Las Vegas, NV - April 12, 2010 - NAB President and CEO Gordon Smith delivered his first NAB State of the Industry opening keynote during the 2010 NAB Show. The convention seems positive overall, but Smith's speech highlighted his concerns for the industry and his commitment to work hard for broadcasters.
In his speech, Smith focused on three issues: the radio performance tax, the National Broadband Plan and retransmission consent rights for broadcasters. In regard to radio, he said, "We will continue to fight the record labels in their attempt to save their business model on the backs of free, local radio."
He also stated that overall, "broadcasting is a cornerstone of our democracy. The values that underpin broadcasting are still essential to the American people and to our democracy." Following is his speech:
Thank you and welcome to the NAB Show.
I'm Gordon Smith. And up until the 2008 Obama election tidal wave, I was a two-term Republican senator from the very Democratic state of Oregon. But, as my cousin, the late Morris Udall of Arizona said after losing an important Democratic primary to Jimmy Carter, "The voters have spoken... the bastards!"
And while I would never say that about the voters of Oregon, nevertheless here I am.
Of course another favorite saying of Cousin Mo was that the only cure for political ambition was embalming fluid. But, lest there be any doubt, my ambition is to succeed in the politics of serving America's broadcasters.
I am very happy to be here indeed.
You may ask why the NAB board would hire a defeated Republican to represent their industry when Democrats control both ends of Pennsylvania Avenue and the agencies in between. Well, for one thing, I've always had friends on both sides of the aisle. I've found that when people learn your father worked in the Eisenhower Administration and your mother was born into the Democratic political dynasty of Udalls, it's easy to have friends on both sides.
In fact, one of my closest friends in the Senate was the late Senator Ted Kennedy. We worked very closely together on many issues and in passing a bill that he urged be named after my deceased son, a bill on mental health that was intimately close to my heart.
I think another thing I bring to NAB is an inside view of how government works. Let's face it, Washington is a mess right now. Will Rogers once observed that, "We cuss Congress and we joke about 'em, but if they weren't in Washington they'd be doing something somewhere else that might be even worse."
The reality is that since Will Rogers said that . . . the government is everywhere -- in the health care, financial, automotive, and agricultural sectors... and of course, in communications. So the broadcasting industry has to keep on its toes, which is why I was hired. I know politics.
And in politics, perception is reality. Unfortunately, the perception of some is that broadcasting is the technology of the past. The days of radio's Edward R. Murrow reporting from wartime London and TV's Walter Cronkite influencing the nation from his anchor desk -- some think those days are gone. Yes, those days may be in the past, but broadcasting's vitality and reason for being are not.
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Broadcasting is the original wireless technology. We are mobile, and both radio and television are adapting to new technologies and finding new ways to deliver the most popular and important content. That is not the past -- that is the future -- still.
And here's the reason I ultimately took this job. I genuinely believe the cause of free, over-the-air broadcasting, with its attendant public obligations, is a just and worthy cause. The values of free and local radio and television -- and the public service responsibilities that come with that -- are still relevant and vital today, even as a mature technology is being made new again.
And as my mom used to tell me as a boy, "Gordy, the best way to ruin a good story is to tell the other side."
So my job is to tell the other side -- our side.
As president of NAB, I'm charged with educating policymakers about the enduring contribution of radio and television to the public good. And I've got a great story to tell.
There are many important issues we could discuss today - threats to our revenue, to our advertising streams and to our ability to operate in a free market. But as the old maxim goes, "The mind cannot absorb more than the seat can endure." So I'm going to talk about just three issues that would change radio and television broadcasting as we know it.
First, let's talk about radio and the fee the recording industry wants to levy on stations when they play music.
It's what we call a "performance tax." Labels like to call it a "right" or a "royalty," but whatever you call it, it's basically a bailout of the major recording companies, three of the four largest of which are foreign owned. I think the American people have had enough bailouts.
The economics behind all of this are fascinating. For 80 years, free promotion and free play were the yin and the yang of the music world. Life was in balance. Then a little thing came along called the digital revolution, which the recording industry handled about as well as Louis the 16th handled the French revolution.
