the 1930s, to the complete recorded work of 
Jelly Roll Morton, from the Library of Congress, to the Woody 
Guthrie set coming out next month comprised of newly discovered 
old masters. Many of our most critically acclaimed releases 
will never sit at the top of the Billboard charts, or chart at 
all, for that matter. But they are, nonetheless, important 
recordings. Some will also receive significant airplay on radio 
stations both here but even more, in some cases, in other 
countries which revere and enjoy American music and culture.
    Perhaps Rounder's approach gives us a unique perspective 
and view. Many of our artists are largely middle-class, hard-
working singers and musicians, as Chairman Leahy referred to 
earlier from his home State, trying to make a living doing what 
they love. That is why the Performance Rights Act has 
tremendous support from labor groups across the country. This 
is not just about superstars and big-name acts.
    This legislation will provide significant revenue to many 
of the working artists and musicians we have recorded for the 
last 39 years. Many have already seen significant checks from 
satellite, cable, and Internet radio play. If the PRA is 
passed, they will also benefit for the first time from overseas 
broadcast royalties, as well as royalties generated by 
specialty shows in the U.S. and from public and non-commercial 
radio play, too.
    You have undoubtedly heard the broadcasters' primary 
rationale for not paying: that they promote our music. While 
this excuse may have had more significance 80 years ago when it 
was first used, it is much less meaningful today. Now, radio is 
just one way--admittedly an important way, but just one way--
music is promoted. There are dozens of new platforms and 
businesses that reach consumers which also promote music, but 
with one significant difference: that they do pay a performance 
royalty.
    Only broadcast radio gets this free pass from decades ago. 
Even using their own numbers, the value proposition offered by 
the broadcasters does not add up. Mr. Newberry has testified in 
the past that they provide as much as $2.5 billion in 
promotional value to performers. Meanwhile, they generated $14 
billion from the use of our music last year. Does that sound 
like equal value to you?
    Anyway, the truth of the matter is, as an independent label 
focused on Americana, bluegrass, folk, blue, and similar niche 
musics, we may get less airplay here in the U.S. than others 
who release more mainstream recordings. But our music fills the 
airwaves overseas, so this performance royalty is as important 
to us for these reasons as for American radio. American music 
accounts for 30 to 50 percent of all music broadcast on foreign 
stations. Yet, given our current law, because our stations do 
not pay a performance right, those foreign stations do not have 
to pay us either. Each year, there are tens of millions of 
dollars being left on the table--millions of dollars for 
compensation and for further investment that will flow to 
artists, musicians, and recording company owners when the 
Performance Rights Act finally becomes law. Denying American 
creators and copyright holders money they deserve from overseas 
so that broadcasters can receive a subsidy in the form of our 
property is fundamentally unfair.
    A striking example of this inequity can be found in the 
case of the recent Robert Plant and Alison Krauss record 
``Raising Sand,'' which we released last year. It won five 
Grammy Awards, including Album of the Year and Song of the 
Year. Since Robert Plant is a U.K. native, he will be able to 
receive payment for his work on the recording when it is played 
around the world, but Alison Krauss will not be paid because 
she is a U.S. citizen.
    As I have become more involved in the fight for a 
performance right, I am continuously amazed at the 
broadcasters' misinformation campaign on the Performance Rights 
Act. They state that this legislation is the evil brainchild of 
foreign-owned record companies when, in fact, the fight for a 
performance right was started by performers with the National 
Association of Performing Artists way back in 1936. They say 
that we are just looking for a bailout from our failed business 
model in the digital age when they have fought this right for 
more than seven decades, through up and down cycles, before 
anyone knew what the word ``digital'' was. They warn that more 
than half of the royalties are directed to record labels when 
neither the word ``record'' nor ``label'' appears anywhere in 
the bill. In reality, the legislation directs royalties to be 
split down the middle: 50 percent directly to artists and 
musicians, and 50 percent to the copyright holder. And since 
many artists own their own master recordings, artists and 
musicians will actually get more than 50 percent of the 
payments. There are currently 1,200 artist-owned independent 
labels signed up with SoundExchange, which collects and 
distributes the royalties already from digital and Internet 
radio.
    So, in closing, this is not an easy business, now more than 
ever. Imagine working in such a challenging industry. Imagine 
investing, as we do, in a volatile and unpredictable market. 
Now imagine someone taking your product without consent and 
using it to profit his or her own business without so much as a 
penny in return. ``Unfair'' is not the word. It is 
``unconscionable.''
    But that is the scenario of our current law, and that is 
the reality for all of us in the recording industry--labels, 
producers, managers, performers, and musicians. Today we stand 
united in seeking a right that should have been afforded to us 
decades ago.
    In the end, harming broadcasters is the last thing we want 
to do. They should be our partners in the music business. All 
we are asking for is fair compensation for use of our work. The 
Performance Rights Act provides us with the framework to secure 
that compensation and sets in place the proper balance of 
interests between creators and broadcasters.
    We sincerely look forward to working with broadcasters in 
the future--as lovers of music, as supporters of musicians, and 
as true partners in commerce and in art.
    [The prepared statement of Ms. Leighton-Levy appears as a 
submission for the record.]
    Senator Feinstein. Thank you very much.
    And now we will move to Steve Newberry. He is the president 
and chief executive officer of Commonwealth Broadcasting 
Corporation, based in Glasgow, Kentucky. He is also currently 
serving as the Joint Board Chair for the National Association 
of Broadcasters. Mr. Newberry entered radio ownership at the 
age of 21 and has done just about every job around a radio 
station that one can do. He is a graduate of the University of 
Kentucky, and he resides in Hyattsville, Kentucky, with his 
family.
    Please go ahead, Mr. Newberry.

  STATEMENT OF STEVE NEWBERRY, JOINT BOARD CHAIRMAN, NATIONAL 
ASSOCIATION OF BROADCASTERS, AND PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, COMMONWEALTH BROADCASTING CORPORATION, GLASGOW, 
                            KENTUCKY

    Mr. Newberry. Thank you very much. Good afternoon, 
Chairwoman Feinstein, Chairman Leahy, and other members of this 
very distinguished Committee. My name is Steve Newberry. I am 
the owner and operator of Commonwealth Broadcasting, which does 
operate 23 small-market radio stations, based in Glasgow, 
Kentucky. I am testifying today, however, on behalf of the 
6,800 members of the National Association of Broadcasters, of 
which I do have the privilege of serving as joint board chair.
    I am sure it comes as no surprise to anyone in this room 
when I say that these stations across the country oppose the 
performance fee legislation that we are considering here today.
    I believe this legislation will up-end local radio 
broadcasting as you have known it. I have been a part of the 
radio industry for over 30 years, and I can honestly tell you 
that I have never seen the economic pain the radio industry is 
currently experiencing. And as challenging as radio's current 
economic landscape is, it will deteriorate even further if a 
performance fee were to be enacted. Already this year, publicly 
traded companies are reporting revenues down 24 percent, down 
20 percent, down 24 percent, down 25 percent, and the numbers 
continue.
