Bruce Reese Testifies at Subcommittee Internet Radio Royalties Hearing

Hubbard Radio President and CEO Bruce Reese testified at the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet hearing on Music Licensing, Wednesday (Nov. 28), on behalf of the NAB and local broadcast radio, which, he notes, is made up of 14,000 U.S. stations and reaches 240 million people each week in every local community across the country. "Local radio is responsible for hundreds of thousands of American jobs and has been shown time and time again to be a lifeline during times of emergency," he said. "What makes broadcast radio so successful is the local flavor of our programming, which forges a unique connection with listeners in a way that other media do not. In a constant cycle of new technology, broadcast AM and FM radio has remained part of the fabric of American culture for more than 90 years." However, he noted that today many radio stations still do not stream their music over the web, which does not help broadcasters or artists. "There is one primary reason for the low adoption of Internet streaming by broadcasters – unaffordable royalty rates. For music-based radio stations, the advertising revenue simply does not cover the streaming costs. Further, no matter how popular your Internet service becomes, the cost curve never bends in a favorable direction."

"At Hubbard," Reese continued, "we pay these high rates to stream our stations over the web because we believe our listeners expect us to be there. But in our best years, we do no better than break even in our music webcasting business... [but] the majority of broadcast radio stations, and the local services they provide, remain outside the reach of Internet listeners." Reese said that when initially set in 2007, the rates set by the Copyright Royalty Board were universally decried as being outrageously high. "Four problems at the CRB contribute most significantly to these high royalties. First, the "willing buyer -- willing seller" rate standard provides the judges with no explicit guidance on how to determine a fair market value. Second, the process by which the parties present evidence of a fair market rate to the CRB is insufficient. Third, the CRB appointment and rate setting processes do not afford adequate congressional oversight, allowing these rate decisions to proceed essentially unchecked. And fourth, the CRB process itself is riddled with uncertainty."

"We are here today to begin a dialogue with this Subcommittee on how best to address these problems," Resse continued. "NAB has members who are very supportive of the bill introduced by Congressmen Chaffetz and Polis. Other members are still seeking a better understanding of how the bill would impact their businesses. So while NAB has not yet endorsed any specific legislative approach, it is fair to say that NAB supports congressional efforts to ensure fair webcasting rates and needed CRB process reforms." He concluded, "Regardless of your position on the performance fee issue, Congress can and should act to resolve the important webcasting rate-making problems. The alternative – inaction – risks stifling the growth of Internet radio to the detriment of broadcasters, listeners and artists." The text of Reese's testimony was provided by the NAB.