WASHINGTON, DC – -NAB Radio Board Second Vice Chair Charles Warfield, Jr., president and COO of ICBC Broadcast Holdings testified today before the House Subcommittee on Intellectual Property in a hearing on local radio performance taxes.
Below is a transcript of Warfield's prepared remarks:
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Good morning, Chairman Berman, Ranking Member Coble, Chairman Conyers and members of the Subcommittee, and thank you for inviting me here today to offer the broadcaster perspective on the issue of performance rights for sound recordings. My name is Charles Warfield, and I am President and COO of ICBC Broadcast Holdings serving primarily African American communities in New York City, San Francisco, Columbia, South Carolina and Jackson, Mississippi. I am testifying on behalf of the over 6,800 local radio members of the National Association of Broadcasters.
With regard to the issue of creating a new performance royalty for sound recordings - which we consider a "performance tax" on local broadcasters - NAB strongly opposes any such proposal. We oppose a performance tax because compensation to the record labels and artists is provided under the current system, and the effort to upset the careful balance - envisioned by Congress and beneficial to all parties for the last 80 years - is misguided.
The existing model works for one very significant reason: the promotional value that the record labels and artists receive from free airplay on local radio stations drives consumers to purchase music. A survey done by Critical Mass Media shows that, far and away, FM radio is the dominant medium for listening to music. In fact, 85 percent of listeners identify FM radio as the place they first heard music they purchased. With an audience of 232 million listeners a week, there is no better way to expose and promote talent. As Tom Biery, Senior Vice President for Promotion for Warner Brothers Records said, "It is clearly the number one way that we're getting our music exposed. Nothing else affects retail sales the way terrestrial radio does."
Beyond just playing music, consider that stations give away free concert tickets, conduct on-air interviews with bands releasing a new CD, or hype a newly discovered artist. Local radio is without question the engine that drives music sales. Any suggestion that radio play does not boost sales, or actually diminishes sales, runs counter to simple common sense.
While it is true that the recording industry has seen its profits dip in this new digital world, in no way can that decline be attributed to radio. Just the opposite, local radio is free advertising for record labels and artists and provides the best and most direct way to reach consumers.
In 1995 when Congress last examined this issue, lawmakers rightly considered what new digital mediums were a threat to the sale of music. Satellite and Internet radio, which were covered by the 1995 law, are services often available by subscription and both offer consumers true interactivity to download songs. Local radio, however, is free. There is no subscription. It is not interactive. Between disk jockey lead-ins and commercials, people are not stealing music from over-the-air radio. Congress came to this same conclusion - that local radio airplay does not threaten music sales as satellite and Internet radio does, but rather directly and positively promotes the sale of music.
I come to this debate from experience on both sides of this issue - from my many years in broadcasting and some years as a record label executive. What I have failed to fully understand after 30 years in the industry is why the recording industry is willing to essentially bite the hand that feeds it. The free airplay for free promotion concept has established a natural symbiotic relationship between local radio and the recording industry. Both grow and flourish together. A performance tax, however, will financially hamstring broadcasters.
The effect of such a dramatic increase in radio station costs will not go unnoticed. Broadcasting is an industry that is funded entirely through advertising revenue. We do not have the option of raising our subscription rates. The funding to pay for this new fee has to come from somewhere.
So do we cut the $10.3 billion broadcasters generated in 2005 for public service announcements and community service for charities and other worthy causes? Do we run more advertisements, which will have the effect of playing less music, which will ultimately harm the recording industry? What about small urban and rural radio stations that serve niche communities, such as minority groups? There's a reason the National Association of Black Owned Broadcasters, or NABOB, opposes the imposition of this tax. Finally, how will such a tax degrade the ability for stations to offer programming for their local community, such as community affairs, traffic, and essential news and weather in times of emergency? The answers are not simple and the consequences of this debate will hit both industries in unanticipated ways.
The bottom line is that there is no justification for changing a system that has worked for the music industry as a whole for so many years. The United States has the most prolific and successful music industry that is the envy of all the world. Upsetting the careful balance that Congress struck by imposing a performance tax on local radio broadcasters would be a shift of seismic proportions. For over 80 years, Congress has not seen fit to alter this mutually beneficial policy, and there is no reason to do so now.
Thank you for inviting me here today and I am pleased to answer any questions.* * *
The National Association of Broadcasters is a trade association that advocates on behalf of more than 8,300 free, local radio and television stations and also broadcast networks before Congress, the Federal Communications Commission and the Courts. Information about NAB can be found at www.nab.org.