    But beyond radio's economic landscape, we strongly believe 
that local radio stations do indeed provide compensation to the 
record labels and artists today. The artist is paid with free 
advertising and free exposure every time a station plays their 
music. Local free radio is a unique developer, exposer, 
promoter, and the great populizer of new and old music to 
multiple new and old generations of listeners. There is a value 
to radio's promotional--to the promotion of radio that we 
provide to the labels and the artist. But how do we qualify it? 
How do we quantify it?
    Economist James Dertouzos has determined that radio airplay 
is directly responsible for $2.4 billion a year in music sales. 
By the way, that figure does not include the additional 
billions that are earned in concerts, merchandise sales from 
radio promotions, artist interviews, CD and concert ticket 
giveaways.
    Additionally, every day radio stations are flooded with 
calls, with e-mails, texts, and visits from record label 
promoters trying to get a song on the radio or to increase the 
number of spins or plays that a station will give a particular 
song. One station in Salt Lake City actually kept track of the 
number of calls and e-mails received from record labels. 
Between August 1st of 2008 and July 14th of this year, one 
radio station received 9,597 e-mails from the labels, 755 
calls--that is a total of 10,352 contacts in the course of a 
year. That is an average of 28 contacts per day 7 days a week. 
And that is one radio station in Salt Lake City, Utah.
    Free airplay is important enough for record labels to send 
gold and platinum albums, just as the one that I have here. 
This plaque was presented to radio station WIHT: ``To 
commemorate RIAA's certified multiplatinum sales of more than 9 
million copies of `Confessions,' '' Usher's 2004 release.
    Finally, getting artists airplay on local radio is 
apparently valuable enough that record labels continue to spend 
thousands of dollars inviting radio program directors to hear 
private showcase concerts by recording artists. I would ask 
that this stack of e-mails demonstrating that practice be 
entered into the record.
    Senator Feinstein. So ordered. It will be. Thank you.
    [The information appears as a submission for the record.]
    Mr. Newberry. Thank you, ma'am.
    These private concerts offer a real glimpse into how much 
record labels need radio airplay.
    Chairman Leahy. Excuse me. Could we just have--what was it 
you wanted entered in the record? You mean that whole stack or 
just the----
    Mr. Newberry. No. This stack.
    Chairman Leahy. Okay. Thank you.
    Mr. Newberry. At a later point in the hearing, yes, sir.
    Chairman Leahy. At a later point in the hearing, if that 
request is made, what we will do is keep the stack available in 
the Committee room for anybody who wants to read it. The whole 
stack will not be part of the record.
    Mr. Newberry. This is for a different topic later in the 
hearing, Mr. Chairman.
    Chairman Leahy. All right.
    Mr. Newberry. This is the reference that I was making in my 
oral argument.
    It is true: Radio competes with other listening platforms. 
But this competition has not diminished the extraordinary value 
of radio. Satellite radio has 18.6 million subscribers. 
Satellite radio and Internet radio are certainly a growing 
media. Internet radio has approximately 42 million listeners, 
many of those paying for their services. But these numbers are 
dwarfed by the fact that 235 million listeners receive free, 
over-the-air radio every week. Radio is the number one way to 
expose, promote, and get music into the lives of listeners who 
fund the recording industry through the sales of music, concert 
tickets, and merchandise.
    At the end of the day, no one has been able to prove that 
the value of music is always worth more than the value of 
radio's promotion. None of the witnesses here today can tell 
you that. And before this Committee passes legislation that 
will have a devastating impact on the radio industry, it seems 
to me we should know the answer to that question.
    Competing resolutions opposed a new performance fee in the 
House and the Senate have garnered significant congressional 
support. S. Con Res. 14, introduced by Senators Lincoln and 
Barrasso, has collected 23 bipartisan cosponsors, and H. Con. 
Res. 49 in the House has 246 cosponsors, well over a majority 
of the House.
    Thank you for inviting local radio to tell our story. We 
are part of the engine that drives our economy. We are free, we 
are local, we are community based, and we are fighting to stay 
afloat in this very tough economy.
    Thank you, and I will be happy to answer any questions that 
you may have.
    [The prepared statement of Mr. Newberry appears as a 
submission for the record.]
    Senator Feinstein. Thank you very much, Mr. Newberry.
    I would like to acknowledge that we have been joined by 
Senator Klobuchar and Senator Franken. I would acknowledge 
Senator Durbin and Senator Cornyn, so we are delighted to have 
you here.
    We will now move on to Mr. Oman. Ralph Oman is the Pravel 
Professor of Intellectual Property Law at George Washington 
University Law School, and he is a senior fellow at the 
Creative and Innovative Economy Center. From 1985 to 1993, he 
served as the Register of Copyrights for the United States. He 
has experience working for this Committee, having served as 
chief counsel on the Subcommittee on Patents, Copyrights, and 
Trademarks from 1983 to 1985, and chief counsel of the 
Subcommittee on Criminal Law from 1981 to 1983.
    Welcome back, Mr. Oman.

 STATEMENT OF RALPH OMAN, ADJUNCT PROFESSOR, GEORGE WASHINGTON 
            UNIVERSITY LAW SCHOOL, WASHINGTON, D.C.

    Mr. Oman. Thank you very much, Senator Feinstein. It is a 
pleasure to be here, and members of the Judiciary Committee. 
For me, today's hearing is deja-vu all over again. I have been 
involved in this issue since 1975 when my old boss, Hugh Scott 
of Pennsylvania, the Senate Minority Leader, scheduled and 
chaired a lively hearing before the Subcommittee on Patents, 
Trademarks, and Copyrights that featured sultry Julie London 
singing the Mickey Mouse Club theme song as a steamy love 
ballad.
    [Laughter.]
    Mr. Oman. It demonstrated the importance of the performer's 
contribution to the success of music. It was a great success.
    Chairman Leahy. I came to the Senate too late.
    [Laughter.]
    Mr. Oman. In fact, the issue reaches far beyond my brief 
tenure in the Senate Judiciary Committee, all the way back to 
the 1920s, when radio was in its infancy. The first performance 
rights legislation for sound recordings was introduced in 1926. 
Since that time, dozens of bills have been introduced, several 
of them by Hugh Scott of Pennsylvania, trying to create the 
right for the performers and labels, but none of them has been 
able to finally get across the finish line. There has been 
strong support in the bar. The American Bar Association adopted 
its first resolution--the first of many--urging adoption of a 
public performance right for sound recordings in 1938.
    It comes down to this, in my opinion. As a matter of 
property rights, men and women who create and own a copyrighted 
work should have the right to get paid for it by the people who 
use their works. That is the basic premise of copyright 
protection.
    Nowhere else in copyright law--and nowhere in American 
jurisprudence generally--can one business take another's 
private property without permission or without payment because 
the user concludes unilaterally that long term it would be in 
the interest, the long-term interest, of the property owner's 
business, even if the owner does not agree, does not think it 
would be so. In our case, some broadcasters think that they are 
doing the performers and the labels a favor by creating 
promotional value. Who, I ask, is the best judge of this quid 
pro quo--the broadcasters or the creators?
