The House Judiciary Committee held a hearing yesterday regarding the Performance Rights Act, which would require radio stations to pay royalties to artists for the music they air. NAB Radio Board Chairman Steve Newberry, President and CEO of Kentucky-based Commonwealth Broadcasting Corporation, testified today on behalf of NAB, as did Larry Patrick, managing partner of media brokerage firm Patrick Communications and owner of 14 radio stations in Wyoming. Both men testified that radio is facing an extremely difficult time in this economy as it is, and said that enacting a performance royalty would be devastating to the industry.

"Under H.R. 848, your local radio stations will be forced to cut services or employees, may be forced to move from a music format to a talk format, or may be facing bankruptcy. But the damage resulting from H.R. 848 will run far beyond local radio stations," said Newberry. He pointed out that the bill would hurt others, including composers, new artists, minority ownership and listeners, because the bill creates a financial disincentive to play music, less new artists would be played and there would be less diversity in music. "Stations that listen to and serve their local communities may disappear," he added. "In many of these cases, the radio stations in peril of possibly going off the air are serving very rural areas, where they may be the only station serving their local communities."

Patrick added that, "I have been a part of the radio industry for 40 years, and I can tell you that over the course of my career, I have never seen what the radio industry is currently experiencing. The economic downturn is having a significant and devastating effect on local radio. But as bad as the current local radio landscape is, it will deteriorate even further and more dramatically if H.R. 848 were to be enacted... At this time, stations are laying off employees, reducing wages by 5-10 percent and a number of radio companies are literally teetering on the verge of bankruptcy. If this bill is enacted, it will put at risk an industry that employs nearly 106,000 people across America. I am not overstating the situation when I say that such extraordinary fees imposed on local radio stations in light of the current economic plight of local radio could be absolutely devastating."

Newberry also pointed out that the true conflict exists between artists and record labels, not artists and radio. "At its heart, this bill attempts to create a conflict between artists and radio stations where no conflict exists. In reality, local radio has been supporting the music industry for decades," he testified. "Which is why it boggles my mind that a bill that is supposed to be about benefiting artists, takes 50 percent of the performance fee and puts it into the pockets of the big four record labels, most of which are not even American companies. The record labels actually walk away with more money under this bill than do the featured artists. The real problem, which this bill does not address, is between the artists and these mega-record labels. Artists, often find themselves in such difficult financial straights because of the one-sided, unfair contracts they signed with their record label. If these artists had fair contracts with their labels that included fair royalty clauses, they would have benefited from the promotional value of free radio airplay that they should have enjoyed."

In related news, the Spanish Broadcasting Association (SBA) called on the Congressional Hispanic Caucus to oppose the Performance Rights Act. In a letter last week, charter member Frank Flores wrote, "Although Latinos account for half of the U.S. population growth since 2000, native-born Hispanics had the second highest rate of unemployment (9.5 percent) in the fourth quarter of 2008. If the performance tax is implemented on radio — an industry that is already struggling — even more Hispanic jobs will disappear. A performance tax will mean programming cuts, as stations scramble to find additional revenue to cover these new and unbudgeted fees. For non-English speaking Latinos, it can cut off access to information that isn’t conveyed elsewhere."

Last week, the National Association of Black Owned Broadcasters (NABOB) raised concerns about the disparate impact of the performance tax on African-American communities with members of the Congressional Black Caucus as well.