One of two outcomes will come from todays' three-and-a-half hour hearing on the Performance Rights Act: Either the committee will approve the Performance Rights Act or the National Association of Broadcasters and labels will reach their own agreement. It is very clear the committee members understand the promotional value of radio but think it is unfair that only radio stations get to decide the amount of that value. The issue of whether there should or should not be a performance right is all but decided. The issue to now be resolved is the value of the right and the timing of its introduction.

Even though broadcasters effectively demonstrated the potential impacts the royalties could have, the committee was more concerned of an absence of the right and the uniqueness of this instance in which creators do not have the right to negotiate the value of their work. On occasion the constitutionality of the matter was brought to light. In addition, committee members expressed their desire to protect small and rural broadcasters from financial ruin.

Highlights: Corgan vs. Lundren (1:54). Newbury vs. Bainwol on YouTube (2:01). Nadler's discussion of competing studies with Newbury and Liebowitz (2:02). (Those time estimates are assuming I came in ten minutes late. I'm not sure at which exact point I entered the webcast).

Prepared Statements

Bill Corgan of Smashing Pumpkins (about 40:00 in the webcast) gave a wistful testimony that underlined the importance of radio in his musical upbringing. He called it a "longtime inequity" and "outmoded" law. An "issue of fundamental fairness." Performers deserve to be paid especially since they may not share in other revenue streams. "Who has been taxed more than the artist themselves?" Over the course the hearing, Corgan proved to be an excellent witness. Artists were very well represented.

Paul Almeida of the AFL-CIO also framed this as an issue of fairness and pointed to the advantage terrestrial radio has over Internet radio stations.

Lawrence Patrick of Patrick Communications, a media brokerage firm that owns some small-market radio stations. Started by talking about radio's current financial hardships (some have a 30-50% decline in revenue). New fees would do "significant, long-term damage" to stations. They will reduce staffs and hurt owners while enriching record labels. Threat to emergency services and local coverage. Stations do not have the option of raising their ad rates (which he says are "dropping sharply").

Dr. Stanley Liebowitz of University of Texas at Dallas. Talks about his two studies of whether radio play helps music sales. Neither found evidence that sales are increased by radio play but evidence that sales have been harmed by radio. Explains this means total sales and not sales of individual artists (who obviously benefit from radio play). Time spent listening to radio is time not spent listening to purchased sound recordings. In the absence of radio, a person can listen to nothing or pre-recorded music.

Steve Newbury of Commonwealth Broadcasting, chairman of the radio board of NAB. Takes issue with the pro-artist argument when record labels get 50% of the royalties. "The record labels walk away with more money from this bill than do featured artists." He blames artists' financial difficulties on unfair record contracts, cited Toni Braxton as an example. "Free radio play is the best friend of artists and record labels." Local radio stations would be forced to cut services, switch to a talk format or file for bankruptcy. Composers would be hurt because the bill provides a financial incentive not to play music. New artists would be hurt, and music diversity would be at risk. Radio listeners would be hurt because stations may disappear, especially in rural communities. "Significant unintended consequences."

Mitch Bainwol, CEO of the RIAA. Speaking as a member of the musicFIRST coalition. Five key points. First, broadcasters currently pay nothing to performers but collect billions in revenue. Second, the U.S. is unique in that it does not pay the royalty, and other platforms other than terrestrial pay the royalty. Third, more than half of songs played on radio are oldies. Promotional value is not as great as it used to be. Fourth, the bill focuses on big, corporate radio. Eighty percent of stations in the U.S. are accommodated. Fifth, the issue is not about transferring money to record labels.

Items from Q&A

Bainwol added that the country won't be in a down economy forever. There ought to be a right. The next question is what should the rate be? A percent of revenue? It would be a "modest payment" for cost of goods sold.

Rep. Howard Berman pointed out that radio hosts are paid, that stations pay for the right to broadcast sporting events. He said there is the issue of the right and the issue of the structure. When radio stations have lost $5 billion, payments go down as well. The system will adapt. A GAO study is fine, but should not be what determines if there is a right to this royalty. Asked Newbury if he would support accommodations for small broadcasters. Newbury responded that stations provide promotional value and he has "grave concerns" that damage will be done before an independent third party study is done. Berman suggested to start the study as stations and labels begin negotiations.

