The performance tax hurts consumers

Members of Congress are being asked to consider changes to the way free, over-the-air radio stations divvy up their payments for broadcasting music under the guise of protecting performers’ property. They should not be fooled.

Under the current radio payment/royalty structure, it is the songwriters who get paid due to their songs getting airplay, because they accrue no benefit from concerts and little from the sale of the music. But performers benefit also, receiving an estimated $2.4 billion annually in value from the free play of their music due to increased downloads and album sales alone. This doesn’t include concert revenues, which performers don’t share with songwriters at all.

{mosads}For those who argue that the free market demands that performers get paid for their work by free, over-the-air radio stations, a more misleading argument could not be made.

Radio stations have 60 minutes an hour, 24 hours a day to sell. If they could sell all advertisements and get an audience to listen to them, that would be within their rights. However, federal law prohibits free, over-the-air radio stations from charging the foreign-owned record labels for playing their music.

A true free market would allow stations to auction off their entertainment minutes to the highest bidders and set their play lists accordingly. However, this system has been dashed forever, and I am not advocating a return to it.

Instead of returning to a free market, pampered performers and the corporate labels now want to completely flip the script and have radio stations pay them for the pleasure of promoting their product.

The idea that the government should compel free, over-the-air radio stations to not only give away their product, but to pay the very people they are promoting, is Orwellian even by today’s standards.

The practical side of this question is: How would the government changing the current royalty system impact the songwriters and the broadcast radio stations?

The payments would have to either come from songwriter royalties or from the increased advertising revenues.

If it comes at the expense of the songwriters, then the real creators in the process would be getting the shortest end of a short stick.

If paying performers for airplay comes at the expense of the radio station, either the number of ads on music stations will increase, or the cost of the ads would rise.

The net effect of more ads is predictable. Radio stations know what the equilibrium point is for how many ads their listeners will tolerate before changing channels. More ads predictably would mean fewer listeners as they opt for non-music oriented formats, playing their personal music or a subscription format.

The impact of higher advertising rates is equally obvious. Local businesses would have to shell over more money to buy the same amount of time. If the local businesses balked and spent the same amount on fewer ads, leaving a shortfall due to unsold inventory, the station itself would then have to compensate to stay in business by cutting local deejays and programming, devolving to less expensive national programming or even changing formatting away from playing music.

Needless to say, this creates a lose, lose, lose scenario for performers, songwriters and the free, over-the-air radio stations. Beyond the lower royalties for songwriters and less exposure for performers, this outcome also diminishes the probability of lesser or unknown artists getting airtime.

A 2013 radio industry survey showed that 73 percent of the people identified FM radio as “the main way” they discover new music. Fewer songs played means fewer new artist exposures and ultimately the public being deprived of enjoying their skills.

The existing law creates a symbiotic relationship between performer, songwriter and free radio outlets that benefits everyone. Congress should not mess this up under some misguided notion by further distorting the radio royalty market with predictable unintended consequences that will harm everyone involved in the music-making, production and distribution business by diminishing the amount of free, over-the-air music available. And less free-to-hear music also hurts the most important person in the equation, the consumer who currently has a wide variety of choices at his or her fingertips, but relies on traditional radio to hear new artists and the latest offerings from favorite entertainers.

Manning is president of Americans for Limited Government.