WASHINGTON -- NAB Radio Board Vice Chairman Steven Newberry, president and CEO of Commonwealth Broadcasting Corporation, testified today before the Senate Judiciary Committee regarding an RIAA-backed effort to levy a fee on local radio stations for the airplay of music. Following is a transcript of his prepared oral testimony.
* * *
Good morning, Chairman Leahy, Ranking Member Specter and members of the Committee, and thank you for inviting me here to offer the broadcaster perspective on this important issue. My name is Steve Newberry, and I am President and CEO of Commonwealth Broadcasting Corporation which operates 23 stations located in Kentucky. I am testifying today on behalf of the over 6,800 local radio members of the National Association of Broadcasters.
With regard to the issue of creating a new performance royalty fee for sound recordings - which local broadcasters consider a "performance tax" -- NAB strongly opposes any such proposal. We oppose a performance tax because compensation to the record labels and performers is already provided under the current system.
The existing model works for one very simple and significant reason: the promotional value that the record labels and performers receive from free airplay on local radio stations drives consumers to purchase music. A survey done by Critical Mass Media shows that 85 percent of listeners identify FM radio as the 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.
Beyond just playing music, consider that local radio stations give away free concert tickets, conduct on-air interviews with bands releasing a new CD, or hype a newly discovered artist. Without question, local radio is the engine that drives music sales. The recording industry knows that music sales soar with radio airplay. Just last week at the Country Music Awards, Carrie Underwood, Kenny Chesney, Sugarland and Rascal Flatts all specifically thanked country radio for their success. Taylor Swift, who was named Best New Artist of the Year, said "I want to thank country radio. I'll never forget the chance you took on me."
While it is true that the recording industry has seen its revenues dip in this new digital world, in no way can that decline be attributed to local radio. Just the opposite, local radio is essentially free advertising for record labels and performers and provides the best and most direct way to reach consumers.
In 1995 when Congress last examined this issue, lawmakers opted to require satellite and Internet radio to pay performance fees because these platforms are often available by subscription and both offer consumers true interactivity to download songs. Local radio, however, is an entirely different platform. We are free. There is no subscription. It is not interactive. Between disk jockey lead-ins and commercials, no one is stealing music from over-the-air radio. Congress came to this same conclusion in 1995 - namely that local radio airplay does not threaten music sales. In fact, local radio directly and positively promotes the sale of music.
What I fail to understand after nearly 30 years in the radio industry is why the recording industry is willing to essentially bite the hand that feeds it. The "free airplay for free promotion" concept has established a natural symbiotic relationship between local radio and the recording industry. Both grow and flourish together. But a new performance tax takes this mutually beneficial system and transforms it into an unfair, one-sided scheme that financially benefits only the recording industry - and to the detriment of the local radio stations.
The negative effect of such a dramatic increase in radio station costs will be felt by radio stations and their listeners across the country and in every one of the states you represent. Many many radio stations across the country are struggling to be profitable since most of our operating costs are fixed. The money to pay for this new performance fee has to come from somewhere.
So what are my options? Do I reduce the community affairs programming, including essential news and weather in times of emergency? Because I can't reduce my electric bill. Am I forced to layoff staff or cut the employee benefits at my stations? Because I can't reduce my FCC regulatory fees. Do I move to a non-music format, which will have the effect of playing less music, which will ultimately harm the performers? There's a reason the National Religious Broadcasters, the National Association of Black Owned Broadcasters, the National Association of Farm Broadcasters and the Independent Spanish Broadcasters Association all oppose the imposition of any new performance fees. The answers are not simple and the consequences of this debate will hit both industries in unanticipated ways.
There is simply no justification for changing a system that has worked for the music industry as a whole for so many years. The United States has the most prolific and successful music industry that is the envy of all the world. The law as it stands today works. Upsetting the careful balance that Congress struck by imposing a new performance tax on local radio broadcasters would be a shift of seismic proportions. Congress has consistently recognized the mutually beneficial relationship between local radio and the recording industry, and there is no reason to change the law now.
Thank you for inviting me here today and I 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.