    Over the years, Cabinet Secretaries, Trade Representatives, 
many Members of Congress, and many Registers of Copyrights have 
argued that we have no legal or economic justification for this 
anomaly in our law.
    The bipartisan performance rights legislation introduced in 
this Congress in both the House and the Senate really bends 
over backwards to provide unprecedented accommodations to the 
broadcasters. The bill sets low flat fees for most 
broadcasters, some as low as one-half of 1 percent of a 
broadcaster's revenue. There is a delay in the implementation 
of the legislation to allow broadcasters relief during these 
hard economic times, and there is a long phase-in period that 
gives them the chance to ease slowly into their new partnership 
with performers.
    Promotional value cannot justify free use. Instead, it 
should be a factor in determining the appropriate royalty. We 
use that factor in market negotiations for other content that 
radio stations use, and we use it setting the rate for 
statutory licenses for other platforms, such as Internet radio.
    True parity requires equal footing when it comes to 
figuring out how we should set the rates for these different 
platforms. It also is important in the ongoing negotiations in 
the private sector. Today, because of the patchwork or, as you 
said, Madam Chairwoman, the hodgepodge of provisions in the 
Section 114 license, we have a confusing system of rate 
standards among the various radio platforms. This is 
unnecessary and unfair. Of course, different platforms reflect 
different business models and may wind up paying different 
rates ultimately, but the standard used to derive those rates 
should be uniform or standardized and reflect the fair market 
value for the use of these works.
    The statutory license was never intended to provide music 
at below-market rates. The best rate standard for all radio 
platforms is fair market value, as you proposed, Madam 
Chairwoman, in the Perform Act. Copyright owners and performers 
deserve nothing less for their works--especially when they have 
no choice but to allow their use. Because of the statutory 
license, what some call a ``compulsory license,'' they cannot 
just say no. They cannot walk away from the bargaining table. 
That makes the negotiation one-sided right from the outset.
    As you mentioned, Senator Feinstein, you and Senator Graham 
asked the stakeholders to get together and formulate a new rate 
standard. That effort led to a compromise provision adopted by 
the House Judiciary Committee in H.R. 848. That standard is a 
modification of the standard used today for satellite and cable 
radio proceedings. While I would prefer the language of your 
bill, Madam Chairwoman, I find the compromise language 
reasonable, and I would urge its adoption by the Committee?
    One last point, if I may. As you mentioned, Madam Chairman, 
this lack of a public performance right for sound recordings is 
a huge international embarrassment. The United States loses 
millions of dollars a year to foreign markets. I urge you to 
consult with the U.S. Trade Representative and get his take on 
the many advantages that would flow to the United States if we 
joined the almost unanimous international consensus in granting 
a public performance right for performers and sound recordings.
    Thank you very much for the opportunity to testify. I would 
be pleased to answer any questions.
    [The prepared statement of Mr. Oman appears as a submission 
for the record.]
    Senator Feinstein. Thank you very much, Mr. Oman, and thank 
you for your service to this Committee. It is very much 
appreciated. I want you to know that.
    And, finally, we have Mr. Winston. James Winston is the 
Executive Director and General Counsel of the National 
Association of Black Owned Broadcasters, a position he has held 
since 1982. He is also a partner in the firm of Rubin, Winston, 
Diercks, Harris, and Cooke. From 1978 to 1980, Mr. Winston 
served as legal assistant to Commissioner Robert E. Lee at the 
Federal Communications Commission.
    Thank you and welcome, Mr. Winston.

 STATEMENT OF JAMES L. WINSTON, EXECUTIVE DIRECTOR AND GENERAL 
  COUNSEL, NATIONAL ASSOCIATION OF BLACK OWNED BROADCASTERS, 
                     INC., WASHINGTON, D.C.

    Mr. Winston. Good afternoon, Senator Feinstein. I wanted to 
note at the outset that my light does not work for the time, so 
if I go over, it is only ignorance of the actual time. But I 
thank you again, Senator Feinstein, Chairman Leahy, members of 
the Committee. Thank you for inviting me to testify this 
afternoon.
    You have invited me today to discuss imposing additional 
copyright royalty obligations upon radio broadcasters. In the 
discussion of additional copyright fees, the broadcasting 
industry has consistently been portrayed as one in which all of 
its participants make fat profits. Therefore, imposing 
additional copyright royalty payments on the industry merely 
skims a little off of those fat profits.
    For minority broadcasters, there are no fat profits to 
skim. In fact, most minority broadcasters today are struggling 
to survive. Therefore, I come before the Committee today to 
describe the current state of minority broadcasters and the 
issues that threaten to further erode minority broadcast 
station ownership. As a result of these threats, as I shall 
explain below, NABOB requests that the Committee consider 
investigations of the principal lenders to the broadcast 
industry and of the Arbitron ratings company which has a 
monopoly over radio ratings. It is my hope that once you 
understand the current plight of minority broadcasters, you 
will understand why it is impossible for us to agree to pay 
additional copyright royalties.
    Broadcast station advertising revenues have fallen 
drastically this year, and many minority broadcast companies 
find themselves unable to maintain these minimum cash position 
required by their bank loan agreements. This situation has been 
made worse because of a new breed of lender in the broadcast 
industry today: hedge funds. Therefore, I am here today to 
request that this Committee investigate the practices of the 
leading lenders to the broadcast industry, lenders such as 
Goldman Sachs, GE Credit, the combined Wells Fargo-Wachovia 
Bank, JP Morgan, and Bank of America. These banks have allowed 
hedge funds, such as Guggenheim, Fortress, Silver Point, and DB 
Zwirn into their consortia. Now they are acting at the behest 
of the hedge funds in refusing to enter into workout 
arrangements that will provide minority broadcasters an 
opportunity to keep their companies intact and restructure 
their loans for a brief period until the economy turns around.
    The reasonableness of this request is underscored by the 
fact that the banks listed above are all beneficiaries of 
Government relief through billions of dollars of Troubled Asset 
Relief Program--TARP--funds. Alternatively, NABOB requests that 
the company help NABOB seek assistance from the Treasury 
Department or Federal Reserve under one of their programs, such 
as the Term Asset-Backed Securities Loan Fund or the Commercial 
Paper Funding Facility.
    Minority broadcasters face an additional threat that is 
equally important for us to bring to your attention. This 
second threat is posed by Arbitron, Inc., an audience 
measurement company that maintains a monopoly in the 
measurement of radio audiences. Recently, developed the 
Portable People Meter, an electronic tracking device which 
records signals from the radio stations to which the wearer is 
exposed. Initial results from the PPM measurements have shown 
such huge rating declines for stations serving Black and 
Hispanic audiences that the financial survival of these 
stations is at stake. The damages to minority broadcasters that 
I am referring to are not theoretical. They are real, 
quantifiable, and devastating.
