Radio deejays will go the way of paper boys if the record companies succeed in passing the H.R. 3219, ‚??Free Market Royalty Act,‚?Ě which levies a ‚??performance tax‚?Ě on broadcast radio stations, now working its way through the House.
Just as we have seen with self-service cashier stations and robotic factories, the human element gets replaced, so the business can stay alive.
Most Americans would be surprised to learn that record companies, singers and musicians do not receive royalties when a broadcast radio station plays their songs. In fact, this has always been the case because the performers, who participate economically from record and ticket sales, benefit from the airplay as free promotion.
If anything, in a free market money would flow the other way with music companies and performers paying for radio play, but that is illegal. In the 1950s, there was a ‚??payola‚?Ě scandal, when deejays like Dick Clark and Allan Freed collected tens of thousands of dollars for what the federal government calls illegal unidentified sponsorship.
Now, the music industry is working over Congress to use its taxing authority to collect performance royalties from broadcast radio stations and deposit the proceeds with SoundExchange, an entity owned by the Recording Industry Association of America, and its successor entities. SoundExchange would then pay 50 percent of the proceeds to the record companies, 45 percent to featured performers and 5 percent to non-featured performers.
The problem is that the performance tax does not tap new revenue, it taps existing revenue.
In 1998, I was given the tour of a London digital radio station. The entire ‚??station‚?Ě was a server kept in a closet. The station played country western music, so to complete the illusion, the company paid its Americans ‚??dee-jays‚?Ě to come in once-a-week to record bits like: ‚??Hey, that was Johnny Cash and coming up after the news, we‚??ll hear Garth Brooks and Randy Travis.‚?Ě
When computerized stations first showed up, like SparkNet Communications. JackFM outlets. JackFM stations carry the slogan: ‚??playing whatever we want,‚?Ě as they are a digital jukebox playing more than a 1,000 songs a day, twice the dosage delivered daily by a traditional station, mixing genres and artists from the last 50 years of music.
In New York City or Chicago, listeners revolted and the live on-air talent was brought back.
But, slowly the JackFM model is taking hold. Now, 10 years in operation, there are JackFM stations in 46 America markets, including NYC, Chicago and Los Angeles, in addition to a handful of markets in the United Kingdom.
As the drone radio format becomes more accepted, a performance tax will make it the path of least resistance.
There has been chatter on Capitol Hill that with the confirmation of former North Carolina congressman Melvin D. Watt, the bill‚??s sponsor and perennial champion, as President Barack Obama‚??s director of the Federal Housing Finance Agency, it is no longer in play.
Actually, the bill is in stronger shape than ever.
As Watt packed up his office, his co-sponsor Rep. Judy M. Chu (D.-Calif.) has vowed to take up the fight.
Then in the last week, an unlikely ally of the recording industry has emerged, Pandora, the Internet radio station.
Pandora is a free-to-user, ad-supported, service that allows listeners to build their own music channel tuned to their individual tastes. Once the listener gets started with a style or artist, Pandora mixes in new songs that the listener can give an up or down to. As the listener accepts and rejects songs. Pandora builds a fuzzy-intelligence profile ever more specific.
The service is popular, but there is severe doubt the company will ever turn a profit because the Copyright Royalty Board, a three-man panel appointed by James H. Billington, the librarian of Congress, ruled that Pandora must pay 50 percent of its revenues to the SoundExchange.
The CRB judges reasoned that because the listener participates in the song selection, the Pandora listening experience it no longer just a broadcast. Rather, it was closer to a ticketed-performance or a record sale, which is activity for which¬† performers and the record companies get paid.
Pandora had thrown its weight behind the Internet Radio Freedom Act, which would have reworked the SoundExchange‚??s cut. But, that bill died on the vine and now the music industry lobby has enlisted Pandora in its fight against the broadcasters.
Not bad, right? After taking a pound of flesh from Pandora, the record companies convince the Internet service to help it take a slice off Pandora‚??s competition. In a speech, a politician would call this ‚??leveling the playing field.‚?Ě
With the new level playing field, the broadcasters will have no choice but to convert over to their own server in the closet. Dee-jays will join the blacksmiths, chimney sweeps and paperboys as jobs we once had in America.
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