Opposing sides will speak tomorrow before the House Subcommittee on Courts, the Internet, and Intellectual Property. The issue is H.R. 4789, the Performance Rights Act, which calls for terrestrial radio to pay performance royalties for broadcasting sound recordings. The National Association of Broadcaster has backed a non-binding resolution that calls for the exemption of not only radio stations but "any business for such public performance of sound recordings" (such as bars, retail stores and other public places).
Where you stand on the matter could depend on how much you think radio play influences music sales. I think it's a big influence on some people. Consumers discover music in various ways -- print, TV, word of mouth -- but radio allows for the sort of repeated listens that encourages familiarity and, thus, purchases. But how many people use radio for discovery and not as a substitute for purchases of recorded music?
The musicFIRST coalition, a collection of artists and businesses that is pushing for the new performance royalties, would have you believe radio's promotional power is overstated. On the group's FAQ page, says "radio's promotional value is on the decline" and points to a study titled "Don't Play It Again, Sam" by University of Texas at Dallas economics professor Stan J. Liebowitz that claims "radio does not have the positive impact on record sales normally attributed to it." From the paper:
We have found that, contrary to received wisdom, increases in time spent listening to music radio do not increase the purchase of sound recordings but instead appear to decrease the sale of sound
recordings by an economically large amount. There are two possible explanations for a negative impact. One explanation might be that the time spent listening to radio is time that is taken away from other general entertainment activities and that listening to sound recordings is just one of these activities. The other explanation, which is the one that has been put forward in this paper, is that listening to music radio is a substitute for non-specific music listening that might otherwise have used sound recordings.
In this 2004 paper "The Elusive Symbiosis: The Impact of Radio on the Record Industry," Liebowitz argued radio has a substitution effect that harms sales of recorded music. The paper is similar to the 2007 paper but without the analytical backing.
The NAB is passing around Capital Hill a study called "Sales & Spins" that finds a direct correlation between the number of spins a song receives and the number of album and single sales. I haven't seen the study, which uses information from Nielsen and Pollstar, but I see a problem: only 17 artists were used in the study.
On the surface it may seem that Liebowitz's findings and the argument made in "Sales & Spins" are in conflict. That's not necessarily the case. Radio promotion is a zero-sum game. When one song gets a spin, other songs do not get a spin. Total results are different than in individual cases. Liebowitz addressed this in his 2004 paper in terms of payola's impact on sales. "Although it seems logical to assume that payola means that radio enhances overall record sales," he wrote, "that conclusion suffers from the fallacy of composition — what may be true for individual observations is not necessarily true for the entire group."
I wonder how radio stations will react to a new expense. If you think about this from the point of view of how incentives impact decision-making, it's pretty easy to conclude there will be fewer songs played. New performance royalties would lead stations to play less music in order to keep costs down (or the really cheap stations will mix in some public domain recordings, which is pretty unlikely). Perhaps fewer songs will be played per hour (more talk, less rock, so to speak). It's possible some stations will move to an all-news or talk format, thereby reducing the number of impressions music can make on a community.
More talking could help labels. If you take the Liebowitz way of thinking, you may conclude people will purchase more music if radio stations switched to talk from music. His 2007 paper found differences in the impact music and talk radio had on purchases.
But aren't Americans spending less time listening to radio these days? Shouldn't music sales be up if these arguments hold water? No, and that's because of digital music. As Americans' time spent listening to radio has dropped this decade, so to have recorded music revenues. The number of unique sales -- purchase decisions, they're often called -- have increased, however. Album sales are down but the number of individual track sales and ringtones are greater than the decrease in album units.
Music Groups
It's a new era for rock bands. "TV is now driving radio," says author Charles R. Cross, who wrote the Kurt Cobain biography 
When the Spitzer investigation into payola put an end to a decades-old practice, it was thought by some -- 