    Since PPM became operational in New York City in October 
2008, Spanish Broadcasting System has been forced to reduce 
staff by 37 percent. Inner City Broadcasting Corporation 
reports that in New York revenues are down 58 percent. And 
Inner City's San Francisco station has been forced to lay off 
13 percent of its staff and cut salaries by 10 percent.
    In Los Angeles, the situation is just as grim. KJLH, owned 
by Stevie Wonder, has seen its revenue fall over 48 percent, 
and it has been forced to lay off 13 percent of its staff.
    Arbitron has been sued over PPM by three Attorneys General, 
investigated by a fourth, and is currently being investigated 
by the FCC. In addition, this new PPM product has been denied 
accreditation by the Media Rating Council, the MRC. The MRC was 
created at the urging of Congress to prevent the kind of 
situation we are faced with today. NABOB, therefore, requests 
that the Committee investigate the PPM methodology and obtain 
information on the PPM accreditation process from Arbitron and 
the MRC.
    In conclusion, these two problems--the refusal of lenders 
to restructure broadcast loans to allow these otherwise healthy 
businesses to weather the current recession, and Arbitron's 
abuse of its monopoly position in the radio ratings industry--
are more than an antitrust issue for this Committee. They are 
more than a business crisis for African American and Hispanic 
station owners. They are a civil rights crisis for all of 
America. Without minority communities with strong, vibrant, 
independent voices, America loses an important part of what 
makes our democracy great--a Government in which all of its 
people participate and are heard.
    I thank you for the opportunity to appear here today.
    [The prepared statement of Mr. Winston appears as a 
submission for the record.]
    Senator Feinstein. Thank you very much, Mr. Winston.
    Before going to questions, I would like to recognize a 
distinguished artist in the audience. She is Gloria Gaynor. She 
gave birth to the era of disco, moving into the mainstream 
dance scene, when her song ``Never Can Say Goodbye'' debuted at 
number one on the charts in 1973 and became the first dance 
song to reach number one status in dance music. Today, she is a 
very important part of music and has come to Washington to 
commemorate the 30th anniversary of her hit ``I Will Survive.'' 
If you would stand, we would like to give you a round of 
applause.
    [Applause.]
    Senator Feinstein. Welcome. We are delighted to have you 
here. Thank you. Thank you.
    Let me begin the questions. I am really perplexed. Let me 
tell you the kind of communication I have from the Southern 
California radio broadcasters: ``I know you like to think you 
are protecting intellectual property, but in your attempt to 
protect the performers, you are trampling on the intellectual 
property rights of thousands of radio station brands, and 
actually in the long run, you will be hurting the performers, 
too.''
    And so I am reading Mr. Kimball's testimony, and I come 
upon a chart, and the chart is on page 6 of his testimony. It 
is ``2008 Radio Revenues and Royalties,'' and at the right it 
says ``Broadcast Radio (Music) 2008 Revenue, $16.5 Billion.'' 
At the bottom is ``Songwriter Royalties,'' and as you go over 
to that same ``Broadcast Radio (Music),'' 3 percent of revenue.
    Let me ask this question: Do you believe these are fair and 
accurate figures, Mr. Kimball?
    Mr. Kimball. Yes, I do believe they are fair and accurate 
figures to the extent they can be compiled from public sources, 
which is not always the easiest thing to do. But to the best of 
our ability, using the sources available, I believe these are 
certainly roughly accurate figures that give you a perspective 
of the size of the economics involved and the amounts actually 
being paid.
    Senator Feinstein. Thank you.
    Mr. Newberry, I do not know specifically about the problems 
Mr. Winston was elucidating, so let us put them over here for a 
moment. Take a look at the figure that was just $16.5 billion 
in profit----
    Mr. Newberry. That would be gross revenue, not profit.
    Senator Feinstein. All right, whatever it is. Gross 
revenues to songwriters, 3 percent. And you made an eloquent 
argument, I think, as to why we should protect the status quo. 
I come from California. We are a big intellectual property 
State, and I have found over many decades that protecting 
copyright and patent interests is really important because it 
encourages the development of the industries that these 
copyrights and patents relate to.
    Mr. Newberry. Yes, ma'am.
    Senator Feinstein. You are saying that is not necessarily 
so. You are saying it is okay for us to take the content. You 
are saying it is okay for us to play them without recompense to 
the songwriter.
    I have a hard time understanding this. Can you explain why?
    Mr. Newberry. Certainly. With all due respect, that is not 
what I was intending to say, and I do not believe that is what 
my testimony says.
    Senator Feinstein. Okay. Fair enough. Explain it.
    Mr. Newberry. We are saying that there is a difference in 
the way we compensate the composers of the music and the way we 
compensate the performers. We compensate the composers through 
ASCAP, BMI, and SESAC, and that is what equated historically to 
3 to 4 percent of the gross revenues of our industry, which is 
obviously a much higher percentage of our profit. We compensate 
the composers because they are not known. They do not have 
generally the benefit of celebrity. I can tell you that Jeffrey 
Steele is a songwriter in Nashville, Tennessee. Many of you may 
not know that name. But if I told you that he wrote the song 
``What Hurts the Most'' for Rascal Flatts, you would certainly 
recognize that song. But you associate it with Rascal Flatts.
    We compensate the songwriters so that they have the ability 
to earn a living, their intellectual property, to create those 
great songs that America has.
    Senator Feinstein. But not the performer.
    Mr. Newberry. The performers are compensated through this 
partnership that we have had that has lasted for over 80 years, 
that has been one that while the record industry wants to 
change it now, they have spent millions of dollars to get their 
songs aired on the radio because they know that creates money 
for them. It creates the sale of music. It creates the sale of 
concert tickets. It creates the sale of T-shirts. And that is 
how they have been compensated historically.
    Senator Feinstein. Well, let me ask you this: Why are we 
the only industrialized country that does this?
    Mr. Newberry. Well, we have an entirely different 
structure. In many----
    Senator Feinstein. How so? I mean, why are we separate from 
Europe or any other nation?
    Mr. Newberry. First of all, I think without argument people 
would argue that the U.S. music industry is the most vibrant in 
the world. But there are also different copyright protections 
that occur here. Songs here are protected for copyright for 95 
years. In many countries, it is 50. And if you were to apply 
that same standard, many of Elvis Presley's, the original rock 
songs that came out in the 1950s would now be public domain. 
Soon, within the next 10 years, all the Beatles songs, all of 
the Motown songs, all those songs would become public domain if 
we had the 50-year structure that a lot of European countries 
do.
    We protect those copyrights for 95 years so they are not 
public domain and they can still be monetized by the artist.
    Senator Feinstein. Okay. I just must tell you--all right. 
Let me ask you another one. The National Association of 
Broadcasters is running ads across the country referring to 
this legislation as a tax. However, we all know taxes go to a 
government. Doesn't the performance right royalty this 
legislation would establish go to the recording artists and 
their contractual partners, the record labels, and not to 
Government?
    Mr. Newberry. Yes, ma'am, it does.
    Senator Feinstein. Okay. Thus, isn't it misleading to call 
this a new tax?
    Mr. Newberry. You can call it a tax. You can call it a fee. 