Technology chopped the head off the record industry's business model. So what did the industry do? It began suing people. The problem is that you can't stop technology with trial lawyers. You know you're in trouble when the health of your business is reduced to suing teenagers.
And how's that lawsuit thing been working? Not so great. So now, the recording industry, with desperation in its eye, has decided to bite the hand that feeds it. Who's hand? Ours. In other words - us.
In short, the RIAA decided radio stations should pay for promoting the record companies' songs. To fully appreciate the outrageousness of this, recall that just a few decades ago record label representatives were willing to break the law and risk jail time for the economic benefit that radio promotion offers.
The recording industry, of course, says this new fee is about fairness to artists. A statement that would be hilarious if it weren't so breathtakingly brazen. Under the record labels' proposal, the record company would get at least 50 percent of the money; the performer would get 45 percent; and the background musicians would get 5 percent.
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But if the record company can't find the performer or the background musicians, it would keep 100% of the money. You know, it's amazing in the age of Google that the record labels are having a hard time finding artists to whom they owe money. According to one report, the labels had trouble locating the Mormon Tabernacle Choir. Here's a suggestion: start looking in Utah.
And that's not the half of it. Look at the case histories. Artists from Benny Goodman to Count Basie, from the Beatles to Pink Floyd, from Cher to Eminem. And new groups I have never heard of routinely sue their record labels for unpaid royalties. One case alone included 300 performers.
Now yes, satellite radio and the Internet do pay a fee for the songs they play. But what we're talking about here is free, local radio -- available to everyone. If you choose to pay to listen to Sirius you won't hear the local news or weather updates on the Elvis channel.
And you have to ask, can you name a single Grammy winning artist that would be in that position were it not for radio?
The centrifugal forces of modern life are fraying the bonds that tether our citizens to their communities. Broadcasting, however, serves to keep our citizens connected to our communities and gives those communities coherence. That is a public good. And that's why we will continue to fight the record labels in their attempt to save their business model on the backs of free, local radio.
Now let's turn to two issues that are paramount to broadcast TV: the great spectrum grab of the new National Broadband Plan and the continuing battle over retransmission consent rights for broadcasters.
Let me first say that I applaud FCC Chairman Genachowski for the truly comprehensive effort he made to meet Congress' request for a broadband plan. We all want a plan that will help America move into a bright communications future. And broadcasters are willing to help.
We agree that broadband is good for America. And we also know that broadcasting is good for America. We want to see a bright future for both.
Our concern is that the broadband plan would yank away more than one third of the spectrum used for TV broadcasting so that wireless broadband companies can have more.
Now, broadcasters just spent $15 billion to meet the government-mandated transition to digital; the government, incidentally, spent another $2 to 3 billion to ensure a smooth switch for viewers. In fact, American consumers have spent untold billions swapping out analog TV sets for HDTV sets in detrimental reliance upon the urging of the United States Congress.
In that transition, we gave back more than a quarter of the TV spectrum, which the government then auctioned off to broadband companies. And they haven't even started to use it yet. Unfortunately, this plan appears to be an example of unnecessary government intervention when technology in the marketplace is already working through the issue.
And if history is a teacher, industry innovation solves issues far better and far faster than government.
Remember the 1996 Telecom Act? The ink was barely dry before it was substantially outdated due to technological advancements. The National Broadband Plan took a year and a half, and over $20 million, to draft. Imagine all the innovation that took place while the plan was being drafted.
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With the many advancements coming to wireless that use spectrum more efficiently, you have to ask, what makes this spectrum grab -- and the disruption and loss of innovation it would cause -- really necessary?
You know, when our son, Garrett, was in kindergarten, he and I went to a Monday Night Football game in Seattle. It's one of my fondest memories.
While we were there, I needed some cash, so we went to an ATM machine, inserted the card, punched in some numbers and out came the cash.
While walking away and putting the cash in my wallet, Garrett began tugging on my shirtsleeve and asking, "Daddy, don't you want to try it again? We're getting rich here!"
Broadcasting is not an ATM that can keep spitting out spectrum. There is a minimum we need in order to be viable for the future, and to sustain the enduring value of free and local television.
