HARD OF HEARING?

March 18, 2015

 

Peter Smyth

Recently the Senate Judiciary Antitrust Subcommittee held a hearing on the consent decrees governing the performance rights organizations, better known to us in radio as ASCAP and BMI.  Exciting, you say?  It may prove to be not only exciting but extremely disruptive to the broadcast industry if the big music publishers have their way.  To fully understand the impact of this seemingly inside-politics hearing, some history is in order.

We have to go back to the Roosevelt administration, when the music publishers were trying to hold radio stations hostage over the amount they were paying to broadcast songs.  The performance rights organizations had so much control over so many songs that they tried to dictate outrageous rates for their public performances on the radio.  The government stepped in and threatened to invoke the Sherman Anti-Trust Law.  The confrontation ended with a consent decree that established “fair and equitable” royalty payments to all songwriters and appointed a court to oversee adherence to the terms of the decree.  It has worked remarkably well over the more than 60 years the order has been in place.  The rights organizations allow broadcasters and other users, including streaming audio services, to license whole libraries of songs for public usage without having to negotiate with individual publishers or songwriters, and the organizations distribute the royalty checks to the composers.  It is an efficient system to clear performance copyrights.

A significant aspect of the existing structure is that most record companies have their own publishing houses and in fact, are the holders of those rights.  Since the advent of digital and streaming technology, they have been looking for openings to extract more revenue from the changing marketplace.  They now want to be free to negotiate directly with individual music users like radio, TV and online, on a case by case basis, and they are beginning with the digital rights.   It goes without saying that this would throw the current licensing system into chaos.  In fact, Pandora had to file suit to stop Sony Music from withdrawing the digital performing rights to part of its library without telling them which songs were being removed.  What happens when you broadcast a song for which you don’t have the rights?  The fines can run up to $150,000 per infringement!

At the root of these machinations is the music industry’s ongoing effort to extract more dollars from everyone else in the music delivery and promotion ecosystem.   They’re looking for a bigger slice of a changing pie.  To that end, they are lobbying for a way to loosen the current rules or throw out the decree all together.  In that effort, they attempt to charge unrealistically rich royalties or try to reconstruct their business model of the past when they charged premiums for CDs or albums and there was plenty of money to go around.  The problem for the music industry is that today’s consumers are listening on a song by song basis to more eclectic musical choices on more platforms than ever before. They know what they like and how they want to access it.  If renting music via streaming rather than purchasing to own is what the consumer desires, the market will follow them and we all will have to adapt to the new reality.  The solution is not simply to try to squeeze more money from those of us who continue to provide distribution, exposure and promotion of music on a daily basis.

Any changes to the consent decrees are opposed by the NAB and virtually all other businesses that pay royalties, and consumer and public interest groups as well.  This includes Pandora, the Consumer Federation of America, Public Knowledge, The Consumer Electronics Association, the Digital Media Association and the Computer and Communications Industry Association.  That’s not a commonly-seen list of players.

This brings us to the recent hearing by Senator Lee’s Judiciary Subcommittee.  This was an opportunity to make the case to the Senators that, for once, they should leave well enough alone.   Both sides presented their positions and the questioning was lively. Broadcasters were well-represented by Mike Dowdle of Bonneville and we thank him for his testimony.   We should all be concerned about the lack of transparency and the lack of competition among the performance rights organizations and their attempts to change a longstanding solution that works.

We are glad that the committee is taking an interest in this issue and support the NAB for making the case on behalf of broadcasters.   We need to continue to educate both legislators and the public on issues such as these that are vital to the health of our industry and to consumers as well.

Car Business

February 9, 2015

Peter Smyth

I’ve written previously in this space about the importance of the rapidly evolving connected car. In the past several months, we have seen new advancements and powerful new players make their presence known.  Google Now and Apple Car Play are names you will hear more about in coming months. They are the two giants’ efforts to extend your mobile phone look and controls seamlessly onto your new car’s center screen. They will allow voice control of the functions as well as a recognizable interface. In short, it will look like an iPhone or Android phone screen.

However, the folks in Detroit are not conceding to the powerhouses of Silicon Valley. They continue work on their own systems.  Most notably, Ford is introducing a whole new approach to the interface for their Sync platform, with a much simpler and cleaner look and feel. Other car makers have moved to include a built-in cellphone connection in the dash, a part of their plans for the intelligent car that lets you know when maintenance needs to be performed and, farther in the future, the autonomous (self-driving) car.   This should prove to be an epic battle with real consequences.

Radio needs to make its case to the lords of the dashboard that customers need and want a simple, readily-available interface to find their favorite stations in the new center stack.  This is easier said than done.  Radio is a medium of thousands of local stations and the auto industry is an industry of multinational behemoths.  It’s difficult to make a meaningful case to a Detroit executive on behalf of one local station, or even one corporate broadcaster. Scale is everything to auto manufacturers.  That is why it is important for every broadcaster to develop a strategy for the connected car. Aggregators do exist like iHeart Radio, TuneIn, or NextRadio, who have the scale and staff to cooperate with the automakers in a meaningful fashion. Even if you have a mobile app for your individual station, you should have an extension strategy with one or more of these national efforts.

It is also crucial that you take a good critical look at your station’s relationship with the local car dealer community. Here is where the station’s local influence can be brought to bear.  These are  some of our best long-term advertising clients, and deepening and broadening our relationship with each local dealer is an important piece of work for every sales staff. The car dealer’s business is evolving and changing as rapidly as our own.  In past years, it was almost a given that car dealers were family-owned and operated, and they had a standing year-round presence on your airwaves.    Today, they are more and more often part of a multi-brand, multi-location corporation and are heavily involved with their own online presence and online advertising. They have retooled their marketing budgets to include a significant online ad presence in response to manufacturers’ mandates.

As significantly, car dealers have new challenges in their selling process. Prospects are asking more questions about technology than horsepower these days, and if you’ve bought a new car in the past several years, you know that the orientation can take literally an hour to cover.  These new demands on dealers’ staff and time can provide opportunities for your station to partner in deeper ways with them. We are involved with their customers and technology; we are a logical candidate to help with some of these consumer demands. An entertaining video explaining the new center stack hosted by your station’s morning team can be more entertaining and informative (and accurate) than using more of their sales staff’s time.   Perhaps a monthly seminar for new car owners would be useful for both the dealer and the radio station.  Your station’s digital staff can help create learning modules for inclusion on the dealer website as well as yours.

In order to develop these partnerships, it requires radio sales managers and senior sellers to sit with owners or dealer sales managers and get a sense of how they are responding to their challenges.  It’s only then that we can explain to them what other capabilities we have beyond the traditional on-air broadcast schedule. We are limited only by the client’s needs and our creativity.

It is a priority for radio to more deeply involve ourselves with automotive. It is not only a prime advertising category; it is a business partner for the continued health of radio as a mobile medium. We have long-standing relationships with each and every local outlet for this category. It is an opportunity that we cannot squander by doing business as usual.

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