You can call it whatever you want it to be called. There is no 
question that it is a movement of money from one industry to 
another, without a--if it is being done by the Government, 
without it being a fair market transaction.
    Senator Feinstein. Do you consider the copyright royalties 
you collect from cable companies to be taxes?
    Mr. Newberry. I do not collect any royalties from the cable 
companies, ma'am.
    Senator Feinstein. You do not?
    Mr. Newberry. No, ma'am.
    Senator Feinstein. Okay. Then my information is wrong.
    Senator Cornyn, would you like to go next? And then we will 
go to Senator Leahy.
    Senator Cornyn. Thank you, Madam Chairman, and thanks to 
each of you witnesses for being here today.
    Mr. Oman, based on your testimony, it sounds like this 
fight has been going on a long, long time, and I do not know if 
we are any closer to resolution than we were when it started, 
but let me just suggest an idea. I think it was Ralph Waldo 
Emerson that said, ``To the person whose only tool is a hammer, 
that person tends to regard every problem as a nail.'' And I 
would like to suggest maybe the possibility of a different tool 
to address your concerns and see from the various witnesses 
whether there is any interest in this, any viability, because 
it strikes me that both parties to the debate are arguing that 
they confer value on the other, and to me it seems pretty 
obvious, that there is value being conferred both ways. The 
recording industry argues that music drives advertising 
revenues for radio stations. The broadcast industry contends 
that radio airplay drives sales of songs, albums, and concert 
tickets.
    One of the main complaints I have heard from the recording 
industry is that record companies and artists do not have any 
choice as to whether their music is played on the radio. I 
think, Mr. Oman, you mentioned that this is the taking of 
intellectual property. And I understand the frustration of 
artists having no say in whether their music is being played.
    But I wonder if one way, maybe another way of restoring 
choice to the performers who own their intellectual property 
without imposing a compulsory license, one possible way of 
accomplishing that would be a ``Do Not Play'' list under which 
artists could opt out of allowing their catalog to be played on 
terrestrial radio. This would give artists full control over 
their work. If an artists believed that the promotional value 
of being on the radio was not enough to make the radio play 
worthwhile, then the artist could take his or her songs out of 
circulation. So instead of the radio station having a 
unilateral option to play music, the radio station and artists 
would have to agree that free airplay is in their mutual 
interest.
    Would there be any, do you see any--well, let me just ask: 
What do you think about that kind of proposal? Mr. Winston, 
would you care to offer an opinion on that?
    Mr. Winston. I have heard that proposed, and I would have 
to see the structure that you are proposing. But I think if you 
make it a situation where the artist can opt out per station, 
what you are going to do is drive all small stations out of 
music because the artists will only do business with the big 
stations. So I think that, you know, if they are going to do a 
``Do Not Play'' list, it has got to be nationwide, that they 
are going to say we do not want to be on the radio nationwide. 
Otherwise, they are only going to do business with the big 
stations.
    Senator Cornyn. That is an interesting perspective. That 
would not have occurred to me.
    Mr. Oman, would that address some of your concerns about 
taking of the intellectual property of the performers without 
compensation?
    Mr. Oman. The copyright law has traditionally protected the 
small and the powerless against the powerful and the rich. By 
suggesting that we create a playlist, you would be in some ways 
forcing the unknown, the powerless new performers to give their 
rights up in exchange for this chance of exposure, this chance 
of air time that is so valuable to develop their careers. So I 
think that would be contrary to the approach of copyright, and 
it would also not serve the public interest.
    I think it is well established that the listening public 
generally has a preference for established performers, 
established repertoire, and if this system encouraged the radio 
stations to take only the new and hungry performers, it would 
not serve the public interest.
    Senator Cornyn. Well, if I am the relatively new artist 
trying to get my music promoted by a radio station, I may well 
decide that it is in my personal financial interest to do so. 
But if I am perhaps a more accomplished artist that you do not 
need that kind of promotional airplay in order to--I am talking 
about something I do not know much about--to promote your 
music, then you could choose to do that.
    What do you think, Mr. Newberry? Would that work?
    Mr. Newberry. Senator, I had not heard this concept until 
today. I think that it certainly draws a line and says if 
performers or record labels feel that there is not adequate 
value in the promotional level, then they would be saying, 
``Sure, do not play our songs,'' and they would have to take 
the chances.
    I agree with Mr. Winston that if it is negotiated 
individually with each radio station, I think you would really 
do terrible harm to small independent radio stations, and you 
would probably have effects that you would not want. But if it 
is a blanket prohibition on radio, I can certainly see that 
that would force an artist or a label to say, ``Is there value 
to radio or not? ''
    It is an interesting concept. I would want to think about 
the ramifications of it before I said whether it would be 
something I could support or not. But it certainly does draw 
the line in the sand and say, ``Is there value to what radio 
does or not? '' And if an artist wants to take that chance, 
certainly it would put their money where their mouth is.
    Senator Cornyn. Thank you. My time has expired.
    Senator Feinstein. Thank you very much, Senator Cornyn.
    Senator Leahy.
    Chairman Leahy. I just want to make sure I fully 
understand. Mr. Newberry, you said if they were to negotiate 
with each single radio station, radio station by radio station. 
Another way could be for them to simply say any radio station 
that wants to play our music is going to have to negotiate with 
us. What do you think of that?
    Mr. Newberry. Well, I think what----
    Chairman Leahy. I mean, are you saying the radio station, 
if we were to pass something, would be free to use any 
recording unless the artist has specifically called that radio 
station and said, ``I do not want you using mine'' ?
    Mr. Newberry. No, I am not saying that because it is a 
proposal I heard just moments ago. But the concern that I have 
in that is, as a small-market broadcaster, a recording label or 
artist may say, ``It is not important to us whether our songs 
are played on stations in markets 100-plus; we just want to 
have our music played in the top 50 markets or the top 100 
markets.'' So I think that harms rural America's exposure to 
the arts.
    The second thing that I would say is problematic to this is 
that----
    Chairman Leahy. What if they said they will play it only in 
those top stations unless they paid for it in the other 
stations at a rate, say, based on the size?
    Mr. Newberry. I think when you move to where those artists 
and those labels with the most money get their songs played 
most, you are setting up a very bad precedent for the way the 
music industry works and for new and evolving artists.
    Chairman Leahy. Yes, but what I hear in the letters that 
your organization asks people to send to me, and several--and 
before you suggest they are all spontaneous, I have called 
several of these people, and they say they have gotten the form 
letter from you.
    Mr. Newberry. I was not going to suggest that, Senator.
    Chairman Leahy. All right. I was just trying to keep you 
from making a bad mistake here. But I hear that they say, 
``Well, of course, the music, the radio stations are doing the 
artists a service by playing their music.'' You are not 
suggesting, I am sure, that people otherwise would be turning 
on the radio station in the interest of hearing the 
commercials.
