<DOC>
[110 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:40284.wais]
S. Hrg. 110-254
EXPLORING THE SCOPE OF PUBLIC PERFORMANCE RIGHTS
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 13, 2007
__________
Serial No. J-110-61
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma
Bruce A. Cohen, Chief Counsel and Staff Director
Michael O'Neill, Republican Chief Counsel and Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Cornyn, Hon. John, a U.S. Senator from the State of Texas,
prepared statement............................................. 29
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 33
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 2
WITNESSES
DeVany, Dan, Vice President and General Manager, Classical WETA
90.9 FM, Arlington, Virginia................................... 8
Lovett, Lyle, Singer/Songwriter, Nashville, Tennessee............ 3
Newberry, Steven M., President and Chief Executive Officer,
Commonwealth Broadcasting Corporation, Glasgow, Kentucky....... 6
Peacock, Alice, Singer/Songwriter, and President, Chicago
Chapter, The Recording Academy, Chicago, Illinois.............. 4
QUESTIONS AND ANSWERS
Responses of Steven M. Newberry to questions submitted by Senator
Specter........................................................ 26
SUBMISSIONS FOR THE RECORD
DeVany, Dan, Vice President and General Manager, Classical WETA
90.9 FM, Arlington, Virginia, statement........................ 31
Lovett, Lyle, Singer/Songwriter, Nashville, Tennessee, statement. 34
Newberry, Steven M., President and Chief Executive Officer,
Commonwealth Broadcasting Corporation, Glasgow, Kentucky,
statement...................................................... 38
Peacock, Alice, Singer/Songwriter, and President, Chicago
Chapter, The Recording Academy, Chicago, Illinois, statement... 58
U.S. Trade Representative, Washington, D.C., fact sheet.......... 62
EXPLORING THE SCOPE OF PUBLIC PERFORMANCE RIGHTS
----------
TUESDAY, NOVEMBER 13, 2007
U.S. Senate,
Committee on the Judiciary,
Washington, D.C.
The Committee met, Pursuant to notice, at 9:35 a.m., in
room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy, Specter, Hatch, and Cornyn.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. I call the Committee to order.
First, I do appreciate very much the fact that Lyle
Lovett--who was performing over at the Birchmere until late
last night, and I am told by Bruce Cohen you were in his office
at 8:30 on a rainy morning. I do not think you get to sleep at
all. We first met in Texas, and I want to thank you for being
here.
Like most people, I am an avid music fan. Music inspires
us, and it connects us to others and to matters larger than
ourselves. It fills our memories. I am grateful to broadcasters
for all the music I first heard on the radio back in the old
days. I also feel strongly that the artists who make our life
so happy should be compensated for their work. So the issue of
``performance rights on sound recordings'' can be stated pretty
simply: Should broadcast radio continue to use musicians' work
without paying for it?
I think the issue of performance rights raises an issue of
fairness. The question is simple; the answer may not be. First,
is it fair to continue to exempt broadcasters from royalty
obligations?
Second, is it fair to U.S. copyright holders for the United
States not to align its practices with every single OECD
country? They all recognize, of course, a performance right.
And is it fair for some kinds of radio equivalents to pay
royalties to performers but for traditional broadcast radio
stations to continue to be exempt from such obligations?
Webcasting and satellite radio pay performers for their work,
but broadcast radio, which generates advertising revenue by
playing the same music, does not.
Fourth, is it fair to require the same payment from small,
non-commercial, or religious radio stations as broadcasters
that own many stations and generate very large profits?
And, finally, is it fair to impose public service
requirements on broadcast radio but not to make those demands
of others?
So I want to be sure that our culture remains vital and
vibrant. Radio has been part of that vibrancy, whether it is
old-fashioned broadcast radio or new-fangled Internet radio. I
want it to survive. I want it to prosper. I want my
grandchildren to have the widest possible access to good music,
including classics or new creations. But I also want to be sure
that the creative artists, those who perform that music, get
their due. When we turn on the radio, I want to know that the
voices I hear belong to artists who are being treated fairly.
I do appreciate the fact that this panel came together on
very short notice. As I was telling Mr. Lovett before we came
in, there will be a roll call vote shortly after 10. I will go
to that. And something that I think I have only done twice in
all my years here, I have gone to Vermont in the middle of the
week. I am going to have to take a late morning flight to
Vermont. Senator Cornyn has offered to sit in for me and
continue the hearing after that.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Chairman Leahy. With that, I would yield to Senator
Specter.
STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE
OF PENNSYLVANIA
Senator Specter. Thank you, Mr. Chairman. This is an
unusual hearing. I have been on this Committee for a while. I
have not seen so many still cameras in my experience here. I
think we might have a better public response if we let the
performers perform as opposed to hearing the Senators do too
much talking.
But we have a very important subject and a very complex one
as we have seen how broadcasting has changed from traditional
AM-FM, so now we have Internet, satellite, and high-definition
broadcasting.
We did make some changes in 1995 to grant the recording
industry for the first time a performance right in digital
music transmissions. But it is a complex field with a lot of
inconsistencies. Satellite radio providers are charged
different royalty rates than Internet service providers, while
traditional broadcasters are almost totally exempt.
We want to encourage performers to come along with the
tremendous entertainment for the American public. At the same
time, we want to make the music available in ways that we can
appreciate those performances. So it is a complex balancing
act, and I think it is time that the Committee took a very hard
look at the complex issues which are involved here.
One of the difficulties is that we have such a crowded
agenda, last week totally consumed with the new Attorney
General, later this week very heavily engaged in the Foreign
Intelligence Surveillance Act. But we all enjoy the music, and
we all enjoy our radios, and we greatly value the performers.
And we want to be fair to all sides, so we will take it up and
try to make as equitable a decision as we can.
Thank you, Mr. Chairman.
Chairman Leahy. Thank you.
I am going to call first of Mr. Lovett, instead of going to
further opening statements, if that is all right, just simply
because of the vote, and obviously the time will be available
for others. I almost feel it is redundant to offer an
introduction, but he is a four-time Grammy Award winner from
Klein, Texas. He has released more than ten albums, many best-
sellers on the Billboard charts. In addition to being a popular
singer and songwriter, he is a gifted performer. He is an
accomplished actor. I remember ``The Player.'' He has
graciously agreed to take time off from his current tour to
help us focus on this, and as I said, Bruce Cohen and others
from my staff saw and heard you at the Birchmere last night and
gave you rave reviews.
Mr. Lovett, it is all yours. Is your microphone on?
The little red button.
STATEMENT OF LYLE LOVETT, SINGER/SONGWRITER, NASHVILLE,
TENNESSEE
Mr. Lovett. Thank you very much. Thank you, Chairman Leahy,
Ranking Member Specter, members of the Committee. I am proud to
be here today on behalf of the MusicFIRST Coalition. I am a
member of the American Federation of Musicians, the Recording
Academy, the American Federation of Television and Radio
Artists, and Sound Exchange. I am incredibly lucky to be able
to make my living doing something that I love to do--creating
art for others to enjoy.
My first public performances was at the age of 7, singing
``Long Tall Texan'' in a school talent show. I grew up in Texas
and still live there in a house that my grandfather built in
1911. My life and music are forever linked to Texas, but I also
play with musicians and singers from Nashville and from all
over the country. The issue you are considering today matters
to performers all across the U.S., recording all kinds of
music.
Songwriters and performers rely on lots of different income
streams in order to survive. But in this patchwork of income
streams, there has always been one incomprehensible anomaly:
when a recording is played on over-the-air radio, the
songwriter who wrote the words and music receives a performance
royalty, as he or she should. But the performer receives
nothing.
Of course, the songwriter who created the song deserves to
be compensated when that work generates value for another
business, as it does for radio. I am proud to be an ASCAP
member and grateful for the performance royalties that have
helped me to earn my living as a songwriter. But the musicians
and singers who perform the song are also creators, and they
deserve to be compensated as well.
