July 15, 2014
On September 19th, 2009 - a little less than a year after he lost his reelection bid for the U.S. Senate from Oregon - Gordon Smith took the reins of the National Association of Broadcasters to champion the interests of the broadcast industry through thorny issues such as broadcast TV spectrum rights, retransmission consent rules and - an especially high-profile issue for radio - combating performance royalty legislation. Suffice it to say, the latter issue is far from settled, yet Smith remains committed to standing up for broadcasters, agreeing to an extension that runs to 2018. Here, he offers his perspective on the issues that continue to impact radio.
When we interviewed you a little over three-and-a-half years ago, you noted that the performance royalty was the biggest issue facing radio. Has anything changed on that front - and if so, how would you describe the nature of this battle?
I believe the performance tax issue will remain as a Damocles sword to radio. It's always a threat ... a serious one, which is why we're well postured in this Congress to make sure it isn't attached to a bill in the near future.
You already have a majority of Congress signed up in support of a resolution against the performance royalty. Does the fact that support of a resolution doesn't guarantee their actual votes on such a bill's passage concern you?
Of course we're concerned about it, but we know that the 244 members of Congress who have signed did not do so lightly. As for the tactic musicFIRST is taking, I can tell you from firsthand experience, that taking out ads in the hometown newspaper attacking a member of Congress - that doesn't create a warm vibe for a lawmaker. We will be there on the ground to support those who put their names on the dotted line because they supported local radio stations. We're going to make sure the public knows the rest of the story, and why passage of a performance tax could be so damaging to their local radio stations. Every day we'll engage and support all of the Senate and House members who are strong enough to stand by their local radio stations.
When the Supreme Court ruled in favor of the NAB's interests in the AEREO case, a spokesperson for musicFIRST said this: "NAB members commit the exact sin that they condemn in AEREO - they use music as the foundation of their programming, yet refuse to pay the artists and labels who created the music a cent. NAB members twist the copyright laws to deny creators fair pay just as AEREO did, only on a vastly greater scale. As momentum builds in Congress to close the AM/FM performance loophole once and for all, NAB and its members may find their win over AEREO read back to them as Exhibit A in the case for fair pay for all creators across the board." How do you respond when members of Congress say what's good for AERO is good for radio?
There is a huge distinction between the AEREO case and the performance tax - a distinction musicFIRST did not care to highlight. AEREO takes broadcasters' copyrighted work and re-sells it for profit without permission or engagement with the copyright holder. Radio stations do not resell music; they are, in fact, only advertising the music of the performer and the copyright holder, which the consumer can purchase or stream somewhere else. It's an obvious distinction musicFIRST doesn't wish to highlight, but it's profoundly different. It's comparing apples and oranges, but as we put it, radio airplay confers enormous value to the performing community; it's by far the most effective means to advertise talent and sell their works.
It's also important to note that broadcasters pay well over $300 million a year to copyright holders and songwriters, providing them airplay and promotion, in addition to paying over $60 million a year for streaming music online that, again, goes to copyright holders.
What's intriguing about the performance royalty issue is that it's not drawn on party lines or liberals/conservatives, as members of both parties are on both sides of the issue. Does that make your job of getting enough support more difficult?
It's actually easier because not every issue in Congress has to be partisan. What we have on our side is that radio is in every community in the U.S., and radio is the megaphone to almost every American - that's also available to every elected representative. It's the most efficient communication device we have, and it has endured over these many decades because of the power of local connections and local relevance. It's a powerful source for the public good; that's why it endures.
How does this being a non-Presidential election year impact your efforts? Since minimal legislation is usually passed during this time, are you keeping a lot of your power dry until 2015?
On the one hand, we're not idle. We're still constantly educating members of Congress as to the dangers of the performance tax, among many other broadcast-related issues, but it's also true that in an election year, historically Congress is more focused on politics than on the merits of policy. With Congress running out of legislative days and enormous issues still undecided to keep the government running, our issues may be in the mix, but not we're not in the headlines. Still, we'll continue to tell our story.
By the way, as someone who once served in the Senate from Oregon, do you miss any of it now?
I miss many of the people, as well as the importance and gravity of the issues. I do not miss the unnecessary and excessive partisanship. I don't miss the inefficiency of it all and I really don't miss the fundraising.
Back to the performance royalty: Can this issue ever be negotiated or compromised on, or is it royalty or nothing?
There's a deal there that could be made in the future. In fact, we got very close to a deal that Congress could pass but were unable to get it done. The deal we were negotiating was very close to the revenue sharing deals many of our members have made with the labels. Those were done privately, so any mandate the Congress could impose is supplanted by private-party negotiations.
Do you believe there could be an across-the-board revenue sharing deal between terrestrial radio and the labels/artists, or is it every radio group/label deal by itself, as it has been with digital revenue sharing?
We welcome every deal that has been made because it shows that the market can often do what Congress cannot. Markets don't sit still. I feel there's a deal to be made for terrestrial that's similar to what's been made for the digital platforms, a deal that was never finalized in Congress as it was being discovered and applied in the marketplace. Something could be finalized that could actually advance the cause of music without penalizing radio on all platforms and at same time, benefit performers as well.
How long do you think that will take ... five years ... 10 years?
It's likely to happen piecemeal, whether or not Congress can come up with a "one size fits all" solution, which will be very difficult to do because every radio station, every performer and every label is coming at this from a different economic situation. But the market moves on and more and more deals are being done.
