Is the Radio Performance Tax Reverse Payola?

According to Merriam-Webster, the definition of payola is “Undercover or indirect payment (as to a disc jockey) for a commercial favor (as for promoting a particular recording).”

There are two bills in congress, H.R. 848 and S.379, that, if passed into law, would levy fees against radio stations for playing music. Wait… WHAT??? Isn’t that one of the things radio is supposed to do? Play music so that people will hear it and then go out and BUY it?

To listen to the record companies and the artists themselves, you would think that radio is stealing their product. Since the dawn of entertainment-based broadcasting, radio has been used as a means to help promote music and artists. You hear the song, like it, and purchase it. Payola was even used as a means to get radio stations to play songs more often because, say it with me… MORE AIRPLAY MEANS MORE SALES!!!

Now that the record companies are having trouble staying financially in the black, they are looking for new streams of revenue. Hey… let’s charge the people that are helping us a fee. Keep in mind, that radio stations ALREADY pay a licensing fee for the music.

Radio is already in enough trouble. The major groups are all starting to file for bankruptcy protection, literally thousands of employees are being laid off, and syndication is becoming more the rule than the exception. Let’s face it… from a financial standpoint, it’s cheaper to have Ryan Seacrest host 100 of your morning shows than to actually pay for 100 morning shows. I’m not saying radio is innocent in all of this. Consolidation has more or less killed the industry. But… that is a different issue. If these bills pass into legislation, even more people will lose their jobs, and the small radio operators will probably disappear altogether. You will see a good majority of stations switch to talk/news/sports formats. In a lot of cases, it will be cheaper to just shut the transmitters down and call it a day. College radio? forget it… it will completely cease to exist.

And of course, the artists themselves are up in arms over this. “How dare radio play my music without compensating me?” Ummm… let’s go back to paragraph #1. Airplay translates into sales. It’s promotion. You provide the content, radio turn that into sales. And NOT just sales of music. We’re talking ticket sales for concerts and merchandise… both multi-billion dollar industries. Bono has been one of the most outspoken performers in support of the tax. And he’s one of the richest people in the galaxy! Click Here to read what the NAB had to say in response to Bono. I certainly understand that Bono does a LOT of charity work. I appreciate that. But if it wasn’t for media airplay from early MTV and radio, U2 wouldn’t be around today and Bono would probably be a bartender in Dublin instead of owning half of the city! Why do you think artists like the Grateful Dead, Phish, and Dave Matthews ENCOURAGE people to record and trade their music? They know that they might lose some music sales, but they are gaining in merchandise and ticket sales. And The Dead have been around in one form or another for almost 50 years! Sounds like they know what they are doing!

The only music you would probably hear on the radio is that of the biggest artists in the world… the U2s, Rolling Stones, Britney Spears… If you were a new artist trying to get heard, it wouldn’t happen. Whatever happened to the thrill of a new artist hearing their song on the radio for the first time?

Yes… the musicians have a right to be paid for their material. I’m not disputing that. But it is the responsibility of the record companies to pay that. NOT the people trying to help them sell more records. If more artists were to examine their contracts BEFORE they signed them, or learned to negotiate better deals, then this wouldn’t be an issue.

And how would radio pay for these fees if passed? Well, other than laying off even more people, advertising. I think that most “casual” listeners of radio would agree that there are too many commercials as it is. I think that a good average would be 12 to 13 commercials per hour split into 3 commercial “stopsets.” If these laws pass, I have no doubt whatsoever that 20 minutes of commercials per hour would become common.

The record companies know they screwed up big-time when they didn’t jump on the digital bandwagon. And now they are trying to make up for lost time. Piracy is rampant and it’s because the music industry DIDN’T see digital music as a viable platform. For the record (no pun intended), my iPod currently has well over 28,000 songs on it, and it fits in my pocket. How many CDs would I need? The music industry needs to learn to embrace new platforms, not just decide to stick with the old ways of doing business. If they did this back in 1997, there would have been more safeguards against music piracy in place BEFORE it became a major issue.

So… back to the original question. Is this tax a form of revere payola? I think the answer is “yes.” even though payola is illegal, record companies embraced it for years as a way to get their artists more “PROMOTION” by getting records more spins on the air. Now they are asking, no… demanding that radio pay them for the right to promote their music.

I would encourage people to take a look at this website… to get more information.


3 comments on “Is the Radio Performance Tax Reverse Payola?

  1. Great commentary. I wrote on this same topic in my own blog after discovering a report on the subject on the Web site of the Christian radio station I listen to on a regular basis. I think you’re spot-on with regards to the idea that without radio playing the music of these artists, the artists themselves will eventually suffer the same fate as the radio stations will as they fold up shop.
    What’s worse is, as advertising rates will, no doubt, rise tremendously in the wake of passage of this legislation, businesses across America will also suffer as they’ll no longer be able to afford to advertise. It’ll be one big snowball effect across an already crushed economy.
    Here’s my thoughts on this subject.

    • Thank you for the comment, Todd. I read your post, as well. To be honest, I didn’t think about the devastating effect it would have on Christian radio. It’s such a niche format. A great post!

  2. The issue with Christian radio is that much of it (I don’t know the percentage) is “listener supported,” which is another way of saying non-profit. That means the lion’s share of their income comes through essentially private donations. As you can well-imagine, private donations to all forms of charities are down because of the economy. These stations will simply fold without blinking if H.R. 848 and S. 379 pass. And with them will go more jobs.
    I’ve already written my Congressman (my two Senators are frankly a waste of time), and I’ve posted as well to my facebook page. To me it’s all about the grass-roots effort.
    Good luck finding full time work and in your efforts to beat cancer. It’s not touched my family but I know families that have been affected by it.

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