Record companies biting the hands that feed them...

Before the decline and still sluggish recovery of the economy, record companies for a little over two decades have been looking for a way to regain control of an industry they once reigned over with a clenched fist. Since the advent of the Compact Disc (pre-mp3s for the kids out there) we were promised a reduction in the price of albums (still in the $15-20 range) which never came to fruition. Along came the explosion of the internet and our late-friend and now corporate zombie "Napster" which changed the way we "shared" music forever and forcing the hand of record companies to reduce prices. Digitally, anyways.

Before I continue, let me say that I have first-hand knowledge of this issue from my 6 years in the radio business (production & talent) and now as part of the marketing & advertising industry. What most people don't know is that all the great stuff that radio stations give away (concert tickets, MONEY, gadgets, albums, trips to ???, etc.) are paid for the most part by-wait for it... record companies! That's right. Record companies give radio stations all these goodies in exchange for airplay for whatever particular artist they seem to be gushing over at that moment. I know, this totally explains that Kesha girl.

Here's the amusing part. These now "successful" artists go back to their record companies wanting even more money than they already get from radio stations (royalties) likely due to their decline in "success" and bad contracts, so what do the record companies do? Go to the radio stations and ask for more money from the very industry that makes them money in the first place. So let's recap: Record companies give radio stations "promotional" dollars to play their artist's music which radio stations pay royalties (dollars) for playing, and the record companies want even more royalties (DOLLARS)! It's like lending someone your bike and wanting your bike and a new car in return.

So why a "performance tax"? Well, radio stations (corporations) and record companies both have lots of lobbying power in D.C., but since most record companies are now part of larger media conglomerates, record companies have a sweeter deal ($$$) for legislators in Washington. Basically, the record companies are trying to hire Washington D.C. as their "muscle" trying to force radio stations nationwide to pony up some more cash. Or as noperformancetax.org explains it: "The recording industry wants to impose a performance tax that would financially hurt local radio stations, stifle new artists and harm the listening public who rely on free local radio".

How does this affect the marketing and advertising industry? Well I'll explain the food chain in the simplest way possible. If record companies take more money from radio stations, radio stations will have to charge more money to their advertisers, which makes it more expensive (and difficult) for agency clients to purchase radio advertising which means less revenue for agencies which in turn costs jobs and increases prices on the consumers for the advertised service or product.

I would say that 80-90% of radio advertising is local businesses. For those local businesses that can and do advertise on the radio, it is far from "cheap" to do so. If radio advertising cost increases due to a federally mandated tax that only benefits record companies, jobs will be lost at many levels and as with all taxes, the cost is passed on to the consumer. Help the radio and advertising industry in stopping the greed of record companies and their artists from taking advantage of our "free" media, entertainment, and advertising outlet.

How you can help:

• Visit http://noperformancetax.org/
• Contact Senators Blanche Lincoln (D-Arkansas) and John Barrasso (R-Wyoming), along with Representatives Gene Green (D-Texas) and Michael Conaway (R-Texas), and many other members of Congress who have sponsored legislation and efforts against the performance tax.
• Follow @StopRadioTax on Twitter

...and help spread the word throughout the industry!

Bolesta Center on Ad 2 Tampa Bay's AdCast

Judy Horvath and Colleen Mahaffey from the Bolesta Center join host Syleste Porter to talk about the group. Ms. Horvath is the Clinical Director and Education Outreach Coordinator of the center and Ms. Mahaffey is the Fund Development and PR Manager. The Bolesta Center was selected by Ad 2 Tampa Bay to be the 2009-2010 recipient of a pro-bono public service campaign. Tiffany Ryan is one of the Public Service Campaign Directors for Ad 2 Tampa Bay and she talks about what Ad 2 would like to do to promote the Bolesta Center.

The (B)Ad Tax Idea That Won't Go Away

Since June, there's been a portion of the health care legislation being considered in D.C. that has gone back-and-forth almost as many times as the bill itself. For the advertising industry, this tennis match has certainly been worthy of the U.S. Open, only with much larger consequences. How large?

