NAB CEO Gordon Smith Delivers Inaugural State of the Industry Address


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Broadcasting is the original wireless technology. We are mobile, and both radio and television are adapting to new technologies and finding new ways to deliver the most popular and important content. That is not the past -- that is the future -- still.

And here's the reason I ultimately took this job. I genuinely believe the cause of free, over-the-air broadcasting, with its attendant public obligations, is a just and worthy cause. The values of free and local radio and television -- and the public service responsibilities that come with that -- are still relevant and vital today, even as a mature technology is being made new again.

And as my mom used to tell me as a boy, "Gordy, the best way to ruin a good story is to tell the other side."

So my job is to tell the other side -- our side.

As president of NAB, I'm charged with educating policymakers about the enduring contribution of radio and television to the public good. And I've got a great story to tell.

There are many important issues we could discuss today - threats to our revenue, to our advertising streams and to our ability to operate in a free market. But as the old maxim goes, "The mind cannot absorb more than the seat can endure." So I'm going to talk about just three issues that would change radio and television broadcasting as we know it.

First, let's talk about radio and the fee the recording industry wants to levy on stations when they play music.

It's what we call a "performance tax." Labels like to call it a "right" or a "royalty," but whatever you call it, it's basically a bailout of the major recording companies, three of the four largest of which are foreign owned. I think the American people have had enough bailouts.

The economics behind all of this are fascinating. For 80 years, free promotion and free play were the yin and the yang of the music world. Life was in balance. Then a little thing came along called the digital revolution, which the recording industry handled about as well as Louis the 16th handled the French revolution.

Technology chopped the head off the record industry's business model. So what did the industry do? It began suing people. The problem is that you can't stop technology with trial lawyers. You know you're in trouble when the health of your business is reduced to suing teenagers.

And how's that lawsuit thing been working? Not so great. So now, the recording industry, with desperation in its eye, has decided to bite the hand that feeds it. Who's hand? Ours. In other words - us.

In short, the RIAA decided radio stations should pay for promoting the record companies' songs. To fully appreciate the outrageousness of this, recall that just a few decades ago record label representatives were willing to break the law and risk jail time for the economic benefit that radio promotion offers.

The recording industry, of course, says this new fee is about fairness to artists. A statement that would be hilarious if it weren't so breathtakingly brazen. Under the record labels' proposal, the record company would get at least 50 percent of the money; the performer would get 45 percent; and the background musicians would get 5 percent.

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