When radio plays these recorded works, they generate profit
for themselves because they attract listeners and advertising
dollars. Yet radio has never compensated performers for the
value their creative work brings to the radio industry. This
must change.
Don't get me wrong. I love radio, and I appreciate the
support I have gotten from radio over the years. But business
is business and fair is fair, and they should not get to profit
from the music we create without compensating us.
It also would be extremely helpful to performers, and to
the U.S. balance of trade, to bring our music industry into
line with the rest of the developed world. Foreign radio
stations often broadcast a high percentage of American music,
but we do not get our share of the royalties due to our lack of
a right here in the U.S. This is amazing. We are responsible
for 30 to 50 percent of music played on stations around the
world, and we do not have a performance right? I can understand
why China, North Korea, and Iran might not. But here in the
United States?
I have talked a fair amount about myself today, but this
issue is not about me. It is about the thousands of performers
across the country who work so hard to earn livings that are
very modest in relation to their talent. It is also about the
future of American culture and its ability to support the
creators we need. I am honored to have been given an
opportunity to speak for them. I realize that you are at the
very beginning of a legislative process and that there will be
many issues to consider and to resolve, including how to
protect the rights of songwriters while creating new rights for
performers. But I am sure we can get this done so it is fair
and square for everyone involved.
Thank you for giving me your time today and for all your
efforts on behalf of creators as you work on this issue.
[The prepared statement of Mr. Lovett appears as a
submission for the record.]
Chairman Leahy. Thank you very much, Mr. Lovett.
Before we go to questions, Ms. Alice Peacock has joined us
from Chicago. She is a singer, she is a songwriter, she is a
recording artist, released two albums. Her songs have been
featured on a number of hit television shows and movies. She is
the President of the Chicago Chapter of the Recording Academy
as well as the President of Rock for Reading, a nonprofit
organization that raises awareness and resources for Chicago
area literacy programs.
On a purely personal note, my sister, Mary, runs an adult
basic education program in central Vermont, and I will be
seeing her later today, and I will tell her about your
testimony.
Please go ahead, Ms. Peacock.
STATEMENT OF ALICE PEACOCK, SINGER/SONGWRITER, AND PRESIDENT,
CHICAGO CHAPTER, THE RECORDING ACADEMY, CHICAGO, ILLINOIS
Ms. Peacock. Thank you. Good morning, Chairman Leahy,
Ranking Member Specter, and members of the Committee. My name
is Alice Peacock, and I am a singer/songwriter from Chicago. I
am also a member of the MusicFIRST Coalition, I am President of
the Chicago Chapter of the Recording Academy, and a member of
AFTRA. I am truly honored to have the privilege of addressing
this distinguished Committee about what is one of the most
important issues facing those of us in the music community
today.
As President of the Recording Academy's Chicago Chapter, I
have the honor of working with hundreds of music creators of
all types--from those just starting out and hoping to make a
career in music, to the few--I should note, the very few--who
have achieved superstar status.
But the vast majority are just like me, what I like to call
the ``great middle class of artists.'' Like other Americans, we
go to work every day to earn a living and support our families.
Like other Americans, we produce a product that people value
and want to buy. And like other Americans, we expect to be
compensated when businesses make a profit from our work
product.
Music may be our calling, but make no mistake, it is also
our job.
And for the most part, artists are compensated for their
work. When I sell a record, I make a royalty. When I perform a
concert, I receive a fee from the promoter. And when my tracks
are broadcast on satellite radio, Internet radio, or cable, I
receive a performance royalty.
All this seems fair. But there is one glaring, inexplicable
exception to the notion of fair payment: There is no
performance right for sound recordings for terrestrial radio.
AM and FM radio--the platforms I grew up with and grew to
love--do not compensate me when they broadcast my recordings.
Now, there are people more qualified than I to address the
legal, historic, and economic background of this issue. I am
not an expert in copyright law, but I do understand the concept
of basic fairness. If a business uses recorded music to earn
advertising revenue, then it should compensate those who
created that recorded music. It is that simple.
Now, I understand that this concept nearly always turns
into a discussion about promotion. Broadcasters say radio
promotes record sales and so they should not have to pay a
royalty. But I just do not get that. Every performance has the
potential to be promotional, but why should that make a
difference?
For instance, I just had a gig in Grand Rapids, Michigan.
Imagine if the club owner used the same logic about promotion.
What if at the end of the night, after I had packed his club
with paying customers, he told me that he did not have to pay
me because my performance helped promote my record sales. Well,
such a scenario would be unacceptable by any standard.
Frankly, the promotion argument sounds a little silly. Last
week I bought a pair of Nike shoes. I wear them everywhere--
except to perhaps Senate hearings. With the Nike logo on my
feet, I am probably promoting their brand wherever I go. Can
you imagine if I decided not to pay for the shoes on the
grounds that my promoting Nike should excuse me from payment?
My refusal to pay would be called ``shoplifting.'' But radio's
refusal to pay artists is called ``business as usual.''
Now, I would like to make one other point, an important
point about songwriters, who do enjoy a broadcast performance
royalty. I am also a songwriter, and in addition to the
affiliations I noted earlier, I am a proud member of ASCAP.
Many songwriters are not performers, and many performers are
not songwriters. These are two different jobs and, as Congress
has legislated, two different copyrights. A new performance
right for artists should never be implemented at the expense of
the existing right for songwriters. Any new legislation should
make this clear. Just as satellite and Internet radio pays
songwriters and artists, so should terrestrial radio.
Which brings me back to the issue of fairness.
Is it fair that only one platform--the $20 billion
corporate radio industry--be exempt from paying to use the
music that is the basis of its business? Is it fair that sound
recordings are not protected with a performance right when
movies, literary works, and other copyrighted works are? And is
it fair that American artists lack this basic right when our
counterparts in every other developed country enjoy fair
compensation?
Well, everyone in this room knows the answer is no. But
you, distinguished Senators, have the power to make it right.
Now, before I conclude, let me just take a moment to remind
us all of what this is really about: the music. So this is
something from my song ``Bliss.''
[Ms. Peacock sings.]
Ms. Peacock. So, on behalf of the great middle class of
recording artists, I urge you to grant a performance right for
sound recordings. It is only fair.
Thank you.
[The prepared statement of Ms. Peacock appears as a
submission for the record.]
Chairman Leahy. Thank you very much. I am sitting here
wondering just how our tremendous reporter gets that into the
record.
[Laughter.]
Chairman Leahy. I think the last time somebody sang part of
their testimony at a hearing I was at was my late friend Harry
Chapin. It brings back memories.
Steven Newberry is the President and CEO of Commonwealth
Broadcasting Corporation. He is also the National Association
of Broadcasters Radio Board First Vice Chair. He is from
Glasgow, Kentucky, and, Mr. Newberry, we certainly appreciate
you taking the time to come here today.
STATEMENT OF STEVEN M. NEWBERRY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COMMONWEALTH BROADCASTING CORPORATION, GLASGOW,
KENTUCKY
Mr. Newberry. Thank you very much, Mr. Chairman. Good
morning to you Chairman Leahy, Ranking Member Specter, and
other members of the Committee that are joining us today. And I
do appreciate your inviting me here to offer the broadcaster's
perspective on this important issue.
My name is Steven Newberry. I am the President and CEO of
Commonwealth Broadcasting. I own and operate 23 radio stations
in rural Kentucky, and I am testifying today on behalf of the
over 6,800 local radio members of the National Association of
Broadcasters.
