A day after Clear Channel brokered a deal with Big Machine to pay sound recording performance royalties, music execs and interest group reps gathered on Capitol Hill to offer their testimony at a Congressional hearing entitled the "Future of Audio" sponsored by the Subcommittee on Communications and Technology. Here witnesses testified with often divergent views on how they believe the digital and terrestrial radio industry should (or shouldn't) be regulated. Below are excerpts from Ben Allison, a jazz musician and member of the Board of Governors of NARAS; Tim Westergren, Founder and Chief Strategy Officer of online radio site Pandora; Steven Newberry, CEO of the Commonwealth Broadcasting Corporation testifying on behalf of the National Association of Broadcasters; Cary Sherman, Chairman and CEO, Recording Industry Association of America culled from their testimony transcripts listed on the House Energy Committee's website.
Ben Allison, Bassist and composer, member of the Board of Governors of National Academy of Recording Arts and Sciences:
"In less than 24 hours, I'll be traveling to the Bonnaroo Music Festival in Tennessee to perform with my band. But the music created at Bonnaroo will not be confined to the 80,000 people attending the concerts. Like many festivals, Bonnaroo will offer live streaming of performances, while internet radio services like Pandora will offer Bonnaroo-themed stations."
"A number of niche styles of music that never get played on AM or FM radio are finding homes on Internet radio."
"I've chosen my instrument, an 1840 American-made bass, for its pure and nuanced sound. So I want my listeners to hear a recording that sounds as close to the original performance as possible."
"Terrestrial broadcasters have an inexplicable "free ride" when it comes to performance royalties. They are exempt from paying performers any royalties when they use our recordings to fuel their multi-billion dollar industry."
"With the largest radio broadcaster agreeing that a terrestrial performance right should exist, there is no longer any legitimate argument for the NAB to oppose the right."
Tim Westergren, Founder and Chief Strategy Officer, Pandora:
"Twelve years ago, after spending my twenties and early thirties playing in rock bands, and composing film scores, I founded a music discovery service to help independent musicians like me find their audiences."
"While Pandora and other Internet radio services compete directly with broadcast and satellite radio for listeners in every place you find music - the home, the car, the office, on the go - we are subject to an astonishingly disproportionate royalty burden compared to these other formats."
"Last year, on revenues of $274MM, Pandora paid $137MM in performance fees to performing artists and labels, or 50% of revenue. That same year, Sirius/XM, on revenues of $2.74B, paid $205MM, or 7.5% of revenue; and broadcast radio, on revenues of roughly $15B, paid zero. Now I am fully supportive of fair compensation for artists. I'm a musician, and I strongly believe that radio can and should reward musicians for the use of their work - both songwriters AND performers. But this lack of a level playing field is fundamentally unfair and indefensible."
"So why is there such a disparity in royalties? The inequity arises from the fact that Congress has made decisions about radio and copyright law in a piecemeal and isolated manner; as each new form of radio transmission was invented, new legislation was passed but only to address the new form. The effect has been to penalize new media and advantage old media when setting
the rules for music royalties."
"It is time for Congress to level the playing field and to approach radio royalties in a technology neutral manner. The current rate-setting law is unfair to performing artists, unfair to record labels, and unfair to Pandora and internet radio as we compete every day with broadcast radio and satellite radio for listener loyalty and advertising and subscription revenue."
Steven Newberry, CEO of the Commonwealth Broadcasting Corporation, testifying on behalf of the National Association of Broadcasters:
"Given this evidence of broadcast radio's continuing appeal, I am not at all surprised that new digital music services endeavor to style themselves as "radio." They want to claim our heritage, but the concept and reality of the radio industry that I represent before you today is much more than the mere audio transmission offered by many services. We are part of the fiber of our local communities, and we intend to stay that way."
"Efforts to encourage Congress to establish a new performance fee, what we call a "performance tax," come at a volatile time for both the radio and recording industries."
"Record labels and performing artists profit from the free exposure provided by radio airplay, while local radio stations receive revenues from advertisers that purchase airtime to sell their products and services."
"Although NAB vigorously opposes the imposition of a Congressionally mandated performance tax as it has been set forth in previously proposed legislation, in 2010 NAB engaged in discussions with the recording industry in a good faith effort to resolve this issue in the best interests of both radio and the music industry. NAB's Board of Directors subsequently endorsed a thoughtfully drafted compromise based on those discussions, which was peremptorily dismissed by the recording industry without any constructive comment."
"In short, the royalty rate setting process has become a royal mess, and an opportunity to remedy that process would be embraced by all who stream music. NAB would welcome an opportunity to discuss reform of this dysfunctional process in greater detail"
Cary Sherman, Chairman and CEO, Recording Industry Association of America :
"One of our highest priorities at RIAA is to develop the infrastructure that will make it faster and easier for entrepreneurs to offer even more innovative business models to music fans."
"When it comes to protecting or enforcing creative rights, the effort is often caricatured as a quixotic game of whack-a-mole that only enriches the lawyers."
"We continue to believe that the best and single most important anti-piracy strategy remains innovation - experimenting and working with our technology and Internet partners on consumer-friendly new business models."
"The bottom line is that every platform that (legally) plays music pays to do so - except for one. AM/FM radio stations use music to draw billions of dollars in advertising revenue for themselves, but they don't pay a cent to artists, musicians and sound recording owners who make the music they use."
"Music remains a centrifugal force in culture and commerce, and it's only going to get stronger. It's worth creating, and it's worth protecting."