Cross-ownership used to be a big issue for radio - at least until the performance royalty issue came to fore. How important is that for the NAB nowadays, especially considering the fact that the print media is in a far more precarious financial strait than radio?
If you can explain to me why there are still cross-ownership limits to me, you'll be smarter than Congress. Broadcasters are still saddled many outdated media ownership rules that do more harm than good. We have argued for a long time that a comprehensive review of those rules is long overdue, and irrelevant regulation ought to be dispensed with -- one of those being the radio/newspaper cross-ownership ban. It makes no sense in this age of information overload, where no one has a monopoly on media. What is hanging in the balance is good journalism. If radio and print companies could provide economies of scale, that might go a long way to preserve quality journalism.
Radio, TV and the newspapers have a common interest in preserving good journalism -and creating that is expensive. There's no monopoly on newsgathering when the Internet is providing so much competition. It seems to me that the old paranoia of having "too much big ownership" has turned out to be patently ridiculous in the age of the Internet.
Wouldn't it be more advantageous and forward-thinking for the NAB to encourage cross-ownership deals or strategic relationships with phone carriers and major tech companies?
Absolutely. At last year's Radio Show, I gave a keynote address and encouraged broadcasters to embrace innovation and think of a long-term future. We need to be where the listeners are, to give them the content they want. Radio needs to constantly push being on new platforms, be they on iPads, smartphones or tablets - all the ways which radio expands will benefit the American listener.
NAB Labs provided some of the financing needed to develop the NextRadio app, which has gotten rave reviews from techies and consumers alike. We're very pleased with the initial reception of the marketplace to what radio did with Sprint, resulting in a 21st century relationship that broadcasters can use going forward with other carriers. We're looking for every way to innovate to reach where the ears and eyeballs are.
Emmis and Sprint have launched NextRadio, an app that utilizes the FM chip in smartphones. None of the other phone carriers are on board yet ... and not all of the radio groups are fully investing themselves in it, either. Is the NAB doing anything to generate more interactivity on both ends?
We keep the spur in every radio member to adopt it, utilize it, to participate, help in its financing and spread its adoption. It's an ongoing effort. Some of our most forward-thinking members are leading the charge, hand in glove with Sprint. It just takes time. I'm very pleased to say that we've made tremendous progress with just one carrier, and we're continuing to progress by offering NextRadio on a new HTC smartphone, which is really great news. Radio-enabled smartphones, using the NextRadio app, is hugely popular with consumers who learn of it and try it.
The last time we talked, you basically said the NAB "stayed out of the issue of the PPM" of audience measurement. Has Nielsen's acquisition of Arbitron and its PPM - and the recent meter problem in L.A. -- prompt you to revisit the NAB's stance on that?
For us, it would be a new issue to deal with, but we have so many ideas on our plate right now. We'll continue to watch it but for now we are staying out of what we believe is something radio stations need figure out on their own, creating a new business model provided by the PPM.
The Supreme Court essentially threw out the FCC indecency fine against CBS TV over the Janet Jackson Super Bowl incident and sided with media over "incidental profanity." Yet there still seems to be no clarity as to what the indecency rules are. What is the NAB telling its member radio and TV stations to do regarding this? And what would you like the FCC to do to clear things up?
Indecency is just such a subjective standard in a culture that is, frankly, changing constantly. It's very difficult for the FCC and difficult for the broadcast industry. It's something of a double-edged sword for us. On one hand, it governs our editorial and content creation efforts, while at the same time our efforts to provide the public with family-friendly content is also valuable advocacy tool. The double edge is that it's a regulatory burden that nonetheless confers a benefit to the American people. It's a burden with a blessing.
Are you concerned that terrestrial radio is at a creative disadvantage against satellite and Internet radio because of those family-friendly restrictions, much like network TV is going up against the likes of cable offerings such as "Breaking Bad," "Game Of Thrones" and "Walking Dead?"
Indecency restrictions do concern some of my members. Then again, I have many TV and radio members who embrace the idea of broadcasting as a haven against the increasingly explicit programming on pay TV and radio platforms.
I'm heartened by the fact that on any given week, 95 of the top 100 shows will be on broadcast television, and that 244 million people tune in to free and local radio every week. There is still a very large audience for programming that is sensitive to community decency standards. I'm gratified by how many sets of eyes and ears are still being served by our broadcasters, even in an era of choice and fragmented programming options.
Finally, congratulations on your extension. How has the experience been? And what are your goals from here on out?
This is a great job, and I'm honored by the faith that the NAB Board of Directors has placed in me and the remarkable NAB staff in Washington. I love telling the story of broadcasting. My mother used to tell me the best way to ruin a good story is to tell the other side. Every day, I get a chance to tell the side of the broadcasters' enormous contribution to the American people.
Unlike our competitors, our programming is free. Unlike our competitors, our programming is local, and our transmission architecture is one-to-everyone. Broadcast radio is the original wireless technology. It provides indispensable entertainment, news and lifesaving information in times of crisis.
I plan to tell that story every day, and to make sure that policymakers hear it. At the end of the day, NAB's role is to make sure that Washington recognizes the enduring importance of broadcasting. Our members must have laws and rules in place that allow them to meet a payroll and grow their business. NAB's team in Washington is on the job and up to the task.