With regard to the issue of creating a new performance
royalty fee for sound recordings, which local broadcasters do
consider a performance tax, NAB strongly opposes any such
proposal. We oppose a performance tax because compensation to
the record labels and performers is already provided under the
current system. The existing model works for one very simple
and significant reason: the promotional value of what the
record labels and performers receive from free airplay on local
radio stations drives consumers to purchase music. A survey
done by critical mass media shows that 85 percent of listeners
identify FM radio as the first place they hear music they
purchase. And with an audience of over 232 million listeners
each week, there is no better way to expose and promote talent.
Beyond just playing music, consider that local radio
stations give away free concert tickets, conduct on-air
interviews with bands releasing a new CD, or hype a newly
discovered artist. Without question, local radio is the engine
that drives music sales.
The recording industry knows that music sales soar with
airplay. Just last week, at the Country Music Awards, Carrie
Underwood, Kenny Chesney, Sugarland, and Rascal Flatts all
specifically thanked country radio for their success. And
Taylor Swift, who was named Best New Artist of the Year, said,
``I want to thank country radio. I will never forget the chance
you took on me.''
While it is true that the recording industry has seen its
revenues dip in their new digital world, in no way can that
decline be attributed to local radio. Just the opposite. Local
radio is essentially free advertising for record labels and
their performers and provides the best and more direct way to
reach consumers.
In 1995, when Congress last examined this issue, lawmakers
opted to require satellite and Internet radio to pay
performance fees because these platforms are often available by
subscription and they both offer consumers true interactivity
to download songs. Local radio, however, is an entirely
different platform. We are free. There is no subscription. It
is not interactive. And between disc jockey lead-ins and
commercials, no one is stealing music from over-the-air radio.
Congress came to this conclusion in 1995, namely, that local
radio airplay does not threaten music sales. In fact, local
radio directly and positively promotes the sale of music.
What I fail to understand after nearly 30 years in the
radio industry is why the recording industry is willing to
essentially bite the hand that feeds it. The free airplay for
free promotion concept has established a natural symbiotic
relationship between local radio and the recording industry.
Both grow and both flourish together. But a new performance tax
takes this mutually beneficial system and transforms it into an
unfair, one-sided scheme that benefits financially only the
recording industry and to the detriment of local radio
stations.
The negative effect of such a dramatic increase in radio
station cost will be felt by radio stations and their listeners
across the country and in every one of your States. Many, many
radio stations across the country are struggling to be
profitable. Since most of our operating costs are fixed, the
money to pay for this new performance fee has to come from
somewhere.
So as a broadcaster, what are my options? Do I reduce the
community affairs programming, including essential news and
weather, in times of emergency? Because I cannot cut my
electric bill. Am I forced to lay off staff or cut the employee
benefits at my station? Because I cannot reduce my FCC
regulatory fees. Do I move to a non-music format, which will
have the effect of playing less music and will ultimately harm
the performers?
There is a reason that the National Religious Broadcasters,
the National Association of Black-Owned Broadcasters, the
National Association of Farm Broadcasters, and the Independent
Spanish Broadcasters Association all oppose the imposition of
any new performance fees. The answers are not simple, and the
consequences of this debate will hit both industries in
unanticipated ways.
There is simply no justification for changing a system that
has worked for the music industry as a whole for so many years.
The United States has the most prolific and successful music
industry that is the envy of the world. The law as it stands
today works. Upsetting the careful balance that Congress struck
by imposing a new performance tax on local radio broadcasters
would be a shift of seismic proportions. Congress has
consistently recognized the mutual beneficial relationships
between local radio and the recording industry, and there is no
reason to change the law now.
Thank you for inviting me here today, and I welcome your
questions.
[The prepared statement of Mr. Newberry appears as a
submission for the record.]
Chairman Leahy. Well, thank you, Mr. Newberry, and I do
appreciate your coming here.
Dan DeVany is the Vice President and General Manager at
WETA 90.9 FM based in Arlington, Virginia. It is a public
broadcasting station. It switched to an all-classical format
earlier this year. Before coming to WETA, he worked with the
National Symphony Orchestra. I think that is where we first
met.
Mr. DeVany. That is right.
Chairman Leahy. And for the Fine Arts Network of Minnesota
Public Radio. Mr. DeVany, please.
STATEMENT OF DAN DEVANY, VICE PRESIDENT AND GENERAL MANAGER,
CLASSICAL WETA 90.9 FM, ARLINGTON, VIRGINIA
Mr. DeVany. Thank you, Mr. Chairman, Senator Specter, and
members of the Committee, for giving me the opportunity to
speak with you today. I am head of Classical WETA, the only
classical music radio station here in Washington, D.C., and I
am here today in opposition to the proposal that radio stations
be required to pay performance fees for broadcasting musical
material. These fees would impose a significant constraint on
the ability of community music broadcasters such as WETA to
provide public service within the publicly funded system in
which we operate.
Earlier this year, as you mentioned, Mr. Chairman, WETA
made the decision to adopt a full-time classical music format
on our radio station's 90.9 FM and 89.1 FM. We did so when it
appeared that our Nation's capital would be without any over-
the-air station devoted to classical music. The company that
owned and operated the last remaining classical music station
in Washington, WGMS, had decided to move away from the format
in favor of other types of programming. There was going to be
no classical music on the radio in Washington.
For many in this community, it was unthinkable that there
would not be access to classical music on the radio free and
available to all. WETA enthusiastically adopted the format as
part of our core mission to serve the Greater Washington Area
with programming that is significant, meaningful, and with
intrinsic value.
And we did so against a trend in broadcasting where more
and more radio stations are abandoning the classical music
format in favor of programming that, it is hoped, will be more
successful in garnering increased audience and revenue. Last
year the National Endowment for the Arts reported that the
number of classical music stations in this country was in steep
decline and that 6 of the top 30 markets in the United States
had no classical stations at all. Philadelphia still has no
classical music radio station.
WETA is a not-for-profit community broadcaster licensed to
the Greater Washington Area and chartered to serve the
community with programming of value and significance. Our
operating budgets are built upon public funding, the vast
majority of which comes from voluntary private contributions
from our listeners. Needless to say, raising this money year
after year is a central challenge for us and any other
similarly organized broadcast enterprise.
We at WETA are proud and passionate about our place of
service to Washington. And we are not alone in our efforts.
WETA is part of a family of community stations most of whom
broadcast a genre of music unique to their markets.
The current proposal to require radio stations to pay a
performance fee for material played on the air would be an
onerous burden on community stations such as WETA who are
already greatly challenged to raise the money needed to stay on
the air and provide public service. Like WETA, the operations
of community music stations are built upon a razor-thin margin
that cannot withstand additional tolls or tariffs beyond that
which we already pay to music licensing entities. Payment of
these additional fees would be difficult for WETA; it might be
impossible for smaller stations. By the very nature of the
programming we offer, our audiences are limited, as are our
resources.
Please let me be clear. I do not suggest that artists
should not be fairly acknowledged and compensated for their
work. I say this as a former professional musician myself and a
member of a family of working professional musicians and music
educators.
We community broadcasters who nurture, promote, and
preserve art forms such as classical music, jazz, folk music,
or any other that is underrepresented in mainstream terrestrial
radio do so as a labor of love and with the deep conviction
that our efforts support the work of artists most of whom would
not be heard on radio if we did not exist. We have built
communities of listeners upon this principle. And we have done
so in partnership with performers who share our conviction and
believe that the music to which they are devoted benefits from
free exposure. It is a system that has worked for many, many
years, and the ultimate beneficiary is the public we all serve.
As you review this proposed legislation, I urge you
consider the effects it would have on community-based music
stations.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. DeVany appears as a
submission for the record.]
Chairman Leahy. Thank you.
Let me ask this question of both Mr. Lovett and Ms. Peacock
to followup on what Mr. Newberry and Mr. DeVany have said. If
you were paid by the radio station, aren't you getting paid two
different royalties for the same song? How would you respond to
that?
Mr. Lovett. Go ahead, Alice.
