NJBA Weekly Newsletter Friday, October 23, 2009

Stop the Performance Tax Before it Stops You

As you know, your steadfast support of the NJBA is crucial in these times of constant assault on the broadcast industry. Your association is continuing its fight against the onslaught of legislative and regulatory threats to our industry. Because the Performance Tax issue is clearly a “Bet the Farm” issue for New Jersey Broadcasters, Quick News is devoting this week’s edition almost exclusively to examining the arguments in support of the Local Radio Freedom Act.

Senators Ask Leadership to Kill Performance Tax

Senators Blanche Lincoln (D-AR) and John Barrasso (R-WY) are asking both democratic and republican senate leaders to not bring the proposed Performance Tax to the Senate floor for a vote. These brave legislators join New Jersey Congressmen Adler, Smith, Andrews, Lance, Garrett, LoBiondo, Pascrell, Pallone, and Frelinghuysen in recognizing the “devastating" impact any Performance Tax would immediately have on local broadcasters.  Senators Lincoln and Barrasso are the original cosponsors of a non-binding resolution opposing the additional royalty.  It's been signed by 26 senators to date. The NJBA is very hopeful that Senators Lautenberg and Menendez will show their exemplary leadership and support of New Jersey’s vibrant and diverse broadcaster community by joining our growing coalition of legislators, community leaders, and citizens in fighting this toxic tax on free over-the-air radio. Call our Senators and Congressmen Holt, Payne and Rothman at 202-225-2131 and tell them: Now is the time to stand up for New Jersey by voting NO on the Performance Tax! It’s not fair to you and it’s not fair to New Jersey.

NJBA Holds Fall Board Meeting

On Tuesday, the Board of Directors of the NJBA met to discuss the many challenges facing the Garden State’s broadcast industry, and the Performance Tax concern was squarely in the center of Association leadership’s sights.  The very full agenda was dominated by the regulatory and legislative challenges posed by Congress and the FCC. The NJBA will continue to fight for New Jersey broadcasters with its enhanced presence in Washington and strong working relationship with NAB. In fact, in-coming NAB President Gordon Smith joined the Board of Directors via conference call from the west coast to brief the Board and to discuss shared strategies to fight the Performance Tax, Fairness Doctrine and other assaults on our industry. Bill Velez, Executive Director of the Radio Music Licensing Committee briefed the Board on the ongoing contract negotiations with ASCAP and BMI, and Mark Levy from the Radio Advertising Bureau (RAB) made a presentation regarding the new educational programs it has designed to meet current market conditions, which will be available to our members. The NJBA very much appreciates the contributions made by Senator Smith, Bill Velez and Mark Levy and would like to thank them for their continued support of our association.

Irland Steps Down From Board; DeNafo to Fill Term

Long time NJBA Board Member Dick Irland resigned from the Board of Directors this week, stepping down to allow new participation on the Board by his colleague Brett DeNafo, who was elected by the Board to fill Mr. Irland’s unexpired term. “Dick has been a strong leader and faithful friend to the NJBA” said President Paul Rotella, in announcing Mr. Irland’s decision to step down from the Board. “On a personal note, Dick was always available to consult with me on many important board matters and his leadership, friendship and support for our initiatives has been especially heartening, not only to his colleagues on the Board, but to all New Jersey broadcasters.”  In advising Rotella of his decision, Dick pledged to remain active within the association and to continue to contribute to the success of the NJBA. Incoming Board Member Brett DeNafo is the owner and General Manager of the Atlantic Broadcasting Group in Atlantic City. His station group, Atlantic Broadcasting of Linwood, NJ, includes Oldies WTKU, Classic Rock WMGM, Regional Mexican WTAA, News/Talk WOND, and Active Rock WJSE in the Atlantic City-Cape May, NJ markets. Mr. DeNafo purchased the station group from Access.1 Communications one year ago this week. “I think Brett will be an energizing addition to our already talented and dedicated Board and he and his team at Atlantic Broadcasting have already made several contributions to our organization’s success”, said Rotella. The NJBA welcomes Brett to the Board and thanks Dick for his selfless service over the years. We send to both of these great New Jersey broadcasters our very best wishes for continued success.

Radio Performance Tax Does More Harm than Good

The following is the complete text from NJBA President Paul Rotella’s recent letter to the editors of our local Garden State and regional newspapers:

Dear Editor: Support for the Local Radio Freedom Act continues to be strong in the House and the Senate. Currently, more than 250 members of the House and 26 U.S. senators are on record in opposition to a performance tax. However, the NJBA is convinced that a stealth attack on free over-the-air-radio is very possible in November or December, perhaps even sooner. In New Jersey, Local radio is very important and the prospect of a Performance Tax is akin to a Death Tax for broadcasters.

