Satellite’s Challenge May Improve Terrestrial Radio, Panelists Say

Traditional radio is nowhere near its final resting place, argued Chris Mays, program dir. for Seattle’s KMTT. “Radio is absolutely not dead. Broadcasters are ready to move and react and grow as the marketplace dictates,” she said, citing some stations’ decisions to shift programming away from “Top 40” formats to capture growing niche markets like Hispanic populations. “At our best, local radio broadcasters are a mirror of the community,” Mays said: “The ones that are the most successful are ones that are able to capture the spirit and values of the local community and show them back to you.” The prominence of satellite radio doesn’t spook Mays. An informal poll of her listeners indicated all of them were aware of XM and Sirius but only 4% intended to subscribe. MP3 players are another ball of wax. She said 20% of them owned iPods or other portable digital music devices and 43% planned on buying one in the next year. She said terrestrial radio is “leapfrogging” over satellite radio, taking the medium from “from broadcasting to me-casting… People would rather pay for things they can create themselves.”

Several panelists, including FCC Comr. Adelstein, griped about the state of terrestrial radio in the nation’s capital in particular. Adelstein admitted he recently switched to satellite radio after getting frustrated with his options in the D.C. market: “I was a big radio listener… [but] I got tired of the same songs over and over again and the lack of cutting edge material.” He said he hopes the digital transition will reinvigorate the industry -- and create new outlets for emerging artists to showcase their talent. Since broadcasters who go digital will be able to create new channels more easily on AM and FM dials, he expressed optimism that new channels that cater to specific audiences will be launched rather than all the stations targeting what he called “the lowest common denominator.” SoundExchange Exec. Dir. John Simson seconded that: “We have the worst radio in Washington -- with a few exceptions, mostly talk and NPR.” In fact, he said there are very few major markets that embrace the kind of innovative formats that make Seattle stations like Mays’ so unique. But Mays put a positive spin on the news, noting that broadcasters -- even mammoth conglomerates like Clear Channel -- are reintroducing niche stations that are growing in popularity as they stray from the national hit playlists.

AFTRA’s Ann Chaitovitz and RIAA Gen. Counsel Steve Marks had a very different beef with terrestrial radio. They reignited the longtime grievance expressed by record labels and labor unions that radio pays the songwriters for their lyrics but stations are exempt from compensating artists for their sound recordings. “I find it morally wrong, it’s economically wrong and it does a disservice to artists and to the culture and to society as a whole,” Chaitovitz said: “It’s wrong that our artists are building your business. They should be paid.” Chaitovitz said the U.S. is the last country in the industrialized world that doesn’t have a model to pay artists for radio play, and her organization has been fighting for this since the 1950s. The argument that radio is an important promotional vehicle for artists is no longer a valid approach, they said. “We've moved into a different world now [with] different business paradigms. People are no longer buying products, people are buying listens,” Chaitovitz said, and radio stations give listens away for free without promoting record sales.

Marks said changing the exemption for broadcasters has never been more important than now, since all subsections of the music industry are moving away from their traditional business models. Record sales alone won’t suffice for providing proper returns for the artists, he said: “As sales come down, more and more its important that you have those different revenue streams.” Despite the outcry for change, there is no clear strategy for bringing American radio broadcasters into the global payment regime and deciding what type of reimbursement model is fair, he said. “You're talking about an industry that has generally a profit margin of about 40% so there’s no question that broadcasters have the ability to pay -- they're not a start up business.” The standard statutory license agreement for subscription Web services use a standard of 10.9%, he said: “If that’s good enough for subscription webcasters to pay, it’s good enough for the broadcasters to pay.” Mays wouldn’t engage in an argument over how artists are compensated because she said she’s a creator, not an attorney: “I'm certain it will be figured out.”