The copyright reforms Congress should be considering, instead of radio royalties

Derek Khanna | Technology Activist

“This is amateur station W2AG at Yonkers, New York, operating on frequency modulation at two and half meters.”

That was the first broadcast of FM radio in the world.

They said it couldn’t be done, but in 1933 the first FM broadcast volleyed the clearest signal ever heard over a radio forty miles away. Listeners had never heard anything like it.

Broadcasting over FM eliminated static and provided better sound quality than AM by producing most of the range audible to the human ear.  Both established AM market players and music industry interests quickly realized this meant FM radio would displace AM, but they also worried it would be the end of customers paying for performances or buying records.

To avoid this result, lobbyists got to work in Washington. RCA in particular was involved in asking the FCC to move FM radio to a different band of spectrum while also cutting the broadcast power of FM radio to ensure to limit the range of each FM station. The FCC finalized this move in 1945, while granting the emerging technology of television the better bandwidth.

Of course the music industry’s fears were never fully realized. Having music played on the radio ended up being quite a boon for the record industry. It allowed new songs to be heard across the entire country. Radio broadcasters introducing American audiences to their music allowed for new artists to rise rapidly on the national stage. Radio has played a big part in creating a robust, competitive and dynamic music market-place.

Today there is a proposal to regulate the market by expanding copyright, which would increase the costs for broadcasters, and potentially disrupt the ability for emerging artists to get on the radio. As is the case for all forms of greater regulation, the onus is on content holders to prove how this regulation is beneficial, and whether further expansions of copyright fall within the Constitution’s purpose of promoting “the progress of science and useful arts.”

Data shows that copyright is important for this purpose, but economists have long been opposed to significant extensions of copyright beyond its constitutional purpose. Conservatives support constitutional copyright, not Mickey Mouse copyright. While current policies may work for the few, the data demonstrates that deviating from the Constitution has caused unintended negative effects for many, including the creators of new content, innovators and the general public.

Instead of addressing these very important issues, instead of seriously caring about the interests of artists and movie creators, lobbyists for the content industry are changing the conversation, to avoid talking about real problems and constitutional principles. This diversion is the proposed regulation of broadcast radio.

Apparently these guys are so slow to adapt to new technologies that they believe now is the appropriate time to deal with the FM technology of 1933.

For several years, major lobbying groups for the content industry have tried to implement a performance royalty fee, which would require radio broadcasters to pay musicians for broadcasting music – which they already do for the composition itself.

Congress has introduced another bill on this issue, despite there being no economic data showing that this regulation is beneficial. This new legislation should be rejected, given the clear evidence of its harm and no demonstrated benefit.

It’s extremely unfortunate that Congress is quick to introduce legislation on an issue that no economist has ever recognized as a problem. Congress has chosen to avoid having substantive economics-based hearings on current copyright law, where economic data demonstrates that our outdated policies hurt the market and cost jobs, and opted for a meaningless debate over more intrusive copyright.

Congress should take note of the abundance of data demonstrating the economic harm of abandoning the Constitutional purpose of copyright, and consider the following instead:

1) Given the constitutional purpose for copyright, how long should copyright terms be?

2) How is fair use working and how can be it be strengthened?

3) Are our statutory damages appropriate for this market, given the damage it does for transformative content creation?

4) Will the Trans-Pacific Partnership agreement further outsource American copyright law and further abandon the Constitutional purpose for copyright?

5) Why do we choose to ban useful technologies under the aegis of protecting copyright? Technologies like accessibility technology for persons who are blind and deaf, cellphone unlocking and jailbreaking are now illegal.

6) Why does Congress delegate new powers to the Librarian of Congress on what technologies to ban? Why would we want to delegate such power to an unelected bureaucrat?

7) Tort lawyers have found a new source of income through false claims of copyright infringement, which they use to shut down new competitors (e.g, Craigslist v. 3Taps and NeighborCity). How can this be addressed before more American innovation is stifled from tort abuse?

Rather than address these important issues, some in Congress would rather reintroduce legislation to regulate broadcast radio. If enacted, that legislation could be the most significant expansion of copyright since the Sony Bono Act in 1998. That act received significant criticism from free market economists like Milton Friedman and Ronald Coase, not to mention leading conservative voices like Phyllis Schafly.

The conservative position is to be extremely skeptical of further expansions of copyright, a system of regulation that our founders referred to as a “monopoly.”

Because copyright today has expanded so dramatically, the onus is on the record labels to demonstrate how further expansions are beneficial. We do know the potential harms; this change will cost broadcasters across the country, which may reduce the number of stations and reduce the quality of their content by increasing advertising to pay for their new costs. In so doing, it may generate more revenue for established music entities like Britney Spears and Elvis, but it will also likely hinder new and emerging artists.

Copyright laws exist for a specific purpose. Congress may, if it so chooses, provide copyright for “authors,” and patents, for the purpose of “promot[ing] the progress of Science and useful arts.” This stipulated purpose for Congress’s power is extremely unique within the framework of the Constitution. The Constitution provides an enumeration of 17 specific powers granted to Congress (Article 1, Section 8). The power to create patents and copyright is unique because, unlike any of the other enumerated powers, the Constitution provides a very specific purpose for this optional power.

The operative question here is: does creating a new right to copyright, one that was very alien to that of our founding fathers, promote the progress of the useful arts? This is an empirical question, one that can be argued and resolved largely through data, but the onus is on the record labels to prove their case.

Rather than show a need, existing studies shows only the contrary. There has never been a single study demonstrating harm to artists from broadcast radio. In fact, quite the opposite. According to a study produced for the National Association of Broadcasters:

“There is a direct correlation between the number of ‘spins’ (plays on free, local radio) and the sales of albums or singles. … It is this promotion … that drives record sales.”

While this is only one study, and is funded by the broadcasters themselves, it is a significant empirical analysis based upon statistical data. The report concludes, “If a new performance fee were enacted, stations could reduce the amount of music airplay, change formats and even cease to operate, resulting in the loss of much of this promotional benefit.” If this 100-page economic regression analysis based report is inaccurate, then why hasn’t any empirical study demonstrated contrary findings since 1933?

So far, the anecdotal data demonstrates that artists want to be on the radio, and do whatever they can to ensure their music gets played. Is there a single artist that has said, “I hate it when my new music is played on the radio?” Even if such an artist would step forward, the economic benefit for some artists to get on the radio is so high that we have laws that prohibit them from paying to get on the radio (payola laws).

Deciding whether to regulate FM radio through a performance right fee involves a relatively simple economic equation, comparing costs of this legislative change and the Constitutional mandate that copyright be used to promote more creative works. Congress can approach these questions with the scientific method, examining if there is a problem, getting the data, implementing the best legislation to accomplish that goal, and then reassessing if that legislation worked out as intended. If Congress does so, it can bypass lobbyist spin and address the substantive issues of our time that keeps the economy from generating new jobs and robust economic growth.

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