Rep Smith addressed a GAO study and pointed out that most take a year to complete. Asked Bainwol about an outside study, he said he prefers to dual-track this (study concurrent with negotiations). Bainwol wants the study to be done in the context that a right is established.

Would they support an amendment to the bill that artists get all royalty payments. Bainwol said no. There is a 50/50 split because it is a good thing to invest, and record labels get a return on their investment. Giving all money to artists would dry up investment in new artists. Newbury did not answer the question because he doesn't support the right in the first place, but "taking the record companies out" of the equation is more in line with what broadcasters want.

Rep. Smith asked Corgan about declines in recorded music sales and how the bill will help. Rise of Internet culture and free downloading. Labels dug in their heels to try to reverse it, but it didn't help. It's a complicated issue, 50 different people could give 50 different answers. Later, Corgin complained that artists have no leverage in this issue.

Rep. Watt asked if stations would have an incentive to switch to a talk format. Talk hosts have to be paid. Even at minimum wage, that would be more than the station would pay for performance royalties (in the case of a small station). Patrick said a station in many parts of the country can get a talk radio show for free. Newbury gave the example of ESPN programming, which is provided at no cost to the station. Rush Limbaugh, however, is paid in exchange for the exclusive right in that market.

Debate over the rights of the label to take half. Corgan said he negotiated away some rights in good faith. He has no problem with record labels getting half the royalties.

Rep. Lundgren brought up the constitutional aspect of the ownership right. Less creativity today? Corgan talked about the "erosion of the revenue base" that has brought in conservative approach. He feels music has been hijacked by corporate interests and you see fewer leading-edge artists. There are fewer stars per generation. Today is different in terms of sheer numbers. There are more artists then ever but fewer stars. There is something going on that is creating fewer stars. Lundren came back to ask about the incentive to play unknown artists versus established artists if there is a performance royalty. Corgan said it's an issue of making the proper capital investment to develop artists, and that's not happening. Labels don't have the revenue to make the capital investment. Stars drive the business, Corgan said. Stars are not just the most popular, they enact a change in music and increase creativity.

Rep. Nadler asked how much value obviates the need for a performance royalty and if the same principal would hold in other industries. He asked about an NAB-sponsored study and added that Liebowitz's study was independent. Newbury did a very poor job explaining his issues with Liebowitz's studies. Liebowitz entered the discussion to talk about his methodology and talked about the NAB study. NAB did not allow data of the study to be shared because its license with Arbitron did not allow for it, something Liebowitz downplayed and said is the wrong to conduct a study without allowing for outside analysis. Nadler asked Newbury if he would ask Arbitron for permission to share the data. If the NAB wants anybody to trust the study, Nadler said, it should do what it can to get Aribtron to share that data. Later, Liebowitz said he did not want to unilaterally share his data with the NAB but would give his data to the committee.

Rep. Waters asked Bainwol why record companies should get 50% and if they already charge them for production, promotional and other costs. (My RealPlayer conked out at this point. It's a shame, I think this was a good part of the hearing. I came back to hearing Rep. Waters encourage the two sides to bring to the House a solution and underscored the importance of keeping small broadcasters in business.)

Later, Rep. King brought up the question of whether or not stations should be able to accept payments from labels if they are required to pay artists and labels for performances. No broadcaster was about to say it wants to circumvent anti-payola laws and policies, but it is food for thought.

Corgan talked about mechanical rights and labels' use of them as a negotiating tool. He wants labels to pay out 50% and not use performance royalties in negotiations, that he finds it annoying that labels negotiate with mechanicals. He said artists and labels agree on the 50/50 split and that critics who say the bill is unfair to artists are incorrect. Labels and artists are united on this. Corgan later said the band renegotiated with its old label (EMI) and has a 50/50 split on its old songs, but most bands get more like 20% royalty on sales.

Rep. Weiner believe the issue of the right has been determined as the committee has given little to no objection to that issue. He brought up the possibility that some artists would pass on their right to be remunerated in return for the promotion.