Round two: Radio royalties ruckus resumes in the US House

These boots were made for talkin'

For her part, Ms. Sinatra turned out to be a much softer-spoken proponent than her predecessor, who while recounting a story about "Send In the Clowns," suggested that she lead a series of class-action lawsuits against her neighbors at the witness table. Instead, invoking the memory of her legendary father, she graciously separated herself from a majority of American musical artists, saying she was luckier than most with regards to compensation.

"When most people are asked, 'How much do you think artists are paid when their music is played on the radio?' they usually say, a few cents. But...we're paid zero," Sinatra began.

"Many years have gone by since we began trying to right this wrong, yet performers still are not compensated for the use of their work on broadcast radio, and we're still here, still trying to get fair pay. This is an injustice that compelled my father 40 years ago to lend his voice to the cause of fairness. For some of the singers and musicians that I know, especially back in the band era, their only compensation was their initial salary as a band singer, a stipend perhaps. If they were to receive a royalty from their classic recordings that are still being played four and five decades later, it would mean the difference between having food and prescription drugs or not.

"Imagine, if you will, struggling in your job, perhaps for years, to make the best product you can -- a product made of your blood, sweat, and tears -- and now imagine people taking that product to use to build their own hugely successful businesses. Just taking it, no permission, no payment, no conscience. Imagine those people telling you they are doing you a favor by taking your product without your consent, because some more people might come to...value your products. Imagine those people now telling you to go find compensation from those other people -- and by the way, make some more of that product so we can take that, too."

That memory of Frank Sinatra that his daughter invoked comes from another age, when it appeared that royalties organizations were actually buying stock in broadcasters, and radio stations actually appeared to be committing to playing, or at least preferring to play, one catalog over the other -- ASCAP's or BMI's. This was the emergence of rock and roll, where many thought that the only reason stations could possibly have been playing that "junk" over established standards was because they were being paid to -- the "payola" era.

After over an hour of mostly pro-performer arguments, followed by a recess, Charles Warfield finally was allowed to step to the plate. And just like before, he came out swinging hard.

"For over two years, I worked for a record label, and I've seen from the inside how this industry works," Warfield began. "But I can tell you the artists have focused their aim on the wrong target. We should be addressing the root cause of the artists' compensation concerns: the record labels.

"First, is it fair that the record labels will take a full fifty percent of any new performance royalty under HR 4789? Unfortunately, [the Recording Industry Association of America] is not here to explain why it needs half of the new performance fee that is designed for artists' compensation. Second, HR 4789 is unfair in that it targets local radio stations when the real culprit for the lack of artists' compensation is the result of inequitable, one-sided contracts that artists find themselves entangled in for years after they've signed with a label. I've heard these awful stories about artists who were forced to tour in their later years, but the reason these older artists are slogging from city to city instead of spending time with their families is not local radio, it's their record label."

A read of the bill itself shows it doesn't directly target local radio as Warfield suggested. Rather, it selectively deletes language from existing law whose exemptions and benefits directly target local radio.

Later, Subcommittee Chairman Howard Berman (D - Calif.) challenged Warfield's thesis that the record labels deserve Congressional scrutiny: "The notion that these days...that the labels have put a ring through the nose of the recording artists, and are leading them to be their front people for their interests, and that the recording artists do not have a sophisticated and intelligent understanding of what their interests are, and that somehow these people -- whatever the conditions were 25 years ago, or 40 years ago, or 50 years ago, and we know some horrible stories from those periods of time, and those contracts, that's all true and accurate history...haven't organized, formed a vibrant coalition, aggressively pursued their interests hand-in-hand with the union representing the musicians...that ain't the world today, and I am sure the labels -- off the record -- will let you know that they may wish that were the world today, but it isn't anymore."

This time around, fewer members of the Subcommittee were too shy to openly vocalize their support for radio in the presence of a singing star. Among the dissenting voices from the subcommittee bench this time was Rep. Mike Pence (R - Ind.), himself a former radio broadcaster.

Rep. Pence turned the whole issue on its head, or at least tried to since not many others present fully understood what he was saying -- some admitted as much. But suppose it could be shown that radio promotion did lead directly to improved music sales, as Warfield's evidence Wednesday suggested. If broadcasters are paying the record labels to be able to drive those sales, why then shouldn't broadcasters get a cut? And how would that hurt performers, who would still be compensated under a royalties plan?

