Friday, March 14, 2008

Will Recording Artist Performance Royalty Open Payola Loophole?

You should check of Bruce Houghton's article from Hypebot on potential payola problems with requiring a performance royalty for recording artists, as well as the original Hear 2.0 interview ("It’s time for Radio to charge labels for airplay – legally") on which the article is based.

As an initial matter, it should be pointed out that the interview was conducted with David Oxenford, a broadcast attorney. My guess is that David spends most of his time working on behalf of radio stations, and one might conclude that his allegiances are with them. I don't mean that to be a jab, just that we as practitioners tend to work with a class of clients and even in our off time will advocate for their position. It just so happens that my clients are artists, and I wholeheartedly admit my bias.

David argues that radio has always served as a form of "free promotion" for labels; if radio has to pay a performance royalty then stations should start charging labels to play their songs.

This is ridiculous on several levels. First, how arrogant is radio to think that it could one day flip the switch and never play a song unless it got paid by the label? Advertising only exists on radio because of the music; so radio thinks it can charge one company a fee for the opportunity to be advertised in connection with another paid advertisement? And does radio really think that a playlist dictated solely by who paid the most will be anywhere near the quality required to maintain listeners? Are late-night informertials captivating for any reason other than their comedic value? It would be impossible for a 100% paid-for playlist to even be consistent, much less entertaining or relevant, meaning listeners will stop tuning in, thus reducing commercial rates, which will in turn reduce revenue.

Second, why would any label be willing (or able) to pay for play when they just got done fighting for the right to receive money from those plays? It applies a pre-royalty mentality to a post-royalty situation. Even if labels were willing to pay (as they have in the past), why would payola regulations suddenly cease to apply? There is no causal connection between a performance royalty and pay-for-play; publishers get a performance royalty but you don't see them lining radio's pockets for spins.

The short answer is, payola would still be illegal. However, it appears as though radio would like to change that (or at least tweak it a little).

David discusses how current payola regulations don't apply a wholesale ban on pay-for-play, only that stations have to disclose the fact that they were compensated for playing the particular song. In his view, this regulation is unique to the radio industry. He illustrates by pointing to grocery store displays for products (the stack of Cokes at the end of the isle), which are paid for but require no special disclosure. He also mentions lunches and favors given to doctors by drug manufacturers. In both of these situations, the "provider" is receiving a benefit and is in turn promoting a product to you (the chips at the end of the isle, or the new blood pressure drug).

In David's view, radio should be treated just like grocery stores and drug companies: They should not be required to disclose the fact that they were paid to play a song. If radio had no disclosure requirements then it would be free to charge all artists to get their spins, thereby reversing the performance royalty while also creating a new revenue stream. The problem with David's analogy, and the wholesale pay-for-play concept in general, is that music and radio are nothing like grocery stores or drug companies.

Nobody is foolish enough to think that the display in the grocery is there by chance, and whether its Coke or Pepsi is of little consequence to the richness of our culture. Music, on the other hand, is art. From our nation's founding we have sought to protect and encourage the arts (for instance, copyright law was intended to protect creative expressions, not for financial reasons, but to give creators an incentive to create). There is no similar sense of national interest in which soda pop we drink.

Another key distinction is that your local Publix is a private business operating in a private building on private land. Radio, however, is made up of mostly private businesses operating on public airwaves. Not only does the government have an interest in promoting the arts, it has an interest in regulating the use of the airwaves, which are supposed to be used for the public good, namely, providing news, information and, yes, music, to the public. Payola runs contrary to our collective interests in both the arts and the airwaves because it prevents any creative decision-making or musical knowledge from going into the music selection, and only music that is paid for gets played, thus turning the entire broadcast into one long series of commercials and eliminating any modicum of public service. A music director picking music he/she thinks is good = public good. Corporate head selects music for fat check = public bad.

With respect to David's analogy to drug companies taking doctors out to lunch, while I'm no expert, several of my friends are drug reps; if David thinks radio has it bad, he should try looking into pharmaceutical sales. True, doctors don't have to disclose to patients that a drug rep took them out to lunch. However, this is only because the government so strictly regulates what and how much doctors may receive in the form of freebies. What would David say if the fed told Clear Channel that its station manager couldn't be on the guest list for concerts anymore?

Just how untenability of radio's opposition to a master performance royalty is evident in the nature of their arguments. For years they have relied on statements like, "Radio is free promotion - we help the artist sell records;" "This is how it's always been," and "Major labels are just greedy." While all are true, radio has never been able to dismiss the far stronger responses: "It may be free promotion, but you're still making billions on it so it must be worth something," "We've only dealt with it because your lobbying group has been stronger than ours," and "At least with a performance royalty artists can bypass the labels and actually get paid."

David Oxenford's interview presents radio's new tactic: If you can't win with logic, try scaring the crap out of them. Tell artists that if radio has to pay a royalty then radio will make artists pay to get heard. Funny that they should try this now, when consumers have alternatives to terrestrial radio. Oh yeah, and those alternatives already pay a master performance royalty, and don't charge the artists to get played!

You know, sometimes I think terrestrial radio wants to become extent.