    Mr. Newberry. I am saying that our radio stations are much 
more than simply the songs we play, absolutely, sir. I think 
that there are local personalities. I think our commitment to 
our community----
    Chairman Leahy. I will grant you that. I will grant you 
that. And we have two or three radio stations or several radio 
stations in our State where I have complimented them over and 
over again because they actually care about the local area. One 
is just 5 or 6 miles from where I live in Vermont. It is the 
only way you can actually find out if there has been a flood or 
if a bridge is out or a road during bad weather, and I have 
complimented them on that. I have even helped them on different 
things. But they do have radio personalities.
    We also have other radio stations where it is kind of a 
format, click in, one, two, three, four, speak, speak, speak, 
ad, ad, ad, one, two, three, four, speak, speak--I mean, you 
know those. And I think that music is a very significant part 
of their success.
    Mr. Newberry. Yes, sir.
    Chairman Leahy. But radio play, whether satellite radio, 
Internet radio, broadcast radio, does promote sound recording. 
But if you have the promotional value of that, if that is 
considered, why are you concerned that the royalty rates would 
be too high?
    Mr. Newberry. Well, as a small-market broadcaster, I can 
tell you that I do not think the average small-market station 
in the country is going to see income from the record labels. 
And I realize that in the House there was a proposal for a flat 
fee for smaller amounts. I think as with any fee that I have 
ever seen, it grows over a period of time.
    Chairman Leahy. Do you have a problem with the fee as it is 
now, the $500 fee?
    Mr. Newberry. Yes, sir. In principle, I have a problem with 
that. Five hundred dollars for a station----
    Chairman Leahy. In principle or amount?
    Mr. Newberry. Sir?
    Chairman Leahy. What would that same station pay in dues to 
your organization?
    Mr. Newberry. $500, $600, $60 a month.
    Chairman Leahy. Okay. Over the last several years, the NAB 
argued that XM and Sirius should not be permitted to merge 
because radio stations compete with satellite radio and XM and 
Sirius would have an unfair advantage in the marketplace. So 
broadcast radio competes with satellite radio, and I presume 
Internet radio. Why is it fair for competition that broadcast 
radio is the only media that does not pay for the sound 
recordings it uses to compete? XM and Sirius have to pay for 
it. You speak of them as being--you have argued against their 
merger because they are competition. But if they are paying for 
that, why shouldn't you pay for it and you are competing with 
them?
    Mr. Newberry. Well, there are two reasons that I would 
address particularly. Number one, they are competing for ears. 
They are competing for listeners.
    Chairman Leahy. They are competing for what?
    Mr. Newberry. Ears. They are competing for an audience. But 
their business model is one that is based on subscription. They 
get to charge their listeners for their product. I am very 
proud to be a broadcaster that has community service 
obligations. I am proud to serve my community. I am proud to 
have the restrictions on it that we do. But it is an entirely 
different model.
    When my fellow panelist here talked about you turn on the 
radio and the listener cannot differentiate between XM or 
Sirius or AM or FM or Internet, the listener may not 
differentiate. But when you press the button and you come to 
one of America's licensed broadcasters, we have obscenity 
regulations, which I certainly am not advocating are removed; 
we have political requirements----
    Chairman Leahy. Because you would not get a very eager 
audience up here.
    Mr. Newberry. But, sir, I would not get my audience in 
Glasgow, Kentucky. I am not pandering to this distinguished 
panel. I am saying----
    Chairman Leahy. I understand. No, I understand. We both 
agree on that.
    Mr. Newberry. But we have a totally separate set of 
regulations, expectations, and obligations that over-the-air 
broadcasters have. So when we talk parity, we are not really 
talking parity. We are talking parity on the fee, but we are 
not talking parity in terms of operating requirements.
    Chairman Leahy. Thank you. Thank you, Senator Feinstein, 
and I will work with you and Senator Cornyn on this, but I 
would urge your association to sit down and negotiate with the 
artists and talk with us, because legislation will move. I 
would rather have legislation move that reflects your interests 
as well as their interests. But that is only going to happen if 
you are sitting there at the table. Thank you. And thank you 
for answering my questions.
    Mr. Newberry. Thank you, sir.
    Senator Feinstein. Thank you very much, Senator Leahy.
    Senator Durbin, you are next up.
    Senator Durbin. Thank you, Madam Chairman.
    Madam Chair, in my callow, reckless youth, I owned a 
restaurant/night club with live music. I learned more about 
music copyright law in one phone call than I ever learned at 
Georgetown Law School. A fellow called me and said, ``I was at 
your club on Saturday night. It was really great. Nice crowd. 
Loved the music. And, incidentally, you played 22 ASCAP-
licensed music selections, and so we are going to send you a 
bill.''
    [Laughter.]
    Senator Durbin. And I said, ``Wait a minute. I paid the 
performers.'' He said, ``No. The law is written that you have 
got to pay us now, too. It is not just enough to pay the 
performers. You have got to pay the owners of the music that 
was played in your establishment. After all, you sold a lot of 
beer because of that music, right? ''
    Well, I learned a little bit about copyright law there. But 
I learned that it just was not enough to be satisfied with the 
obvious, and that is why I cannot quite grasp this particular 
issue from the viewpoint of radio stations. If you do not want 
to pay the performers, do not play their music. I mean, these 
folks have put their life into it, and they have created this 
music.
    Mr. Newberry, you referred to a partnership. A partnership 
suggests an agreement. You do not have an agreement with these 
performers not to pay them. You happen to have the protection 
of the law, which does not seem fundamentally just to me, that 
your radio station can make whatever profit it makes, in good 
and bad times, at the expense of performers and not compensate 
them.
    Mr. Cornyn's suggestion--I am sorry he has left, but I 
think there is one element that raises doubt in my mind--you 
would have to have both the composer and the performer say ``Do 
not play,'' because they both have a property interest in the 
performance. The composer is being paid for it. And if the 
performer simply said, ``Do not play,'' the composer is going 
to say, ``Wait a minute. I want them to play it because I get 
paid for it.'' So it seems that there is some problem there in 
terms of what he is suggesting.
    Mr. Newberry, how do you come up with this partnership if, 
in fact, it is imposed on performers by law? Was there a sit-
down agreement with performers?
    Mr. Newberry. I was not here for that meeting, and so I 
cannot say there was. But I would say that it has been a 
partnership because for many years the record labels and radio 
stations worked very closely in breaking new artists, worked 
very closely in establishing those great catalogs that are 
there.
    So is there a formal agreement, to your point? No, sir. But 
there has been a demonstrated partnership.
    But you raise a point that I have a question with that I 
can understand. You talked about your night club where you paid 
the performers. But in restaurants, in ballparks, we have 
performances that occur every day, but yet this bill does not 
want to address that. It just wants to address radio stations.
    Senator Durbin. That is a separate fight. I will say it.
    Mr. Newberry. I understand, but for us it is difficult for 
us to understand why if it is about the principle of this 
argument, why is this not a comprehensive----
    Senator Durbin. We may be forced to visit that, as painful 
as it will be. And I have been in on this conversation. But, 
really, I do struggle with this notion that the radio stations 
can pick anybody's performance and use it to their benefit and 
not compensate them.