Ms. Peacock. Well, Senator, I would say that those are two
different jobs. I am a songwriter, but I am also a performer,
so I should be paid fairly for both. They are two different
jobs.
Chairman Leahy. Mr. Lovett?
Mr. Lovett. And I also perform my own songs, but in
addition to that, I perform songs that I did not write. And it
is not just about receiving a performance royalty for me myself
with airplay.
Ms. Peacock. That is true.
Mr. Lovett. This performance royalty would extend to the
musicians that I record with. Those are people who are usually
not credited as writers of a song, but are extremely
influential in bringing a song to life and are very much part
of the creative process.
Chairman Leahy. But, you know, we hear the radio stations
speak of the promotional value of hearing it, which also would
add to your value for concerts and all where others are going
to be involved. We have also heard of promoters who will pay
stations to play, sort of supporting this theory there is a
promotional value to it.
Are you saying that is not enough?
Mr. Lovett. Well, certainly radio stations may provide
promotional value to what we do, but it goes both ways. It is
the music that people tune in to hear. It is because of the
music radio stations are able to sell advertising. Radio
stations work in what we provide, and we are just asking for
the opportunity to be given fair compensation.
Ms. Peacock. And may I add, Senator, that satellite radio
and Internet radio are also playing our material as well and
offering promotion, but they are paying a royalty. So we are
just really asking for what is fair.
Chairman Leahy. Well, that goes back--Mr. Newberry, I am
trying to tie, in the few minutes I have here, back and forth
on this. You say the radio play should be sufficient so they
should not receive additional payment.
Now, doesn't that imply the performer would want to give
you the incentive to play his or her work perhaps by permitting
their work to be played for free? Shouldn't that be the
decision of the performer whether they want to forego rights to
encourage airplay?
Mr. Newberry. Senator, as you referenced, there is a
relationship with the composers, and those persons that write
the songs are very limited in their ability to monetize the
value of those songs. And that is why the broadcast industry
has had a longstanding relationship with BMI, ASCAP, and CSAC
to make sure that those who are limited in their ability to
monetize their work are fairly compensated.
But I do believe that what the broadcast industry brings to
the table in opposition or in contrast to satellite and
Internet broadcasters are 232 million relationships each week
with our listeners, 232 million people that listen to over-the-
air radio, and certainly there is a value by us introducing
that artist, by us promoting where the concert is, and that
gives the performer, whether it be in a small venue or a large
venue, the ability to sell concert tickets, sell T-shirts, go
to movie rights, become a celebrity. That is certainly for the
performer a much stronger opportunity for them to monetize this
side of the relationship, and I would like to think that
America's broadcasters have contributed greatly to many, to the
recognition factor of many of the artists that we have.
You know, when Mr. Lovett came into the room, there was a
certain sense of celebrity. And I would like to think that the
broadcast industry contributed to that. And he has an
opportunity to monetize that.
Chairman Leahy. Mr. Lovett, what do you say to that?
Mr. Lovett. While radio may provide promotional value to
me, certainly, you know, it is just fair is fair. And the other
people besides me who participate in these recordings, who do
not have the same opportunities that I might have to monetize
my exposure, deserve to be compensated as well.
Chairman Leahy. My red light just went on. I have further
questions. If I do not get back, I will submit them in writing.
I am told the vote is about to start. I will yield to Senator
Specter.
Senator Specter. Thank you, Mr. Chairman.
Chairman Leahy. And when Senator Specter finishes his
questions, we will stand in recess for the vote once you have
finished, and then, Senator Cornyn, if you would come back and
take over.
Senator Specter. As I study this issue and listen to the
testimony, I think the system is very illogical as it is
currently devised. Whether it is fair is a more complex issue.
But when you start off and say that analog, no performers'
rights, and digital, performers' rights, because analog cannot
be copied because it is blurry but digital can, and then in
1998 we legislate and give performers rights on the Internet
and satellite and on cable, on TV, that is a mish-mosh. That is
a crazy quilt, because now you have 1,200 to 1,500 AM-FM radios
with high definition where it is capable of being recorded. So
by that standard, the high definition ought to have performers'
rights. But how you segment that is kind of complicated.
I think that Mr. Lovett and Ms. Peacock make a very strong
initial presentation on the issue of fairness, but I think we
need to know a lot more. I think we need to know how many
performers are discouraged from entering into the profession
because they do not receive compensation for their performance.
And we need to know more from the radio stations what would be
the impact if you had to pay a performer's royalty. The value
of radio stations has gone up enormously, just gigantically,
from what I have seen, and the commercials pay very, very well.
So the question which is on my mind on commercial radio,
can you afford it? You certainly receive tremendous benefit
from the recordings, from the performers' work. Mr. DeVany
raises a good point about public radio, small stations going
out of business. Well, we do not want to do that. We listened
to NPR and somehow the Washington station changed its format,
and now we hear music instead of the old format. And there is
public financing there, so maybe we can make a dichotomy.
Can you quantify in any meaningful way, Mr. Lovett or Ms.
Peacock, what the promotional value is? You do sell your
records and you do attract people to your shows because you
have become famous for what people hear over the air when they
are not paying for it. Can it be quantified to any extent? And
the subordinate question is: How many performers are
discouraged from entering the profession? We certainly want to
encourage you to perform, Ms. Peacock. That is the only time I
have seen the red light go on when I did not want the--when the
speaker was a performer from going on.
Respond to that question. How many people are discouraged--
can you quantify it to any extent--by not receiving performers'
royalties?
Ms. Peacock. Senator Specter, I cannot quantify it. I do
not know to what amounts. I do know that people go into music,
such as myself, because of we are passionate about it, because
we have no other choice. Music is my calling. It truly is. But
it is my job, and it is how I support myself. And as I call it,
as sort of the great middle class of artists out there, I make
my living from different revenue streams. I am also an
independent label, so, you know, I am a small business. And so
I feel that, you know, if somebody is creating a business model
on my work, based on my work, I should be compensated fairly.
That is where the fairness issue comes in, and this is my job,
that is their business model, and there should be compensation.
Senator Specter. So, Ms. Peacock, you say you perform for
passion not for money, sort of like Senators who are in this
line for passion and not for $165,000 a year.
Ms. Peacock. But you do have to pay the bills.
Senator Specter. Senator Hatch has royalties, too.
[Laughter.]
Senator Specter. But he is entitled to them.
Mr. Newberry, how well are your constituents doing, the
radio stations, aside from the public stations? Isn't it a
pretty lucrative line these days? Can you afford to pay
performers and still stay in business with a significant
profit?
Mr. Newberry. Senator, as I was listening to Ms. Peacock's
answer to your question just a moment ago, it struck me that we
probably find ourselves in the same position. I would consider
myself a member of the middle or lower class of the broadcast
community. Sixty-five percent of the radio stations in this
country are outside of rated markets. It is rural America. And
I can assure you that those small market radio stations in
today's economy, with the challenges that are being faced, with
the consumer confidence level where it is, with gas prices
going up, many, many stations, as I said in my oral testimony,
are struggling to find profitability. And the impact of these
fees being paid by those radio stations would be dramatic and
would be devastating because stations would have to make hard
decisions. We are a fixed-cost industry.
Senator Specter. Mr. Newberry, would it be rational to make
a distinction somewhere along the line between the stations you
describe and those which are profitable?
Mr. Newberry. Senator, I think it is an issue of principle,
because what I would say in response to that is the larger
stations that are in the metropolitan areas provide even
greater value to the artist. They reach more people. They have
more impact. So I think it is a balanced system, and for us to
bifurcate the industry I think would be a mistake.
Senator Specter. Well, when we establish public policy, we
try to do it in terms of stimulating entrepreneurialism, and
performers are certainly in the free enterprise system
entrepreneurs. But we want to keep radio stations going, too.