First, New Jersey Broadcasters would like to express our deep appreciation to Congressmen Smith, Adler, Pascrell, Pallone, Sires, LoBiondo, Frelinghuysen, Lance, Garrett and Andrews, for their courageous leadership in opposing this unfair and wrongheaded tax. These Legislators are to be applauded for their early recognition and constant vigil over free-over-the-air radio’s service to the local communities across the Garden State. Thank you Congressmen! We are hopeful that Congressmen Payne, Holt and Rothman will reexamine their positions and come around to the obvious conclusion that New Jersey Radio is too important to play politics with for the benefit of a few foreign owned record companies.

The way free-over-the-air-radio opponents typically operate is to covertly insert an “amendment” into a “must pass” piece of legislation, often totally unrelated to the topic at hand. The amendment could come at several junctures in the legislative process. A particular favorite is the “Conference Committee” amendment during the reconciliation process between House and Senate versions of a bill. Often, these amendments are slipped into a bill under the cover of darkness and proponents (or opponents, as the case may be) of the amendment (often an entire bill, in and of itself) have precious little time to respond to the merits of the insertion or amendment since the vote usually comes within 24-48 hours of the bill being reported out of conference.

Worse, these add-ons or “Christmas Tree” amendments are not debated or voted on individually, and voila! You could get a controversial edict passed on a simple “up or down” vote, without debate or fanfare, and on its way to the White House for executive signature into law. In short, all of our hard work on repelling the industry crippling Performance Tax could be in vain because of this devious legislative choreography.

So, with this daunting prospect looming over our industry, we will need some fancy footwork of our own to quickly counter this very real threat.  It is vital that the NAB, NJBA, all other state associations, as well as our supporters on Capitol Hill, along with our broadcasters and listing public, be very aware of any movement on any appropriation measures or activity on large, complex pieces of legislation where such an amendment could easily be attached and passed into law without our being able to respond effectively. I strongly encourage our allies and all who recognize the need to defeat the Performance Tax to be vigilant and aware of any legislative maneuvering that could lead to this unhappy prospect.

In New Jersey alone, it is estimated that the Performance Tax would siphon off apx. $30 million from the $100 million radio industry in the Garden State, and go up from there. And these new royalty fees would be on top of the billions the radio industry already pays in royalties to artists and songwriters through ASCAP, BMI and SEASAC! In these challenging economic times (or in any economic model), can any industry afford a 30% increase in net operating costs? But this is all not about dollars; it is about common sense.

The unavoidable result of the Performance Tax’s passage is much more than merely reeking economic havoc on local radio stations. The passage of the bill would force the closing of a majority of local radio stations in New Jersey and across the country. To be sure, the prospect of enhanced opportunities for localism and outreach would be stifled immediately. Station groups and networks would be hurt, as well. Localism would be out the window and thousands in New Jersey would lose their jobs.

Much more horrific, the closure of these vital broadcast outlets across America would also decimate our already ailing Emergency Alert (EAS) Warning System capabilities and pose a genuine threat to homeland security. And for what? So a few greedy foreign owned record companies can try to line their coffers with more American dollars, taking billions out of our economy? And worse, the move would directly or indirectly, wipe out hundreds of thousands of jobs in the United States.

Moreover, this new oppressive Performance-Tax would hurt emerging artists who might not ever get their music on the air if stations have to pay a fee every time a new song is played. Performing artists almost universally recognize the honest and incomparable value radio air play adds to their industry and business model. The record label's recognition of the unparalleled promotional value of radio airplay contradicts statements made by recording industry representatives in Washington who have characterized radio airplay as "a form of piracy." What nonsense.

Certainly, no artist would ever have an opportunity to become famous and successful absent their natural partnership with free-over-the-air-radio! Our two industries have worked perfectly together for decades. This symbiosis evinces the inescapable conclusion that both sides are benefiting. Why do you think local stations across the country are bombarded with sample CD’s and “demos” by emerging artists (and seasoned veteran artists) begging station managers to play their new tune? It’s because broadcasters and artists genuinely “get it.” It’s how they sell records, (yes, vinyl records are making a comeback) CD’s, downloads, and video. So you see, a new Performance Tax imposed on radio stations by record companies would only be biting the very hand that feeds them.

Equally disturbing is the disingenuous comparison of broadcast radio to internet providers and pay/subscription audio entertainment programming and fees paid by satellite radio. The proponents of this legislation want us all to be alike – just because Cable, Satellite and Internet services pay these royalties. While I have set forth the totality of circumstances that weigh against the implementation of the P-Tax, I want to reflect on this offensive language.