The AAF estimates that disallowing the advertising tax deduction would increase the costs of advertising and marketing for affected companies by up to 35%. The ad industry provides $6 trillion in annual sales in the U.S. and 21 million jobs, according to the AAF. - Ad Age; October 21, 2009

Fortunately for the advertising industry, they not only have the AAF and its lobbying efforts trying to persuade legislators to drop this idea, but they have also gotten support from broadcasters and newspapers. These "traditional media" outlets would certainly feel the effects from significantly reduced or even eliminated advertising budgets at a time where they are already fighting over those same dollars being dispersed amongst "new media" outlets such as social media, blogging, and the web. Taking into consideration that it is highly likely that there will be a "government provided" health care option for Americans, our elected officials in D.C. need a plan to pay for it.

Representative Charles B. Rangel, Democrat of New York and chairman of the House Ways and Means Committee, said last month that legislators would consider ending the tax break for drug ads as a way to raise money to pay for the health care overhaul. - New York Times, July 26, 2009

Some legislators are not only using this logic to pay for the "government provided" health care option, but also a way to express their disapproval with this form of advertising entirely.

The proposed legislation to eliminate the tax deduction for health-care advertising is going under the short title of the "Protecting Americans from Drug Marketing Act." - Ad Age; October 21, 2009

Most of us may not have pharmaceutical companies as clients, but the fear amongst many is that it won't stop there.

"Where does one draw the line?" One United States Senator has asked. Would we also tax advertising for vehicles that do not meet emissions or fuel economy standards, advertising for gaming, or foods that do not meet some nutrition standard? - AAF; October 20, 2009

What can we do? Please contact both of your Senators as soon as possible and express your strong opposition to any effort to deny the deductibility of advertising expenses. Some of the names associated with this legislation are: Senators Al Franken, D-Minn., Sherrod Brown, D-Ohio, and Sheldon Whitehouse, D-R.I., Bill Nelson, D-FL, Representatives James P. Moran, D-VA, Charles B. Rangel, D-NY.

Senators can be contacted through the Senate webpage at http://www.senate.gov/ or by calling the Senate switchboard at 202-224-3121.

UPDATE:
Congressman Targets Food Advertising Congressman Dennis Kucinich, D-Ohio, has sent a “Dear Colleague” letter to other members of Congress announcing his intention to introduce legislation to “eliminate the tax deductibility of fast food and junk food advertising directed at children.” The Congressman is inviting other members to join him as a cosponsor.

The removal of any advertising tax deductions will certainly open the flood gates and make the entire industry vulnerable.

Helpful links:
AAF, Alert: Another Threat to Advertising Deductibility
Franken and Senate Democrats Go After Tax Deduction for Advertising
Lawmakers Seek to Curb Drug Commercials
House Considering $37 Billion Drug Tax, Rangel Says

Twitter Rally to fight Harmful Legislation

THIS SITUATION IS CHANGING QUICKLY. STAY TUNED TO THIS BLOG FOR UPDATES.

It's time for a National Twitter Rally!!!

U.S. Congress is considering legislation that could hurt the advertising industry by eliminating the current tax-deductibility of advertising costs as a normal business expense for pharmaceutical companies — which could begin a slippery slope of removing the lack of service tax that our industry depends on. (see previous post for full details)

Please join our Twitter Rally to let the House and Senate know how you feel! Be POLITE, and tell them where you stand.

FLORIDA
Senator Bill Nelson - http://twitter.com/senbillnelson
Senator Mel Martinez - http://www.twitter.com/MelMartinez
Rep. Kendrick Meek - http://www.twitter.com/kendrickbmeek

NATIONWIDE
U.S. Congress Twitter Directory – http://tweetcongress.org/


EXAMPLE TWEETS
@SenBillNelson Health care reform is important, but so is my advertising job. Please fight for our rights in DC. #NoAdTax

@kendrickbmeek Please keep advertising deductible. My future depends on it. #NoAdTax

@MelMartinez Advertising fuels our economy. Please keep it deductible for Rx companies! #NoAdTax

Legislation Could Harm Advertising Industry

(Information dated June 16, 2009)

The Senate Finance Committee today is discussing revenue options for financing healthcare reform, including whether to tax advertising. The proposal under discussion would deny the business expense deduction for the cost of the advertising of prescription medicines.

Because healthcare reform is moving very fast, and Senators communicate with each other it is vital that ALL Senators hear strong opposition TODAY to this proposal from their constituents. Please circulate this alert to your ad club members and/or employees and urge them to place calls.