The first thing all of us do when we get into the car is turn
on the radio. The first thing we do. And we hear a lot of
commercials. A lot of commercials. The first thing I do is turn
on television--I asked my staffer, I saw in my notes Internet
and satellite have to pay performers. I wondered about
television. A lot of good music on television. And I was told
that on cable they have to pay performers.
Well, it is a vexing issue, and we want to be fair. We want
to keep the radio stations going. We also want to keep the
performers going.
Senator Hatch has more experience in this field than I do.
He can provide more of the answers. But the Chairman has put us
in recess until the vote concludes. We will all be right back.
[Recess 10:17 a.m. to 10:27 a.m.]
Senator Cornyn. [Presiding.] I will call the hearing back
to order. I hate to interrupt all the good conversation, but I
do want to make sure we move our way through the hearing in the
interest of your time as well as ours.
First I want to thank Chairman Leahy for convening this
important hearing. I was thinking there has not been one I have
enjoyed personally as much in a long time because of the
entertainment and because of some of the personalities who are
here. And I was thinking, Mr. Lovett, as Chairman Leahy was
talking about your contributions to music, which are many, that
Texas has produced a large number of our Nation's most storied
musicians, from Bob Willis--Wills. Excuse me. I do not know why
I said ``Bob Willis.'' I was looking at Ray Benson as I was
thinking that.
[Laughter.]
Senator Cornyn. I remember his performance, riding with Bob
at the Kennedy Center, which I enjoyed a lot. It celebrated the
life of Bob Wills. I do not know why I said ``Bob Willis.''
Excuse me.
To Willie Nelson, from Janis Joplin and Norah Jones, from
Buddy Holly to Stevie Ray Vaughn, and from Robert Earl Keen,
who I understand was your housemate at Texas A&M. Is that
correct, Mr. Lovett?
Mr. Lovett. Well, we were friends. We lived right down the
street from one another, and we met there, and, you know, we
sat around and played a lot of music together.
Senator Cornyn. Well, I want to also say that my own
appreciation for music has overcome some early hurdles in my
life when my parents forced upon me trombone lessons in first
grade. And then I learned later when I went to college, I
learned how to play the guitar badly. But I found that the
opposite sex was not attracted to trombones.
[Laughter.]
Senator Cornyn. They were not attracted to my bad guitar
playing either.
Then let me just relate one other personal anecdote and
then segue into my questions. When I went to law school and
became a lawyer, I worked for a senior partner in my law firm
in San Antonio, and one of his clients was ASCAP. And he would
sue local clubs for non-payment of royalties, and he would give
me the responsibility to go about midnight, usually on a Friday
or Saturday night, along with a United States Marshal, with a
writ of execution, to levy the writ of execution on the cash
register and the proceeds that were accumulated during the
evening's course of business. And I was always appreciative
that we did not encounter someone with an attitude, and perhaps
even a gun, that would have challenged that, or I might not
have been here.
But, of course, the royalties that we were helping to
collect for ASCAP I would be interested in understanding
because--and maybe the record would benefit from knowing how
that money is distributed vis-a-vis the author, the writer,
versus performer versus the music publisher and others.
Mr. Newberry, could you perhaps enlighten us a little bit
on that?
Mr. Newberry. Certainly, Senator. Every radio station in
the country pays a fee to ASCAP, BMI, and CSAC through
independent licenses with each of those three entities. And it
is based on a percentage of revenue that the stations are
audited for and remit to those three entities on a monthly
basis, generally.
The funds have been distributed--and I am not intimately
familiar, but familiar as it relates to being a broadcast
owner. The funds have been distributed to the composers based
on the airplay of the songs, and we are required by law and by
the license agreement to provide to those companies an audited
portion of our play list for a given period of time. Sometimes
it is 3 days; sometimes it is 7 days. It can be longer or
shorter. We provide that, and then they, through a statistical
analysis, allocate the funds back to their various composers.
Again, that is my understanding. I am not an employee of
any of those three companies, but as a broadcaster, that is my
understanding of how the practice works.
Senator Cornyn. Do any of the royalties or fees associated
with that flow back to the performer, Ms. Peacock, Mr. Lovett,
to your knowledge? Or does it solely go to the benefit of the
creator of the music? By ``creator,'' I mean the songwriter.
Ms. Peacock. It goes to the songwriter.
Senator Cornyn. Only. Is that right?
Ms. Peacock. Only.
Mr. Lovett. Yes, sir.
Senator Cornyn. Do you know why that has been historically
the case?
Mr. Lovett. Well, songwriting and performing are, as Ms.
Peacock said in her opening, two separate jobs. They are two
separate things. As a songwriter, someone else might record and
perform my song. And as a performer, I might record and perform
someone else's song.
Senator Cornyn. Mr. Newberry?
Mr. Newberry. If I could just add, the broadcasters
recognize--as stated earlier, the broadcasters recognize that
the composers are limited on their ability to monetize their
artistic work. They do not have, generally, as much opportunity
to go out and perform merchandise sales, et cetera. So the
broadcast industry certainly wants to be fair. And for many
years, we have been paying those fees to the composers and are
very comfortable with that relationship and value that
relationship immensely. While they are two different jobs,
there are also two different compensation structures for that.
Senator Cornyn. Ms. Peacock, you alluded to the fact that
satellite broadcasters already pay a performance fee to
recording artists or somebody who performs somebody's music.
How did that come about? As part of a negotiation process? It
was not mandated by Congress, I gather.
Ms. Peacock. You know, I am actually not familiar with the
exact details of it, but I believe it was several years ago
that this started happening. I receive royalty rates when my
songs are played on XM or Sirius or Internet radio or cable. So
I receive checks usually through a SoundExchange or something
like that.
Senator Cornyn. Do any of our witnesses know why XM Radio
or satellite radio has been treated differently from
terrestrial radio when it comes to paying fees to performers as
opposed to composers?
Mr. DeVany. Senator, I believe one of the reasons is that
in the case of satellite radio, it is a subscription- based
system as opposed to a free, over-the-air system. So that those
who receive that service are already paying for it.
Mr. Newberry. The same would apply to the cable industry as
well.
Senator Cornyn. And I guess the advertising revenue that is
available to terrestrial radio stations is not as available, I
guess. As I recall my XM Radio subscription, I do not think
there is a lot of additional advertising associated with it. So
the fee for service basically is a substitute for advertising
revenue. Is that right?
Ms. Peacock. Well, that is true. There is not as much
advertising on the satellite radio. However, Internet radio is
free, and they also pay a royalty.
Senator Cornyn. OK. I think it was Mr. DeVany or you, Mr.
Newberry, who talked about a symbiotic relationship between the
performers and radio.
Mr. Newberry. It was me, sir.
Senator Cornyn. And it seems clear--and I think Ms. Peacock
and Mr. Lovett acknowledged they benefit from the exposure
given them on radio, but they, I think, make a pretty
compelling argument that that should not be the limit of the
benefit that they receive if, in fact, the marketplace would
provide for additional compensation by virtue of their
performance rights.
Could you speak specifically to that argument, that while
certainly they do acknowledge the benefit of promoting their
record sales otherwise, that they should not be limited to
that?
Mr. Newberry. Absolutely, Senator, and the relationship
that I did refer to in my testimony as symbiotic has to deal
with the value that we provide in a relationship that has been
in place.
I will tell you that it is really a three-party
relationship. One of those parties that is not at the table
today that I would hope would engage in this discussion, and
that is the recording industry, the actual record labels,
because many times they own a 50-percent interest in what the
performers' rights fee would be, or tax, whatever we wanted to
call it.
But we help promote the label, the artist. We help promote
their venues. We help promote their celebrity. We help to make
them familiar so that you hear the song that is played. We play
it on our station, and there is a direct correlation, and you
can see that we drive the sales of the merchandise and the
sound recordings. And I think that that relationship is very
proven. We can provide documentation to show that, the
correlation between the two. But I would encourage that the
record labels, the multinational record labels, be brought into
this discussion because they are very much a part of this
relationship.