We are not alike!  Free over-the-air radio & television are the only exclusively local media that exists! We are licensed separately and differently; we have a very different mission, mainly to operate in the public interest from the EAS for local emergency notification such as NJ Amber Alerts and community wide emergencies such as forest fires, hurricanes, blizzards, and other extreme weather hazards, and flash flooding, to local news of community events and happenings in entertainment from our great and diverse variety of formats.

The internet and satellite applications referred to in mislabeled “equitable royalty fee” arguments serve merely as signal reception sites or “web-based antennas” for content emanating from a great broadcast radio station. Compared to free radio’s more than 235 million listeners in the United States alone, satellite and subscription services reach less than 10% of radio’s ever expanding and diverse listening base.  And it’s free! Think about how many people in today’s economy can afford to pay to hear radio in the first place. That’s why their subscriber base is contracting. By the way, if anyone wants to see the effects of wrongheaded Performance fees, just look at the recent 30%+ increase in satellite’s monthly subscription fees, and the “going dark” of some radio stations’ steaming audio on the net, due largely in part to the ever-increasing royalties charged to stream content.

And to lie to rest the specious argument that the performing artists will get any money from the new Performance Tax, all you need to do is review the typical recording contract any new artist is “forced” to sign if they want to get their coveted “record deal”. It often provides for very little compensation to flow to the artist after record production and promotion costs are re-cooped. More disturbingly, many artists complain about the notorious greed with the industry itself. In a surreal report released a few weeks after Michael Jackson’s death, it was revealed that the King of Pop told interviewers that it was “Time for artists to take a stand against record labels.” In a video interview filmed by director Brett Ratner, Michael Jackson “lashed out at record labels. Asked about his greatest lesson learned, Jackson replied: Not to trust everybody in the industry. There are a lot of sharks and record companies steal. They cheat. I have to audit them. And it's time for artists to take a stand against them.” Bravo, Michael.

So keep listening New Jersey! Let’s defeat this Performance Tax and let’s keep New Jersey radio free!

Court’s Ruling May be Good News for Broadcasters vs. P-Tax

District Judge Denise Cote Ruled that wireless phone carriers don’t have to pay a royalty fee every time a ringtone gets played, because, get this, Ringtones are not public performances—and thus, wireless carriers do not have to pay the content owners every time one of them gets played—according to this ruling. ASCAP sued AT&T and other carriers earlier this year, in an attempt to try to get them to pay royalties every time a user’s ringtone was played. This is in addition to high download rates the carriers already pay for the 30-second song snippets. ASCAP’s logic? That these plays were public performances, which meant that they deserved additional payment. But Cote struck down the claim last week, ruling that the Copyright Act’s performance clause didn’t pertain to mobile carriers, since they had no control over when or how many time a ringtone got played—but also because they didn’t earn any revenue per-play themselves.

The Trenton Report: From the Marcus Group

As Trenton prepares for a busy lame duck legislative session from November to January, all eyes remain focused on a tightening race for Governor. The latest polls show major party candidates Jon Corzine and Chris Christie in a neck and neck battle, with independent Chris Daggett a major wild card factor. Commercials for all three candidates for Governor as well as for numerous other races for local office are likely to flood our broadcast outlets in the closing days of one of the most hotly contested and expensive elections in our state's history. Daggett is registering between 12-18% in the polls, an unprecedented showing for an independent candidate in New Jersey. Should some of that support erode as Election Day approaches, where the Daggett vote goes will determine who will be Governor of New Jersey for the next four years. Election Day is November 3rd. Good luck to all of our gubernatorial candidates.

New Threat to Tax Deduction for Advertising

Yet another piece of legislation has been introduced in the Senate to eliminate the federal tax deduction on advertising for prescription-drug medications, but this one could endanger the proposed $829 billion health-care reform bill. U.S. Senator Al Franken (D-Minn.), along with co-sponsors Sens. Sherrod Brown (D-Ohio) and Sheldon Whitehouse (D-R.I.), have introduced legislation (S. 1763) to disallow the federal tax deduction for all advertising and marketing expenses for prescription drugs. Rich Thomaselli of AdAge reported this late breaking story on Wednesday.  The NJBA will be monitoring the progress of this legislation, but we are told Senator Franken is going to propose this legislation as a “floor amendment” attached to the Health Care Bill, that appears to be moving closer to heading to the Oval Office for signature. 

QuickNews is provided for general information purposes only and should not be relied upon as legal or tax advice pertaining to any specific factual situation. Legal and tax related decisions should be made only after proper consultation with a legal professional of your choosing.