Sorting out PRA: The inevitability factor


One reason for finally entering into talks with musicFirst/RIAA is that key members of Congress really wanted that to happen. How much could it hurt to talk? In fact, late last year, that WAS the reason talks began. And NAB was usually very careful to call them talks, not negotiations. But is the fact that they seemed in fact to have morphed into negotiations a good thing or a bad thing?

The party line on this issue for a long, long time was uncompromising. Yes – radio uses music as the basis of its programming. But it was precisely that use of music that propelled musicians and record companies into earnings that were unimaginable before the advent of radio. The labels, in other words, received equal benefit.

It was and remains a symbiotic relationship. A radio station receives three minutes worth of programming. Meanwhile, the artists and distributors receive an off-the-rate card three-minute advertisement.

The simple fact is that radio stations had the power to propel a given tune to hit status, and the record companies knew it. The labels weren’t sliding cash, gifts and favors under the table to unscrupulous program directors because they loved to give away their hard-earned cash. They knew very well the power of radio.

There still is no better place to make a tune known to a large number of people at once than radio.

The biggest thing that changed is that the internet came along, bringing with it Napster, and the labels snoozed while their business model was disintegrating.

Starved for cash, they are flailing about for any income stream they could find. Included in these efforts are two textbook cases of what not to do when faced with an existential crisis.

They are randomly suing their own customers rather than adapt to new digital realities.

They are blindly slashing at radio, their most reliable marketing partner, putting the goal of getting their hands on a short-term supply of cash ahead of the futures of both industries.

On Capitol Hill, the battle lines cut strongly across party lines. This is often the case in communications issues generally, and it is also often the case when the issue at hand is one group of businesses versus another.

The RIAA had a built in advantage this year – sympathetic Judiciary chairmen in both houses of Congress. In football terms, think of it as the passing game. It completed quick strike long bombs in both the House and the Senate and got PRA out of committee.

NAB has had the better ground game, however, by far – it moved well past the tipping point in the House, making it a fool’s errand to try to bring PRA to the floor. And NAB may have even more support there that is as yet undeclared. However, the support is not for a counter-bill, but a softer counter-resolution.

Senators are much less likely to make their views known ahead of time than those in the House, where it’s much harder to get a piece of the spotlight. But even there, NAB was rounding up opponents to PRA. And in the Senate, one reliable member can do quite a bit to gum up the works if necessary.

So why the deal?

One oft-mentioned reason is fear of the dreaded Senate-House reconciliation committees that iron out differences between House and Senate versions of a bill behind closed doors. One such committee codified the somewhat bizarre 39% national television audience reach cap into the rules and regulations for broadcast television groups. (To recount all of the many ways that was bizarre would take much more time and space than we’d care to go into right now, since it’s off topic.)

That is something to be wary of, especially if it can be attached in the dead of midnight to a must-pass bill. PRA is not something that will become a campaign issue; therefore legislators can ultimately vote either way without making a dime’s worth of difference to their re-election prospects. Ultimately, when NAB says PRA could happen as passed out of committee, and they might not be able to stop it, NAB is correct.

Another reason to think this may be a good deal is that it takes the bizarre, seemingly random and uninformed antics of the Copyright Royalty Board out of the rate-setting business, at least as far as radio is concerned. The CRB set what appear to be daft rates for digital music promotion, and if you don’t believe us, just ask all the entrepreneurs who were put out of business, and maybe ask all of the musicians and labels who aren’t getting download fees because that many fewer people get a chance to hear and instantly buy their work.

But we return to the original question: is PRA inevitable?

It certainly seems more inevitable than it ever did before, now that the stance of the NAB has publicly gone from “NO WAY!!!!!!” to “maybe…..” The camel’s nose has certainly been allowed under the tent in a way it never was before – just sayin’ – and to undo that little inconvenient fact will require quite a bit of tugging on the camel’s hindside.

Even if there had been no public movement of the camel’s nose, there is another thing driving pursuit of a really good deal: PRA promises to be a zombie legislative initiative. Just like the issue of free airtime for politicians, it will be impossible to kill. Stop it? Yes. Destroy it? No. Its musty-smelling, weed-draped carcass will rise up again two, four, ten years from now all over again, so long as there is a breath of life in the labels.
So maybe getting a really good deal now IS worth it.

But it had better be REALLY good, since radio is still providing effective free marketing to the music industry.

Radio professionals are seeing problems with this on an almost daily basis that seem not to have been considered – at least not publicly.

We’ll add a reminder of one right now. A common radio operator promise is that they will retreat to a spoken word format should some form of PRA be enacted. There is one problem with that – there are already stations out there, many doing well, and many struggling – with a spoken word format. A sudden influx of competition into the music-free radio universe will be hard for both incumbents in the format and newcomers trying to wedge their way in. If you think about it, it’s somewhat of an idle threat.

But it’s something lawmakers and regulators must consider before they place radio operators in between the rock of an impossible music-format business environment, and the hard place of an already-saturated spoken word-format environment.

One thing in radio’s favor is the late stage of the 24-month legislative calendar – not only is there little time left to kick off a new congressional initiative of any sort, but on top of that a third of the Senate and all of the House is preoccupied with getting re-elected.

That suggests to us that the odds are good that this issue will spill into 2011. That may well give the NAB time to make absolutely sure that any deal-making does not throw anybody in radio under the bus.

And if a bus-flattening remains a reality for any class of radio operator, maybe NAB should kick the camel’s nose back out of the tent and brace for the next time it tries to jam its way back in.

RBR-TVBR note: Radio vs PRA, CTIA, CEA the controversy, money, the Chip

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[The national television audience cap noted in this story was initially stated inaccurately, and has been corrected — Editor]