Senator Cornyn. As I understand it, there currently are
prohibitions against play-for-pay or payola.
Mr. Newberry. Yes, sir, absolutely.
Senator Cornyn. If a performance fee is levied on over-the-
air terrestrial radio, would it make sense to remove those
payola laws? In other words, I am trying to figure out if
Government intervenes in this relationship, this business
relationship, as Mr. Lovett says, between the performer,
between the creator, the people who actually broadcast it, to
what extend should Government be in the middle of this by
prohibiting economic relationships that might ultimately work
their way out in a free market, a freer market?
Mr. Newberry. First of all, I think from a logical
correlation or one step leads to another, if we are paying for
the fees, then one could say--if we are paying for the rights
to perform the songs, then one should say that we should be
compensated for that. I do not think that is the right model. I
do not think for artists it should be who has the most money
gets the most airplay. I think it should be a case of who
provides the best artistic content gets the most airplay.
So I would hate to see us go in a direction that pay for
play became the standard because I think that that would be a
tragedy for many, many artists that are working to evolve.
Broadcast radio, over-the-air radio, we introduce thousands of
artists each year, and if I might, I could relate a personal
story.
Last year at this time, I had an opportunity to meet a very
shy, very retiring, very quiet, very modest young lady by the
name of Taylor Swift, who had just released her first song, and
she was just very--almost timid. And then when I saw her
perform on the Country Music Association Awards the other
night, I saw this young lady that had blossomed into a great
performer. I am very proud of what radio has done to introduce
her to the listening audience, and certainly her talent has
taken her beyond--I do not want to say radio contributed all of
her success. But I think that seeing artists evolve like Taylor
Swift--and if we got into a pay- for-play circumstance, I think
we would miss a lot of artists that would be introduced to the
listening public otherwise.
Senator Cornyn. I would be interested, Mr. Lovett and Ms.
Peacock, talking about the prohibition of radio play for pay
and whether that would or should be removed--I am not
advocating that. I am just trying to figure out how heavy the
hand of Government should be in intervening in basically a
business, market-based determination of value and who gets paid
for what. I think the arguments you have made are pretty
compelling, but I wonder whether there might be some other
consequences to increase Government intervention in your
business relationships that would not be beneficial in the long
run or whether you harbor any of those concerns.
Mr. Lovett. Our position is really pretty simple. Mr.
Newberry has--I appreciate what Mr. Newberry has done for me in
a promotional way. Certainly, radio adds value to what I do.
But it simply works both ways. Musicians and artists add value
to what radio does, and it is just--what we are talking about
is bringing this performance royalty into line with practices
that could be viewed as standard across the world, and talking
about--Ms. Peacock made the point that Internet radio is free
as well, but we are talking about bringing our practices in
line with standards that are prevalent in the developed world.
They add value to us. We do not argue that, and we thank
radio for that. And in no way are we trying to put small market
radio out of business. Goodness gracious, we rely on radio. We
need radio. We support radio. We mention radio at all of our
shows. You know, at shows that- -we are often in business with
the radio station to help promote a show. I make it a point to
thank our sponsoring radio station.
It is a symbiotic relationship, and we are just talking
about bringing these practices in line with the standard. And I
think the coalition is--as performers, we are looking to the
Congress for your wisdom and what is fair. We are just asking
for a fair look at this, and we appeal to you to help us figure
out what is fair. And the coalition certainly I think has in
mind ideas that would--where smaller market commercial stations
would not pay the same money that larger market stations would,
and certainly non----
commercial stations would have a lesser payment as well.
So we appeal to you to--we are interested simply in
fairness, and we are grateful for this opportunity to be
considered.
Senator Cornyn. Thank you very much.
Senator Hatch?
Senator Hatch. Well, I want to thank the Chairman and the
Senator from Pennsylvania for holding this hearing on
performance rights. The subject of royalty payments is an
important one, and it deserves this Committee's attention. As a
songwriter, I have had the advantage of meeting and mingling
with some of the finest and talented individuals in the world,
and certainly in our country, the best our country has to
offer.
Some people are under the wrong impression that everyone in
the music industry is making a fortune. But they are not aware
that all too often it is a struggle to survive.
I will never forget, I gave the keynote address at the
ASCAP national convention 1 year, and a thousand songwriters
were there, and I told how I got involved in writing music, and
part of it was so I could understand this field and understand
all of the problems. And it really has taught me an awful lot
about it.
But I had just received my first royalty check for 57
bucks, and I said, ``And I just got my first check for 57
bucks,'' and I held it up and the place went wild. I mean, they
screamed and shouted and stood on chairs. And I thought, My
gosh, they treat U.S. Senators pretty well.
[Laughter.]
Senator Hatch. I sat down next to Marilyn Bergman, who is
the head of ASCAP, and a great songwriter herself, Academy
Award-winning songwriter with her husband, Alan, and she said,
``Senator, the reason they are so excited is that there are a
lot of great songwriters there and hardly any of them will ever
get a royalty check.''
It is really that tough. It is a tough business. If you are
a performer, you have at least a chance. But even there, there
are those who really hit it big, and there are those who just
continue to strive who may be every bit as good, but just for
some reason do not click like they would like to.
I recognize there is no easy solution to the performance
rights issue. It is a complex area of the law, and I am glad
that Chairman Leahy has made this hearing possible. And I
consider it a valuable opportunity to learn more about this.
Let me just say that the more I get into it, the more I
realize that it is very, very complicated. I have to say that
it is true, isn't it, that Europe, just as an illustration,
pays performance royalties? They pay writers' royalties. I
know. I have received royalties from Europe. But I do not get
them from America. I have just wondered about that many times
and, of course, have gotten into it.
Mr. Lovett, I thank you for your testimony today. I
appreciate you and Ms. Peacock taking the time to be here. And
I appreciate you two gentlemen who have your own problems here.
So as a songwriter, I am sympathetic to royalty payments, not
because I ever expect to make any real money at this, although
actually it is surprising. But it troubles me that music sales
and revenues are in decline. Most writers have to take second
jobs--or first jobs in order to write, and then they have to
really, really work very, very hard to get even a chance to--
and some of them are wonderful writers, but just do not have a
chance, and especially when they are not performers themselves.
Now, I believe that we have to do something to keep the up
and coming songwriters and performers motivated and able to
make a good living. However, I am concerned, as Senator Specter
is, about the unintended consequences that may be created by
any--and as Senator Cornyn is, that may be created by any
action that Congress might take. But common sense tells me that
if stations face paying significant sums of money in
performance royalty payments, it is going to impact their
programming decisions, and here is my concern. This could lead
to a scenario where well-established artists benefit at the
expense of newer or lesser known artists. And I do not want to
see that happen either--not that I do not want established
artists to do well.
If I were running a radio station and had to pay for the
use of a song, I would likely play music that is more popular
to ensure that my ratings remained high and that I could sell
my advertising needed to pay for the new royalty expense. Now,
that is great for the well-established artists of the world,
but what about the artists who are struggling to just break
through or just get a chance. And we have new ones every year
that come through that are really, really good. But if they do
not have a chance, it is going to be something. How would such
a royalty payment structure sustain the vast majority of
artists who are in that group?
Now, let me just say this: Mr. Newberry, could you explain
some of the limitations, the restrictions terrestrial radio
faces which do not burden other platforms, such as satellite
radio and Internet music services? And if we accept the
proposition that parity is a good policy, how do we achieve it
given some of the restrictions placed upon terrestrial radio
that other platforms may not have?