If there is a broadband problem, we volunteer to help solve it. But let's make sure we do it right. Let's first get a comprehensive inventory of unused spectrum, as key lawmakers have suggested. Let's explore whether digital compression technologies and other innovations can solve this alleged spectrum shortage, without forcing broadcasters off the air.
As broadcasters, we were prepared to embrace an FCC broadband plan that was truly voluntary. But how voluntary is it when the plan says, and I quote:
"The government's ability to reclaim, clear and re-auction spectrum is the ultimate backstop against market failure and is an appropriate tool when a voluntary process stalls entirely."
This sounds about as voluntary as Marlon Brando saying in the Godfather that he wanted either the guy's signature or his brains on the contract.
Moreover, the broadband plan doesn't fully take into account the unparalleled lifeline service that broadcasters provide in times of crisis.
Make no mistake: this matter is one of homeland security. During times of emergencies, there is no way that cell phone and broadband networks will ever be as reliable as broadcasting in terms of delivering timely and accurate information to the masses.
Indeed, having DTV receivers in mobile devices - along with FM radio capability in cell phones -- would help to make America safer. These advancements demonstrate broadcasting's ability to adapt to changes in the marketplace.
The sad truth is that the people who would be most hurt by the new broadband plan are the disadvantaged and the elderly. Fifteen percent of households rely exclusively on free, over the air television. And that number appears to be growing, post DTV transition.
We're hearing anecdotal stories across America of people disconnecting cable and satellite services because of all the free digital and HD broadcast channels you receive with just an antenna.
Another thing. As you know, broadcasting is regulated to observe community standards of decency. Broadband is not. The unpleasant truth is that the Internet is rampant with lewd and degrading material.
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Here is the half-facetious irony: if broadcasting loses spectrum and grandma's new HDTV is rendered useless, at least she will have the consolation of knowing her grandson can get lewd material instantaneously on his cell phone.
To put it simply, this spectrum reallocation is bad for consumers and bad for broadcasters. It's not voluntary as originally advertised. Both broadcast and broadband are agents of change.
Technological and market conditions permit broadcast television to thrive alongside expanded broadband. Broadcasters will work to ensure that broadband gaps are addressed, but we'll also work to make sure that free and local television are available to everyone.
Now, let's turn to another issue of substantial importance to our organization: the continuing battle over retransmission consent rights for broadcasters.
NAB has taken the lead with our network partners to ensure that policymakers understand that the fair and market-based retransmission consent process is working just as Congress intended.
The reality is this: broadcasters create the most compelling and most popular programming on television. Our programming provides real value to our pay TV partners, and we deserve fair compensation for providing cable and satellite viewers with programs like The Olympics, The Super Bowl, "American Idol" and "Lost."
But pay TV doesn't want to compensate us - despite the fact that our content is the backbone of every pay TV package sold. And can you believe this? Cable representatives are now trying to position themselves as consumer friendly on Capitol Hill. That's right - the cable guy as the consumer advocate! Folks, you just can't make this stuff up.
Through aggressive advocacy at the commission and on the Hill, NAB is committed to ensuring that broadcasters can continue our legacy of service to the American public. No matter what others may say, understand this: Broadcasting is a cornerstone of our democracy. Consider presidential debates, the coverage of natural disasters and other emergency information like Amber Alerts and the local news.
We are America's free, local broadcasters. And we serve our communities each and every day. This is our greatest strength and our enduring value.
Broadcasting is evolving right before our eyes, and we have the incredible opportunity to shape its path.
And while I am new to this job, I am not new to the issues this industry faces. I am not new to the values it represents.
The values that underpin broadcasting are still essential to the American people and to our democracy. What broadcasters do for a living is also something they do for this country.
And so, in closing, let me quote Teddy Roosevelt who said, "Far and away, the best prize life has to offer is the chance to work hard at work worth doing."
Ladies and gentlemen, the work of the National Association of Broadcasters is worth doing, and we must do it together --- united. We need you to help us advocate for this great industry, not just in Washington, but all across America.
Let us realize the power of broadcasting and our impact on the American public. Let us continue educating, informing and entertaining our local communities. Let us embrace the digital future and all of its great opportunities.
I am very proud to be part of this industry, and I will work my heart out for you.
Thank you very much.