"Shouldn't radio stations enjoy some of the revenues from sales within that [Area of Dominant Influence]," Pence asked, referring to the geographical means used currently to determine the principal area that a major station covers with its transmitter. "And doesn't the technology actually exist today to allow a portion of that revenue stream to come out of that ADI to flow back to replenish the coffers of performance fees that might be paid? I find myself thinking out loud about that, because I struggle with the Performance Rights Act as currently crafted...[Often, I ask performers,] if you could pay radio stations to air your records, would you? And that's usually one where the most respected members of this industry would look at me blankly and not answer me. And if they in fact would be willing to pay, isn't that prima facie evidence that there is value in the airtime?"

This time, Warfield did not stand alone. Joining his side of the argument was another station owner, Kentucky-based Commonwealth Broadcasting President and CEO Steven Newberry, who presented charts demonstrating that sales of certain songs in select ADIs truly did explode once they were given airtime.

One chart plotted radio airplay and record sales for new country music artist Taylor Swift, in red and blue lines that were almost one single purple one. "The sales mirror the spins," Newberry stated, "and it happens over and over with each song."

A separate chart tracked the status of a song by rising artist Coby Callet, whose first exposure came by way of Internet radio. There was a modest spike when her song "Bubbly" was first propagated over that medium. "But once she got exposure, her sales hit the roof."

"Local radio provides to the recording industry what no other music platform can: pure music promotion," Newberry testified. "Radio is free, it's pervasive, and no one is harming record labels' sales by stealing music from over-the-air radio."

The biggest challenge to Warfield's position came Wednesday from Rep. Robert Wexler (D - Fla.), but it came by way of offering a reasonable compromise.

"You make the argument that somehow the value of the promotion that you provide therefore obviates the need to provide even one cent of compensation to the performing artists," Rep. Wexler's wind-up began. "It would seem to me, the only logical position would be that, yes, in fact, there is a promotional value that a radio station provides to a performing artist, and that promotional value should be a factor in the formulation of the royalty that is paid. That is a value provided by the radio station and the value of the music provided by the performing artist to the radio station, should be calculated together, and there should be an economic calculation that is made based on the equities of the situation.

"But to have the strident formula of the value of the promotion always exceeding, in every situation since the beginning of time until the end of time, the value of the product of the performing artist, defies logic to me." Internet radio, he continued, is paying huge percentages of its revenue to performers; terrestrial radio pays zero. Smaller stations, under the current HR 4789, would only play a flat annual fee of $5,000 or even less.

ICBC station owner Warfield responded by saying that over the past three decades, he had personally worked with and for radio stations that had essentially created stars. "At no point was there any question about the value of what we did," he said. The promotional value has not changed today.

Wexler interrupted. "Tell me, why isn't it appropriate, the best response, that the value of the promotion be a factor in the royalty payment. Why is it always 100% and zero?"

"The relationship that has existed through all of these years," Warfield responded, "has been the fact that it has benefitted these artists as well as these labels for the entire time I'd been in this career. There has been a tremendous benefit that has accrued to all of them, through this. We feel that that balance has been well for this industry for the last 60 years, and should continue."

"So you're saying that in every instance, the value of the promotion exceeds the value of what the work product was of the performing artist to the radio station, and therefore, you owe them nothing? In every instance since the beginning of music?" Wexler shouted.

"There's a strong recording industry in this country, stronger than any other country in America," said Warfield, perhaps sweating for the first time, "and I think the value has certainly been reflected in their success."

Wexler let that response stand unchallenged in silence for several seconds. Last year, the imbalance between arguing sides was so pronounced that one couldn't help but feel sympathy for Warfield's position. But this time, with the scale tipped a little more in his favor, it was impossible to overlook the biggest hole in that position, and Rep. Wexler effectively drove a truck right through it.

Whether that truck will make a return journey during a third annual running of the royalties debate, still appears a distinct possibility.

BetaNews' legislative issues stories all this week are dedicated to the life and memory of Tim Russert, NBC News Washington Bureau Chief. Donations in his honor may be made to Catholic Charities USA.