Mr. Newberry. Senator, as a broadcaster, I am very proud of
the relationship that I have with my listeners in the
community, and I think one of the things that you are alluding
to is the overriding public interest obligation that we as
licensees have for our communities that satellite radio has not
had to demonstrate. Certainly someone that is streaming
independently does not have those obligations.
So we do have a relationship that we have to maintain in
our communities. I am very proud to be a local broadcaster. I
love the fact that last Friday night I was doing a high school
ball game with some friends. Actually, it was not exactly big
listenership, but it was a T-ball football game, Little League
football games. And I love the fact that our communities are
engaged in that.
Mr. Lovett said earlier that music is what builds
relationships with the listeners. It is a component, but it is
not the sole component of what builds our listenership. It is
the overall relationship that we develop.
So, Senator, you talk about the obligations or the
responsibilities, and you raise the question of parity, and I
think your point is dead on. But I would also tell you that
that is not something that I would ever want to give up. I am
very proud of the relationship and the expectations that we
have. I am proud to be a broadcaster. I think that that is a
unique opportunity for me to contribute in my community, and I
think that is what differentiates us also from satellite and
from Internet and other forms of broadcasting and makes us a
stronger opportunity.
Senator Hatch. All right. Ms. Peacock, I have heard the
argument that radio stations should not have to pay performers
royalties because they promote the sales of music. We have had
that throughout this hearing. Now, is broadcast of your music
beneficial to you as a singer and as a songwriter?
Ms. Peacock. Yes, it is.
Senator Hatch. Sure, it is. It appears to me that advancing
technologies today enable radio stations to further promote the
music that they play much easier than in the past, these
advance technologies. For example, I am aware that several
radio stations provide play lists on their websites and direct
links for listeners to purchase artists' music right then and
there. Now, it seems that this level of exposure on the Web
fostered by radio stations would be a significant benefit to
performers. What are your thoughts on that? And I think I
understand them
Ms. Peacock. It is a benefit to performers, absolutely. And
I do not argue with that. Basically, I think as Mr. Lovett
said, what we are asking for today is fair treatment for
performers, to bring us up to date and up to the standards that
are across the world in developing countries that also pay a
performance royalty.
If I could comment on Mr. Newberry's comment about
broadcasting Little League and public service things, you know,
the broadcasters have free air space and so they are supposed
to be doing community broadcasts. So that is part of their job
as well, to be part of a community. And if you are a radio
broadcaster and let's say you are maybe a larger station and
you are broadcasting the Cubs game or, you know, the local
sports network, you have to pay for that. You have to pay for
that content.
So while radio does provide a service, and absolutely it
does provide promotion to an artist, we are part of their
content. They built the business model upon our work, and we
should be compensated fairly.
Senator Hatch. I have gone over, Mr. Chairman, but let me
just take one more second and just say this: I lean very
heavily in favor of the artists and writers because I know that
Europe is going to drop royalties if we do not provide a means
whereby royalties are paid on terrestrial radio. And I do not
want to see that happen. Already, at least one country has
thrown it in our face in refusing to pay royalties. The
question is: Can we do this in a way that does not bankrupt
terrestrial radio? Can we do it in a way that is fair to the
struggling artists or to struggling people, writers, who really
are great but just are not known yet? Can we do it with enough
optimism and opportunity on both sides of the equation to be
able to make this work?
For instance, I listen to your program all the time. Is it
Mr. ``De-vahn-y'' or ``De-vane-y''?
Mr. DeVany. It is DeVany.
Senator Hatch. Yes, well, I knew that you--when you do
classical music, I thought maybe it was just pronounced
differently.
[Laughter.]
Senator Hatch. But I do not want you to go bankrupt, nor do
I want you to have a great deal of trouble. But, also, there is
just simple equity here. I do not want to see Europe and other,
like you say, Mr. Lovett, developed world drop paying royalties
because we refuse to do so. But this problem of the newer
artists and those who are up and coming and those who have not
been known yet and those who need opportunities is one that
bothers me. But I am going to work hard to see if we can come
up with some legislation and be fair to both sides but
literally does what is right with regard to content. And what
is right is when people create something of value and it is
used by others, there ought to be some payment for that.
Now, I have not seen the legislation yet, but I am going to
be very interested in the legislation. I will not be interested
in it if it is all one-sided or all the other. But, on the
other hand, I think that terrestrial radio has got to wake up
on this a little bit, too. You do provide great services. You
do help established artists. You do a lot of good. On the other
hand, I hope we have a country where there is a lot of
opportunity for up-and-coming people who have ability, and
maybe some of those who are older and are no longer capable of
going out and performing and getting accepted. And I would
think it is in the best interests of all of us to be able to
come up with a form like that.
So I would challenge the radio industry, terrestrial radio
industry, to help us to come up with some ways of helping you.
If you have restrictions and difficulties that make it much
more difficult for you to do something that I think is
equitable, when you listen to these artists here, you ought to
find some way of doing it. And we are not interested in hurting
anybody. We just want to make sure that the system works well
and that it is an international system that does not just work
in Europe but can work here as well, and that we reward talent
and we reward innovation, we reward creativity. Because without
it, I do not think that the radio stations are going to do well
either. And it seems to me there has got to be an element of
give and take here that hopefully we on this Committee and
throughout the Congress can resolve. Well, I am going to work
hard to see if we can resolve that, and I just personally
appreciate the testimony of all of you here today. I have
listened. I am not interested in hurting anybody. I just want
to make sure that we have a system that works and works fairly
and makes sense. And to that degree, I am going to do my very
best to work with my other colleagues on this Committee and
listen to them and try to come up with some answers here. Thank
you, Mr. Chairman. Senator Cornyn. Mr. Chairman, before I
completely relinquish any right I have to conduct the hearing
back to you, could I ask unanimous consent that my statement be
made part of the record? Senator Specter. Without objection.
Senator Cornyn. Thank you, Mr. Chairman. Senator Specter. Just
a few more questions. Mr. DeVany, you talk about the stations
which cannot afford to pay performers. Do they pay the
songwriters? Can they afford that?
Mr. DeVany. At this point, they have been. Like Mr.
Newberry said, all stations are paying a fee to ASCAP and BMI.
Senator Specter. Do you know how much they pay the
songwriters?
Mr. DeVany. Let me make a distinction here on that
particular issue when it comes to public radio. Those stations
are non-commercial radio, those stations which fit the criteria
to be what is called CPB qualified--that is to say that they
are eligible to receive funding from the Corporation for Public
Broadcasting--are also the beneficiary of having, through the
Corporation for Public Broadcasting, payments made on their
behalf to ASCAP and BMI. It is part of the way, as I understand
the corporation is chartered, to provide that kind of royalty
support.
Senator Specter. Payments made on their behalf by whom?
Mr. DeVany. By the Corporation for Public Broadcasting.
Through the Corporation for Public Broadcasting.
Senator Specter. Well, would that be a possible way to pay
performers like they pay writers?
Mr. DeVany. It is possible. At this point it is unclear, at
least to me, how that would work. However, it is possible.
Senator Specter. Would you explore that and get back to the
Committee?
Mr. DeVany. Yes, sir.
Senator Specter. Would you let us know?
Mr. DeVany. Yes, sir, I will.
Senator Specter. Because if you are talking about a class
of stations which cannot afford to pay, but they pay the
songwriters, let's see if we can work that out for the
performers.
Mr. DeVany. I would like to make just one other
distinction, if I may, sir. There is a class of station out
there that is not, what I said before, CPB qualified, are not
eligible to receive that. They are very, very small stations
with volunteer staff and that kind of thing. They work very
much--
Senator Specter. Do they pay songwriters?
Mr. DeVany. I believe they do, proportionally smaller.
Senator Specter. What I am looking for, if they can afford
to pay songwriters, why not performers? When you say they
cannot afford to pay.
Mr. DeVany. It is a margin that is so slim, sir, that it
can be very, very difficult to do.
