Politic365 Special Report
When we think of legislation that can have a devastating impact on the quality of life in the Black community, we usually think of bills authorizing racial profiling, imposing draconian sentencing guidelines, or underfunding Black schools.
But as Rev. Al Sharpton told Politic365, “often it is the quiet bills, the obscure bills, the so-called “specialized” bills, the bills no one seems to know much about, that can hurt Black folks the most if we’re not paying attention.” A textbook example, according to Rev. Sharpton and other civil rights advocates interviewed by Politic365, is the “Performance Royalty” legislation that many advocates believe would throw Black radio into a deep tailspin.
Performance Royalty legislation (H.R. 848 and S. 379 respectively) would require radio stations to pay record companies a massive new fee – as compensation for playing music. Proponents of the legislation maintain that while songwriters are compensated for radio airplay, performers (or the owners of the performer’s rights – typically large record companies) are not. On the other hand, radio stations already pay royalties to songwriters, and radio stations promote record labels and artists with free airtime – but under this legislation, the value of radio airplay in promoting record labels and performers wouldn’t count.
What Would a Performance Royalty do to Radio?
Opponents of the legislation say it couldn’t come at a worse time for radio. The industry has lost nearly one quarter of its revenue in just the past two years. Thousands of radio employees have lost their jobs, hundreds of stations have stopped broadcasting, and many radio operators have filed bankruptcy or are on the verge of doing so.
The basic concept in radio airplay has been that radio stations and record labels both benefit from one another. Radio’s use of music drives ratings and advertising revenues. Similarly, radio airplay translates into music sales and other revenue streams for the recording industry. A recent study showed that radio airplay directly translates to approximately $2 billion in annual music sales, without even accounting for the promotional impact on concert and merchandise revenue.
To be sure, the bill includes a reduced royalty fee for small broadcasters – and most minority broadcasters are small. However, civil rights organizations opposing the legislation maintain that the small broadcaster reduced royalty does nothing to help small and minority broadcasters. Advocates point out that the only financing small stations can find is predicated on business plans promising to get large; thus, if the bill passes, small stations that get large would have a license to lose money. According to James Winston, Executive Director of the National Association of Black Owned Broadcasters (NABOB), “a great deal of acquisition financing for small minority broadcasters has already dried up, and if a Performance Royalty bill passes, almost all financing for small minority broadcasters is likely to go away.”
The Impact of Performance Royalty on the Black Community
A community is only as strong as its means of communications – which helps explain why it’s often so difficult for Black communities to achieve political and social equality. Fewer than 4% of the nation’s radio stations are Black owned, according to a 2009 Santa Clara State University study. According to David Honig, president of the highly respected Minority Media and Telecommunications Council (MMTC), “those few stations provide news, information and a cultural outlet for a community that is starving for service, that has been generally overlooked by the rest of the radio industry. Black radio has been the key to ending racial profiling in many major cities, holding city halls accountable for providing decent housing and an equal education for all. And every elected official in America knows that black radio rallies the troops and turns out the vote when it counted the most. Besides the Black press, there’s no other bulwark to protect black America’s civil rights.”
MMTC warns that “misinformation is circulating in the civil rights community suggesting that the legislation will not harm minority radio. In fact, black and Spanish radio would be hit the hardest by this legislation because these stations face the greatest challenges” – including weaker signals, advertising discrimination, and the FCC’s failure to enforce its equal employment opportunity rules. MMTC reports that it has conservatively estimated that the legislation would throw at least a third of minority owned stations over the cliff into bankruptcy. The National Association of Media Brokers (NAMB) agrees, adding that “the imposition of a performance royalty on free, over-the-air broadcast stations will be crippling to the broadcast industry in general, and be particularly devastating to minority broadcasters and their audiences, as well as to other new entrants to the industry.”
In July 2009, the Congressional Budget Office (CBO) released a report saying that the rates charged to commercial radio stations could be “substantial” yet indeterminable. According to MMTC, the CBO’s findings “explain why even the prospect of this legislation is inhibiting the access to capital that minority broadcasters urgently need to survive and grow. Almost no one invests in or lends to a business that’s about to endure an enormous revenue loss. And no one invests in businesses that are incentivized to stay small in order to avoid this revenue loss.”
Opponents of the legislation include about half of the membership of the Congressional Black Caucus as well as civil rights luminaries Rev. Al Sharpton, Dick Gregory and Tom Joyner. Fifteen members of the Congressional Black Caucus have expressed their concern with the impact of the Performance Royalty legislation – including Elijah Cummings, Danny Davis, Al Green, John Lewis, Charlie Rangel and Bobby Rush. Supporters of Performance Royalty legislation include the lead sponsor, John Conyers, as well as Eddie Bernice Johnson and Bobby Scott.
The Commerce Department’s Views on Performance Royalty
Recently the Commerce Department announced that it favors Performance Royalty legislation. The announcement was especially astonishing since it was made in an election year – a time when it is almost unthinkable that the party in power would take sides on the number one issue facing broadcasters, who undeniably influence elections.
The Commerce Department’s announcement was also a complete surprise to organizations like NABOB and MMTC. When Politic365 asked NABOB’s Jim Winston about the Department’s embrace of Performance Royalty, Winston did not mince words, declaring that “the Obama Administration has generally opposed job-destroying legislation and supported small businesses, so the Department’s endorsement of a Performance Royalty bill would seem to conflict with the Administration’s policy goals.”
Rev. Sharpton posed the key political question: “Why in the world would the Democrats at the Commerce Department do this to Black radio – and to radio period? It doesn’t make sense from a political, social or economic perspective. If it passes, this bill would have a devastating effect on Black communities.”