    Mr. Newberry. As can a restaurant, as can a ballpark.
    Senator Durbin. But this is your business, the selling of 
music, and advertising to go with it.
    Mr. Oman, let me ask you this: I think you make a 
compelling argument in your statement here in just a few 
sentences, and I do not have enough time to repeat all of them. 
But you say: ``It comes down to this. . . . As a matter of 
property rights, men and women who create and own a copyrighted 
work should have the right to get paid . . . by the people who 
use their work. . . . Who is the best judge of the quid pro 
quo--the broadcasters or the creators? ''
    So can you--I mean, since you have witnessed this debate 
for decades, can you rationalize how we have come to the point 
that Internet, satellite, and cable radio stations have to pay 
for their songs and terrestrial radio stations do not? What is 
the logic behind that?
    Mr. Oman. The new technologies were addressed by Congress 
in a comprehensive way, and liability was imposed where it 
should have been. The history of the public performance right 
vis-a-vis the broadcasters goes back into the mists of time, 
and there have always been efforts to impose a royalty on them. 
But for a variety of reasons--one of which was the political 
power of the broadcasters, another was originally the 
opposition of the songwriters--that confused the issue and 
encouraged Congress to continually put the issue off to another 
day.
    But I think we have reached the point where postponement is 
no longer the solution. The market has changed so dramatically. 
The public performance right looms so large in the eyes of the 
performers and the record companies, the reproduction right 
having diminished over the years, that now is the time to 
finally impose liability on the broadcasters and have them pay 
for the music they use.
    Senator Durbin. Thank you.
    Let me close, Madam Chair, by just thanking Ms. Gaynor for 
being here. You have survived well. There are many disco fans 
among Senators.
    [Laughter.]
    Senator Durbin. And we are glad you are here. Thank you.
    Senator Feinstein. Thank you very much, Senator Durbin.
    Let us see. Senator Klobuchar was next, then Senator 
Franken.
    Senator Franken. Thank you, Madam Chair.
    I am in an interesting position because I have been in 
radio, working for a radio network that has had some problems 
surviving.
    [Laughter.]
    Senator Franken. And I also am someone who is keenly 
interested in intellectual property. I do not know if I am 
intellectual, but I have created some intellectual property.
    It seems to me Professor Oman, who has been in this a long 
time, makes some very powerful arguments, and, on the other 
hand, we have these stations that are--there are stations that 
are struggling to survive. So I have a question for Sheila E. 
The House version of this, as the professor referred to, 
contains provisions that allow broadcasters who make less than 
$100,000 or $500,000 in revenue to pay a lesser amount in 
performance royalties. It also contains a 1- to 3-year grace 
period for some broadcasters.
    As a representative of a coalition of performers and record 
labels, would you support these kind of measures in the Senate 
bill?
    Ms. Escovedo. Yes, I think that it is fair. I think that we 
are at a place that changes need to happen, and I do not think 
that it is fair that radio uses the music that I have played 
on, performed on, and not pay me for that. I do not think it is 
fair to all the other musicians that have performed on millions 
and millions of songs.
    I think it is fair for some of the smaller radio stations 
to pay a small fee, and $500, if it may be, or $1.37 a day, if 
that is what it may be, $500 for a year, you got to be kidding. 
I do not understand the logic behind saying that is too much 
money to pay us, a small fee. We are just asking to be fair.
    So I think it is disrespectful for the radio to not want to 
sit down with us and have a conversation about--we are 
partners. I depend on radio. I really do. And I want to sit 
down and talk with them. I just think that it is wrong that 
they do not want to talk, and I do not think there is a 
partnership right now. There is not.
    I think that one of the issues brought up about having the 
artist make a decision whether or not we would want radio to 
play our music I think is not a good thing, because that would 
absolutely shut music down, because I think the majority of--I 
am also not just a musician, but I am also a songwriter, and I 
own a lot of my masters as well. So I would choose not for 
radio to play my music because they are not paying me, and let 
my fans go to the other radio stations, digital, and I would 
get paid for that, and that would move the whole fan base. That 
would move everybody away from radio.
    So that is not a really good plan, but I still think----
    Senator Franken. I do not think that plan is really----
    Ms. Escovedo. No, it does work.
    Senator Franken.--going to happen.
    Ms. Escovedo. But also--yes. I just think that there needs 
to be a partnership. Right.
    Senator Franken. As Mr. Newberry said, I think we all heard 
it for the first time today, and it was a nice try.
    Ms. Escovedo. Yes, a nice try.
    Senator Franken. But I do not think that is probably going 
to happen.
    Ms. Escovedo. No, not a good----
    Senator Franken. You know--sorry to interrupt you, but 
actually radio stations already do have no-play lists. I know 
that. The radio stations already have those.
    How will this affect new artists? Because Mr. Newberry is 
making the argument that new artists want radio play, and is 
this going to make it harder for them? I mean, I do not buy Mr. 
Newberry's argument on, say, Roy Orbison. Maybe you would make 
the argument you would pay Roy Orbison because his estate would 
get money, but you are certainly not promoting Roy Orbison 
concerts, right?
    Mr. Newberry. No, sir.
    [Laughter.]
    Senator Franken. So that part of the argument goes once the 
artist is not performing anymore, shall we say.
    Mr. Newberry. May I make a statement to that, Senator?
    Senator Franken. Sure.
    [Laughter.]
    Mr. Newberry. Certainly in cases--Mr. Orbison, I do not 
know his particular case, but there are estates, there are ways 
that those monies can still be monetized. It is not a concert, 
but there are items based on the familiarity and the play that 
do get purchased even after the artist has----
    Senator Franken. Okay. Fair enough, fair enough.
    Let me go back, I am sorry, to Sheila E. Will this have an 
effect on new artists?
    Ms. Escovedo. I think right now in the position that we are 
in, it is going to affect everyone, like it has been for the 
last 80 years, that we need to make a change. Of course, there 
are tons of radio stations that play old music, you know, 
1970s--well, 1960s, 1970s, 1980s. I am in that category. But it 
is affecting not just the past but the future as well. So we do 
need to change this now and make a change so that we all get 
paid for past and future. You know, it is--I think the industry 
right now for the kids, the youth, they are looking at it, and 
they have said to us, you know, ``Wow, you must make millions 
of dollars performing on all these songs. Radio plays you all 
the time.'' No, I do not. I make the money as a songwriter but 
not as a performer.
    Senator Franken. Thank you.
    Ms. Escovedo. You are welcome.
    Senator Franken. Thank you, Madam Chairman.
    Senator Feinstein. Thank you very much, Senator Franken.
    Mr. Oman, something that you said piqued my interest. You 
know, I am concerned that we are the only nation in the 
industrialized world that does not provide these performance 
rights. And you mentioned, you know, we might want to talk to 
USTR about this. What exactly were you referring to?
    Mr. Oman. Under the international regime of copyright, 
American artists are not entitled to collect royalties in 
foreign countries unless we provide reciprocal protection for 
the foreign artists.
    Senator Feinstein. So they lose foreign royalties as well.