Senator Specter. Well, could you quantify for us how much
do they pay songwriters, who actually makes the payments, so we
could explore that--
Mr. DeVany. I can--
Senator Specter. If I may finish--as a legislative channel.
Mr. Newberry, you have your hand up.
Mr. Newberry. Yes, sir. Unfortunately, I do not have a
Corporation for Public Broadcasting or another entity that pays
the fees. I pay the fees. They are paid from the operating
income of the radio station. As an industry, it is about $500
million that is paid to the composers. It is based on revenue.
It is not based on profitability; it is based on gross
revenues. So there is a formula, and it generally runs between
5 and 7 percent of the gross revenues of a radio station.
And your answer to the question of if you can pay one, can
you not pay the other, with all due respect, Senator, the pie
is only so large. And increasing those additional fees,
particularly in the markets that I am referring to, that I--
Senator Specter. What would you think about payment on
profitability as opposed to payment on gross revenues?
Mr. Newberry. I would still have concerns with the very
principle that we are paying by what we are providing to these
artists and to the multinational record labels by promoting
their products. So I would go back to that and say that, on
principle, I am opposed to it. But certainly when you are
looking at someone's profitability as opposed to someone's
gross revenues, that does enable a different standard of
measurement that I think--
Senator Specter. Well, I know you would prefer not to pay.
I understand that.
Mr. Newberry. We are paying in a different--
Senator Specter. I have been listening to your testimony. I
understand that.
Mr. Newberry. Yes, sir.
Senator Specter. But when you talk about gross revenues,
you are talking about something which does not correspond to
ability to pay. You talk about profitability, it may.
Mr. Newberry. Yes, sir. Philosophically, I would still
disagree with that, but that is a measurement to--
Senator Specter. Well, how about a sliding scale, Mr.
Newberry, as we structure our tax laws so that the stations way
down the line on profitability would be paying a lesser
percentage than those in the urban areas who have a greater
ability to pay?
Mr. Newberry. I mentioned this earlier, and I am not sure
if you were in the room at the time. But one of the things that
is of concern to me when we go down that path is that I believe
in the equation of fairness. The larger urban stations,
metropolitan stations, provide even greater value to the artist
and to the recording companies, to the record companies. So I
think that the argument could be made that their value is even
more--
Senator Specter. I was here. I heard that.
Mr. Newberry. Yes, sir.
Senator Specter. I heard that promotional argument, and it
has a lot of weight. But it may not carry the whole day. Or it
may. We really cannot legislate in the dark, and we are pretty
much in the dark.
1 Do you know how much the Internet and satellite folks pay
or the TV on cable pay?
Mr. Newberry. No, sir, I do not.
Senator Specter. Well, we are going to have to find that
out. I am not expecting you to have those answers, but I think
that is a relevant question.
Mr. Newberry. Yes, sir.
Senator Specter. And it may be that they ought to pay more
if there are some who cannot pay as much. We have to make that
allocation.
You talked about the number of stations you have, and their
profitability and their inability to pay. Could you provide the
Committee with some figures on that? How many--
Mr. Newberry. About my personal stations or--
Senator Specter. No, no. You are the President--well, let's
see. You are a member of the National Association of
Broadcasters.
Mr. Newberry. Yes, sir.
Senator Specter. Can the association provide us with
information about how many members you have, how many radio
stations there are?
Mr. Newberry. Certainly.
Senator Specter. And give us some idea quantitatively as to
revenue and ability to pay and also how much you pay the
composers?
Mr. Newberry. Yes, sir. We will cooperate with the
Committee in any way that you request, and we will certainly
provide that information.
Senator Specter. All right. We would like to know what the
facts are so we have some way of gauging the merits of your
contention, just aside from the generalizations.
Ms. Peacock and Mr. Lovett, are you in a growing
profession? Are more people vying to become celebrity star
performers? Do you have an organization which gives us some
idea as to how many performers there are at work?
Mr. Lovett. We are certainly in a changing business. The
music business has, I think, changed more in the last 10 years
than ever.
Senator Specter. How has it changed?
Mr. Lovett. Well, in the way people receive music, in the
way people hear music, because there are so many different
outlets to hear music, not just terrestrial radio but satellite
radio, cable radio, Internet radio; the way people are able to
preview and to purchase music.
Senator Specter. Well, we would like to encourage more
people to be performers. Can you give us some standard as to
what we might look to, to encourage more performers?
Mr. Lovett. You know, people play music. I think people are
interested in writing music and performing music because, as
Ms. Peacock said earlier, they just cannot help it, because
they feel somehow compelled to do it. People love music.
Senator Specter. Well, I am looking for some motivation
from pay.
Mr. Lovett. Yes, sir.
Senator Specter. They feel compelled to do it. We do not
have any business in the field. If they are compelled, they are
compelled. But if they would be encouraged, we would like to do
that. But we would have to have some handle on how we
encouraged people.
Mr. Lovett. Yes, sir. Well, this--
Senator Specter. The last thing you want Congress to do is
to legislate not knowing what the facts are.
Ms. Peacock. We do have organizations--
Senator Specter. And I am groping for some facts.
Ms. Peacock. I am thinking of some organizations, Senator,
like the Recording Academy that could provide maybe some of
those statistics or organizations, I guess, maybe like AFTRA.
Senator Specter. The Recording Academy?
Ms. Peacock. Yes, the Recording Academy.
Senator Specter. Well, if that could be done, it would be
appreciated.
Ms. Peacock. Sure.
Senator Hatch. Could I interrupt on that point? I have one
gold and one platinum record. But I have been told I would have
more if it wasn't for piracy. Piracy is basically making it
very difficult for even established artists like yourselves to
continue to get gold and platinum records--in other words,
500,000 CDs sold or a million CDs sold. And it is almost
impossible to get a diamond record.
I mean, the point is the really top artists might be able
to do that, but the whole industry is suffering because of
piracy and because of lack of compensation. Is that a fair
comment?
Ms. Peacock. I think that is true. When we talk about
changes in the industry, not only are our people getting their
music from different sources as well as terrestrial radio, but
they are turning to satellite radio and Internet radio, which
we are paid a royalty for, but I am also seeing many artists
leaving and forming their own labels as well. So I think you
have the independent artist out there who I think--that is who
I am representing today, the middle-class independent artist
that needs those different income streams to make a living,
because that is my job.
Senator Hatch. You bet.
Mr. Lovett?
Senator Specter. Let me regain the floor here. I am not
going to charge you with--or ask you to figure out the piracy
issue.
Senator Hatch. No, I am not asking them to do that. But
what I am trying to point out is that that is another pressure
on artists and writers and performers that adds to the
pressures that they have. And I worried about a lot of people
who are very, very talented but who have to just get out of the
industry because we are failing here to resolve some of those
conflicts. And, you know, people think when it is on the
Internet it is free. These young kids think it is just free.
They do not believe they have to pay anything for that. And
that is part of the overall thing. That is the only reason why
I bring that up, because it is a very complex, very, very broad
set of problems that are very difficult to understand and very
difficult to resolve.
Senator Specter. Do we have anyone here today representing
the pirates?
[Laughter.]
Senator Hatch. I represent the anti-pirates.
Senator Specter. Well, trying to work within the confines
of the witnesses we have and the issues we have, I think you
get the thrust of what we are looking for, some of the hard
facts as to why you cannot afford more on the broadcaster side
and why the fairness issue is bolstered by the promotion as
being inadequate and how you lure more people to your
profession to supplement the passion which you have
articulated.
We are going to keep the record open for questions. It is a
very busy day here, and I think everybody on the Committee is
very much interested in this subject, and we are looking to
find an equitable solution. And there may be some questions
which others will have, so technically the record will be kept
open.
Thank you all, and that concludes the hearing.
[Whereupon, at 11:07 a.m., the Committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
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