After years of opposition, why did the NAB and its President and CEO Gordon Smith seem so anxious last Fall to cut a deal requiring radio stations to pay millions of dollars in royalties to record labels?
Think back to October when the NAB Radio Board tried to quickly push through a deal committing radio to pay a 1% royalty with musicFirst, the labels’ front organization.
Coming out of radio’s worst recession that saw $5 billion dollars of revenue evaporate, the last thing radio needed was a new multi-million dollar expense item.
Polls at the time showed overwhelming opposition to the deal by broadcasters, yet the NAB pushed hard for the deal.
The people behind the NAB’s Terms Sheet warned that radio needed to complete a deal before Congress forced a more onerous one on radio.
But was that true? Or was there something more behind the NAB’s interest in giving away millions of radio’s dollars?
Smith’s recent key-note address at the Las Vegas convention suggests it had little to do with radio, and a lot to do with the NAB’s priorities.
Here’s what Gordon Smith now says about the royalty fight:
Last year we stopped the legislation that would impose a performance tax on local radio stations. This was a freight train headed for passage.
The White House was for it. Congressional leadership supported it. Both the House and Senate Judiciary Committees had passed it.
We brought the freight train under control by seeking a good faith, workable agreement with the music industry, while at the same time aggressively opposing the bill as written.
It is an interesting re-interpretation of the events of last Fall.
In truth, 260 House members and 27 Senate members were already on record opposing the radio “performance tax” by March of last year. The bill hadn’t advanced since the Summer of 2009 when the proposal was voted out of committee.
The NAB had already proudly announced the tax proposal dead months before. The royalty deal had no chance of passage.
So why does Gordon now declare the bill a freight train headed for passage? Perhaps in part to gloss over the NAB’s bumbled efforts to ram through the musicFirst deal.
But also perhaps because Gordon had a much bigger legislative problem on his hands, and he needed all the Congressional support he could drum up.
In his key-note address he explained the problem:
Less than two years ago, broadcasters gave up more than 25 percent of TV spectrum and spent $15 billion transitioning from analog to digital television.
Now, less than two years later, wireless companies want ANOTHER 40 percent of TV spectrum.
So we are in full battle mode to protect broadcasters from being forced to give up spectrum involuntarily.
Gordon Smith, a former Senator, is a deal maker. He knows that in Washington you give up something to get something.
The NAB’s influence is fading. The much more powerful Internet and telecom industries want the idle television spectrum space, and Smith needs all the friends in Congress he can find.
Radio is pretty small potatoes for the NAB. A business that generates $17 billion in revenue isn’t going to get the help that a $65 billion industry like television gets.
So perhaps Smith decided that throwing radio under the bus by making a deal with the RIAA could win a few Congressional votes opposing the spectrum give-back.
It is a lot easier for Congress to protect television after it can claim it secured millions of dollars for poor starving musicians.
The performance tax might cost radio a few hundred million dollars, but the television spectrum is worth billions.
Of course now that the scheme has imploded, everyone involved will say that their only concern was getting the best deal possible for radio. Read the links and draw your own conclusion.
Just keep the NAB’s priorities in mind when those membership dues come due.