    Mr. Oman. They lose foreign royalties, and that amounts to 
millions and millions of dollars every year.
    Senator Feinstein. Thank you. I did not realize that. That 
is, I think, a very important point in all of this.
    Supposing they record in a foreign country, what happens 
then to their performance rights?
    Mr. Oman. They would be entitled to payments by the 
broadcasters from that particular country, but not from the 
rest of the world. If they recorded their music in Great 
Britain, they could get royalties from the broadcasters for the 
use of that music in Great Britain, but they would not get that 
throughout Europe or in Japan or the other major markets in the 
world.
    Senator Feinstein. Well, wouldn't this encourage some of 
them to record in other countries? Which is not too difficult 
today to do.
    Mr. Oman. I am not aware of that being done myself, but it 
certainly would be a temptation. American authors in the 19th 
century moved to Great Britain to get copyright protection for 
their works in Great Britain. It would be a shame if our 
copyright laws encouraged American artists to go overseas to 
record their works.
    Senator Feinstein. It certainly would. Thank you.
    Ms. Leighton-Levy, you know both the House and Senate bills 
provide discounts for small broadcasters, those with annual 
revenues of $1.25 million or less, and offer them an option of 
a very low fixed annual royalty of $5,000--or even lower for 
smaller broadcasters, and that is the House bill.
    In contrast, the license offered by SoundExchange to small 
webcasters with the same threshold of $1.25 million in annual 
revenues is 12 percent of revenues; thus, a small broadcaster 
at the threshold would pay $5,000 in annual royalty, while a 
small webcaster at that same threshold would pay an annual 
royalty of $150,000. Now, that is a big discrepancy, 30 times 
more.
    How is this fair? Doesn't equity and a level playing field 
require that small webcasters receive the same discount 
structure that small broadcasters do?
    Ms. Leighton-Levy. There may be others here on this panel 
who would be better qualified to address this, to answer this 
than I, but I will say that off the top of my head it does seem 
to me that it is--I mean, that there is a rationale for having 
there be at least some disparity between the two because, of 
course, there are different responsibilities and obligations 
for the small broadcaster in a small market, and----
    Senator Feinstein. As opposed to the webcaster?
    Ms. Leighton-Levy. Exactly, yes.
    Senator Feinstein. Okay. Anybody else have a view on that?
    Mr. Newberry.
    Mr. Newberry. I would just point out that one significant 
difference, the small-market broadcasters are obligated to, 
among many other things, FCC regulations, FCC reporting, equal 
opportunity outreach, annual fees that are charged by the 
Federal Communications Commission, so there is an entirely 
different cost structure for a broadcaster versus a webcaster.
    So we are a fixed-cost business. I am certain that many in 
our industry would argue that if we could rid ourselves of all 
of the regulations and requirements, they would be glad to take 
a higher percentage on a fee. But it is apples and oranges. You 
cannot make the correlation between the two because we have an 
entirely different business structure.
    Mr. Kimball. Well, I very fundamentally disagree that you 
cannot make a correlation between the two. You can make a 
correlation between the two. These small broadcasters are all 
reaching out to niche audiences, exposing new artists that 
could not be exposed through big radio, through big 
commercially programmed radio. They are actually trying to 
achieve many of the same functions. And although their cost 
structures may be somewhat different, they are nowhere close to 
30 times different. That is fundamentally unfair.
    Senator Feinstein. Let me call for Solomon here. Dr. Oman, 
do you have a point of view on this?
    [Laughter.]
    Mr. Oman. I hesitate to get between the two titans at the 
table, but the conclusion I draw from the exchange is that 
there seems to be no recognition by the broadcasters that they 
are getting a tremendous public subsidy in terms of free 
spectrum, that they do not have many of the other expenses that 
are borne by their competitors, and that they have a public 
obligation. And I think at the top of that list of public 
obligations is paying for the materials that they use fairly, 
and they are not doing that now.
    Senator Feinstein. Mr. Newberry, 30 seconds.
    Mr. Newberry. Yes, ma'am. I will make it very quick. I said 
in my opening comments that I absolutely support, embrace the 
responsibilities and obligations that I have as a broadcaster 
that comes with my license. Mr. Oman--I do not know where he 
picked up that we were not acknowledging that. We have a public 
trust with our listeners, with our communities. I am very proud 
to be a local broadcaster, and we pay every day the opportunity 
to be----
    Senator Feinstein. I do not believe he was in any way 
impugning you. What he was saying----
    Mr. Newberry. I just want to be of record.
    Senator Feinstein.--is that you have the airwaves, which 
technically do not belong to anybody.
    Mr. Newberry. They belong to the public.
    Senator Feinstein. That is correct.
    Mr. Newberry. Yes, ma'am.
    Senator Feinstein. And that is a big deal.
    Mr. Newberry. Absolutely, and we embrace that, and I am 
proud of the record of service that the Nation's broadcasters 
have provided as trustees of those airwaves.
    Senator Feinstein. Okay, fine.
    Let me ask, Dr. Oman, webcasters argue that the songwriter 
protection provisions in both the Senate and the House bills 
would tilt the playing field in royalty rate proceedings 
between songwriters and webcasters, allowing the songwriters to 
introduce evidence of the rate for performance right royalties, 
which to date have been significantly higher than the 
songwriters' rates, and to argue that songwriters' rates should 
be increased but would not allow webcasters to use that same 
evidence to argue that they could not afford to pay more to 
songwriters because they are already paying so much of their 
revenues to performers. That is the argument. What do you think 
the validity of this argument is?
    Mr. Oman. The parties are actually engaged in an ongoing 
discussion of that particular point right now, and I think the 
misunderstandings and the suspicions on both sides are about to 
be allayed, and I would not be surprised if we did not have an 
agreement on that point in the very near future.
    Senator Feinstein. Good.
    Mr. Oman. I think the fact that there is good faith on both 
sides is going to help reach the solution. It is a very 
complicated issue, and I would hope that, Madam Chairwoman, you 
would give me the opportunity to provide a more formal written 
answer after the hearing to supplement my oral commentary.
    Senator Feinstein. If you would, it would be very much 
appreciated. I think your views are very much respected, so we 
would like to have them.
    Senator Franken, do you have other questions?
    Senator Franken. No, I do not. I want to thank you, 
everyone, and, Solomon, thank you.
    [Laughter.]
    Senator Feinstein. First of all, let me thank everybody who 
is not on the dais here, but who is working to try to bring the 
industries together and come to some conclusions about what is 
fair. It is very much appreciated. I would like to echo what 
Senator Leahy said. I believe we will have a bill. So I think 
the degree to which you can sit down and solve the problems is 
very much appreciated. Then we will not have to. But if you do 
not, we certainly will try. And I want to thank our witnesses 
today. We very much appreciate their testimony.
    We will leave the record open for 1 week, and we appreciate 
your written comments. Thank you very much. The hearing is 
adjourned.
    [Whereupon, at 4:06 p.m., the Committee was adjourned.]
    [Questions and answers and submissions follow.]
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