On Tuesday, the House Committee on the Judiciary held hearings on the proposed Performance Rights Act. Most of the hearing documentation consisted of the usual red meat type fairness arguments. Highlights on the jump:
Billy Corgan (Vocalist and Lead Guitarist, The Smashing Pumpkins):
From my perspective, this issue is one of fundamental fairness. If the performance of a song has value to a particular terrestrial radio station in its airing, I believe it is only right to compensate those performers who have created this work. Simply put, if a station plays a song, both the author and the performer should be paid. These particular performances must have value to the stations or they wouldn’t be playing them.
Mitch Bainwol (Chairman and CEO, RIAA) raised five issues:
First, this issue isn’t complicated as the broadcasters suggest. On the contrary, it’s pretty simple when you get down to it. This year radio will spin almost a billion songs in the United States, leading to billions in revenue from advertising. The payment to artists and labels for use of those recordings, however, will not amount even to a penny. As George Carlin famously said, what a ratio! . . . The broadcasters brandish hyperbolic diversionary rhetoric.
Paul Almeida (President, Department for Professional Employees, AFL-CIO):
In this worsening economic crisis, we are leaving 70 to 100 million dollars on the table each year because we do not have a performance right for artists here in the United States. Talented artists are denied the ability to recover what they are owed from the airplay of their music overseas. Does it really make sense for the U.S. to continue to allow millions of dollars to go into a French cultural fund every year, instead of coming home to the U.S. where it can help performers make ends meet, and help our local economies?
W. Lawrence Patrick (President, Patrick Communications):
We do know that SoundExchange has consistently argued in other royalty proceedings that the sound recording royalty is far more valuable than the composition royalty. In some proceedings, it has asked for a royalty over six times the amount of the composition royalty. At the House Judiciary Committee hearing held on July 31, 2007, when asked how much the performance fee would be, Marybeth Peters, the Register of Copyrights, suggested that it could a be simple matter of applying the “willing buyer, willing seller” criteria of Section 114 of the Copyright Act to broadcasting. Of course, that standard is the same standard that led to the current Internet radio royalties which have been so controversial.
Stan Liebowitz, Ph.D. (Ashbel Smith Distinguished Professor of Managerial Economics, University of Texas at Dallas):
The time that individuals spend listening to the radio is time that could have been spent listening to prerecording music. According to the US Statistical Abstract (Table 1089) the time people spend listening to the radio (over two hours per day) is four times as great as the time they spend listening to prerecorded music (30 minutes per day). If radio did not exist, many of these individuals would likely be listening to prerecorded music in place of the nonexistent radio, since the two are substitute activities.
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I examined changes in record sales in 99 US cities over a 5 year period of time (1998-2003) as other factors, such as radio listening (music and talk), Internet usage, income, education and other demographic variables (from the US Census) changed.
My findings were consistent with my earlier studies. Cities that had relatively large increases in radio listening tended to have decreases in record sales and vice versa. In other words, sound recording sales were negatively related to the intensity of radio broadcasting. The measured coefficients were quite large, although the results were of only borderline statistical significance. The coefficients imply that a one hour decrease in listening to music radio, which would be a drop to about half the current level, would increase record sales by .75 albums per person, an increase of almost 30%.
[T]he record labels have gone in search of new revenue streams to make up for these losses. For example, the labels now insist on so-called “360° deals” between record labels and performers. These contracts allow a record label to receive a percentage of the earnings from all of a band or artist’s activities (concert revenue, merchandise sales, endorsement deals, fan clubs, websites, artist management, publishing rights, etc.) instead of just record sales.
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The fact that consumers have new ways in which to locate and obtain music does not diminish the value of over-the-air radio’s marketing and promotion. Over the past few years, a plethora of new digital channels are giving consumers the opportunity to acquire music legally in many new ways, but the sheer volume of music available online creates a cacophony of voices. In the new, fragmented world of the digital environment, in which millions of bands are vying for the attention of hundreds of millions of fans, on millions of websites, one of radio’s greatest strengths is that it cuts through the clutter. Radio exposes listeners to new music and drives them to the websites where their desire for the music that they heard can be monetized.
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In many countries, the royalty rate paid to music composers and publishers is significantly higher than that paid for sound recordings, yet the Copyright Royalty Board decisions in the U.S. have provided rates for performing digital audio transmissions several times higher than rates paid to the composers. In its reliance on the example of foreign law, the American recording industry is, in effect, inviting policy-makers to compare non-comparables.
So were any of the arguments effective? Freshman Representative Jason Chaffetz (R-UT-3) chimes in on Twitter: