NAB to Congress: Aren't Record Labels Exploiting Artists?

The president and CEO of the National Association of Broadcasters is urging Congress to open an inquiry into the long-standing relationship between recording artists and their record labels. David Rehr's objective is to determine whether the reason artists claim they've been treated unfairly over the past several decades is not because terrestrial doesn't pay them, but because someone else doesn't.

Last July 31, in one of the more extraordinary exchanges to take place in a US House of Representatives conference room in recent memory, a single spokesperson for the broadcasting industry found himself debating giants of American music. There, ICBC Broadcast Holding's Charles A. Warfield, Jr., told the House Subcommittee on Courts, the Internet, and Intellectual Property that radio was largely responsible for the popularity of most American recording artists since the 1920s -- a fact that, for a time, was actually in dispute -- and that radio broadcasters should not have to pay the recording industry for the right to popularize its artists.

"As you will recall, during the recent hearing there was significant discussion about ways to improve the financial circumstances of performers," wrote National Association of Broadcasters President and CEO David Rehr last Wednesday in a formal, open letter to the Subcommittee's Chairman Howard Berman and Ranking Member Howard Coble. "However, many questions went unanswered. To bring the full picture of the recording industry to light, we respectfully request that you and the Subcommittee members hold additional hearings that address all aspects surrounding this issue, including the relationship between performers and their record labels."

Lawmakers are debating proposals from the recording industry and its representatives to lift the exemption on performance royalties that currently applies to terrestrial radio. For decades, radio stations have not had to pay the specific types of royalties that record labels would distribute to performers, though they do pay royalties to songwriters and to the labels themselves.

With recording labels still strapped by flagging revenue, but with their recent success in increasing royalties paid by Internet radio broadcasters, the industry is looking to extend that success to the terrestrial radio field as well.

With Warfield's testimony having been drowned out quite literally, at one point, by a partial parody rendition of "Amazing Grace" by Judy Collins, there's a good chance his point didn't come across, not for having failed to try. Now the NAB seeks a new hearing that could possibly reveal the long-standing historical relationship between record labels and the performers whose work they publish - a relationship which, though possibly amazing, may lack a certain grace, Rehr suggested.

Rehr seeks a hearing that would preferably bring together the heads of the four largest recording industry rights holders - Sony BMG, Warner Music, Universal Music, and BMI - along with executive heads of the RIAA would give subcommittee members an opportunity to call into question what had been treated as fact during last July's hearing.

"If the goal is to improve the circumstances of performers and build the cadre of music into the future," Rehr continued, "the relationship between performers and record labels also bears examination."

As recording artists testified, the broadcasting industry continues to make a substantial profit, little or none of which is shared with them. But Warfield made the case last July that the vast increase of public awareness in music that comes from radio has always resulted in greater sales, which then benefits the artists and performers, albeit indirectly. If performers aren't seeing the benefits, then perhaps they should take a closer look at the contracts they struck with their recording labels.

Responding to a question from Rep. Sheila Jackson-Lee (D - Tex.) -- who admitted that as a lawyer she represented the surviving members of The Ink Spots in legislation -- Warfield said in July that the "performance tax" (the NAB's term for performance royalties applied to terrestrial radio) "would go to what is referred to as artists and record companies, who in the existing system benefit greatly from the free on-air airplay of their product. Record sales result from that, which benefits the artists as well as the record labels at this point; whereas the composers of the music...do not receive that type of a benefit, which is why there are payments being made to them."

Later, Warfield -- a former recording industry executive before joining a radio station ownership group -- added that with regard to artists' claims that they don't feel they've been treated fairly, "I would put that back as a responsibility of the record labels. Why have the record labels allowed that to happen with artists that have helped make them as successful as they are today? [Why is it] the responsibility of the broadcasters to cover, I would say in some cases, the misdeeds of the record labels?"

Among the questions the NAB's Rehr would have Congress ask the recording industry, as he presented in his letter, are, "Over the years, how much did the various record labels benefit financially from the sales of the performer witnesses at the July 31, 2007 hearing? How does that compare to the compensation actually paid to the performers who testified on the 31st?"