Politics & Policy

Obama Pals in Music Business Aim to Cash In

Democrats get an earful of arguments for a royalty money grab.

The music industry, which offered financial and in-kind support to President Obama during the presidential elections, is now hoping to cash in with new restrictions on music performance.

The so-called “Free Market Royalty Act” aims to squeeze more money out of music lovers to shore up the aging behemoths of the record industry.

Record label lobbyists are pressing their allies in Congress to reward them for their support of Obama and the Democrats.  The misnamed act is a classic example of cronyism wrapped in a free market label.  #ad#

Digital sales and downloads have replaced CDs, and the record companies’ inability to cope with the commoditization of their product has left them scrambling to that last refuge of market losers: Congress.

Every spring, the recording industry comes to Washington to ask for relief as part of its Grammy on the Hill program. This year, the push takes place April 2-3, with a full spectrum of lobbying, schmoozing and the traditional presentation of a Grammy award to some politicians.

Past recipients of political Grammys are Vice President Joseph R. Biden Jr., Sen. Robert P. Corker (R.-Tenn.) and Librarian of Congress James H. Billington, who appoints the members of the Copyright Review Board, which determines what royalties get paid to whom.

For the last three years, the record companies have had one big ask: They want Congress to levy a tax on recorded performances that air on broadcast radio stations.

The revenues from this “performance tax” would not go to the Treasury, but rather to a non-profit entity controlled by the music companies called SoundExchange, which according to the text of the Free Market Royalty Act, would have a codified monopoly to “negotiate, agree to, pay, and receive payments.”

Many Americans would be surprised to learn that while writers, producers and others may get a royalty when a song is played, the performers do not.

This is because it is illegal for music companies to pay for airplay. In a natural market the cash would flow from the music companies to the radio stations, as it once did to record stores. The promotional value of airplay is vast.

The bill would assign 50 percent of the performance tax proceeds to the record company, 45 percent to the featured performers and then 5 percent to be divided up among the minor performers, like the tambourine player.

The record industry has put a lot of effort into buttering up Obama and congressional Democrats.  A February briefing Health and Human Services Secretary Kathleen Sebelius held with her senior staff included Recording Academy representatives Daryl Friedman, chief advocacy and industry relations officer; Kristen Madsen, senior vice president of MusiCares and the Grammy Foundation; and Debbie Carroll, executive director of MusiCares.

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At the meeting final plans were worked out for two March 4 workshops to promote the PPACA in Los Angeles and Nashville. The Recording Academy and MusiCares are working with the Music Health Alliance to increase Obamacare enrollments in the music industry.

Only Wall Street and the lawyers have been more generous to President Barack Obama than the entertainment industry—and singer Katy Perry personally takes credit for winning Wisconsin for the president after her concert rally for 20,000 fans in Milwaukee days before the 2012 election.

Another big-time supporter of the president, Time Warner hip-hop executive Danielle Smith, raised hundreds of thousands of dollars for Obama and the Democrats—only to be busted early this year for embezzling $1 million from her employer through her company credit card. #ad#

Time Warner and all the music companies are doing tight audits right now. The industry is changing quickly and the old business models need to be tossed in the bargain bin.

The music moguls took a hit when both the bill’s sponsor, Democratic Congressman Melvin Watt of North Carolina and supportive Republican Congressman Howard Coble, the chairman of the House Judiciary Committee’s Copyright, Intellectual Property and Internet sub-committee, ended their congressional careers.

Watt resigned to take an administration post as the leader of the Federal Housing Finance Agency. Coble, himself the recipient of a political Grammy, announced he won’t seek reelection to a sixteenth term this year.

Rep. Judy Chu (D.-Calif.), who represents wealthy suburbs outside of Los Angeles, has taken over the Watts bill. Look for some celebrity testimony in favor of it.

Only 3 percent of bills filed become law, but if Chu performs well and it makes it to the president’s desk, there is no doubt she will have earned her own Grammy.

Neil W. McCabe is a Washington-based reporter and a veteran of the Iraq War, where he served as a combat historian.

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