The core of your message should be that the proposal must be opposed because it is a tax on advertising and if adopted is unlikely to stop with prescription drugs. Who knows what might be next when the government needs more money? Advertising for all products and services helps generate $6 trillion in economic activity and supports more than 21 million jobs.

More detailed arguments are listed below, as is a link to the contact information for the key member of each Senator's staff. Again, it is vitally important that you circulate this alert and make your calls today. Thank you for your help with this important matter.

Limiting advertising deductibility of pharmaceuticals should be opposed because:

· The Tax Code and its deductions should be applied equally to all ordinary and necessary business expenses. Even at the height of public criticism of the tobacco industry, Congress did not discriminate between the treatment of the cost of advertising tobacco products, which is fully deductible, and the cost of advertising other products. Some may recall that Congress "affirmed" a ban on television and radio advertising of tobacco products. But it did so after the industry elected to withdraw this advertising rather than face government sponsored antismoking ads. This also took place before the Supreme Court had enunciated the doctrine that protects commercial speech under the First Amendment.

· The underlying goal of eliminating the deduction for advertising prescription medications is very straightforward – it is to make speech about the product more expensive. That will assure there is less advertising, and less advertising will result in fewer sales of the advertised prescription medications, particularly to Medicare Part D eligible patients. In other words, Congress would be taxing speech to save money on a federal program of spending.

· The denial of the deduction would make this advertising 35 percent more expensive (assuming the top federal corporate tax rate). Assuming that the affected companies do not have wealthy uncles or unlimited supplies of spare cash, they likely will reduce their advertising by a similar amount, resulting in a loss of speech to consumers. Thus, the loss of the deduction is no more than a tax on advertising.

· In Grosjean v. American Press Co., Inc., 297 U. S. 233 (1936), the U.S. Supreme Court struck down a 2 percent Louisiana tax on newspapers with more than 20,000 circulation per week. The 13 affected newspapers were critics of Governor Huey Long and sued to challenge the tax as an unconstitutional tax on speech. The U.S. Supreme Court agreed.

· Section 162 of the Tax Code provides for the current deduction of all ordinary and necessary business expenses. This section applies to all such expenses – rent, utilities, salaries, and every form of daily business operation. Virtually all advertising costs are ordinary business expenses. Imagine the world of business however, if Congress were to pick and choose favorite products – products that would get the deduction and products that would be denied the deduction. What else might be on the hit list? For example, would generic drugs be entitled to the deduction, but not brand drugs? What about vehicles that cannot achieve the efficiency of 20 miles on a gallon of gas? What about a bank that fails its stress test?

AdCast: Episode XVI

Once again our regular hosts were absent for this show—always wild things happening in the lives of today's young professionals. As always, their trusty cohorts were waiting in the wings to keep us running. This time our own Cris Vatalaro joined veteran guest co-host Vinny Tafuro for another great month of adcasting (Yes, I'm verbing us. And while I'm at it, I'm also verbing the word verb). We were lucky enough to crash Tampa's Gasparilla Film Festival this time, broadcasting live from the beautiful Tampa Theatre.

The Tampa Bay Performing Arts Center is definitely one of our favorite organizations in the area—both for the great things they bring to the city, and the great people they send our way. This time our guests were the lovelies Kari Goetz and Christen Pettitt, and the topic was Avenue Q. They came on to tell us what that means (Hint: It's a sweet Broadway Show coming to TBPAC) and how Ad 2 can get a great deal on it.
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Next we got to find out what we'd gotten ourselves into, with the Gasparilla Film Festival's Chad Moore and John Rosser. They told us all about one of Tampa's great cultural attractions, and tried to forgive us for crashing it (well actually I think they kinda liked us).
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Having gotten our feet wet, we now dove deeper into the Festival's substance, bringing on some real live independent movie makers. Adam Sigal and Brahman Turner created one of the featured films of the event—a piece called Daydreamer. What followed was some interesting insight into how it all came to be.
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Man, if you like film, this was the show for you. Our next guests were Pete Guzzo and Dan Brienza, who told us about Tampa's upcoming Weekend Film Workshop. It sounds like a great event for aspiring film-makers, covering all the aspects of making it happen in film. And... action!
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Continuing with our film theme, we brought Erik Cattele and Adam Lenfest of Polycreative on next. Polycreative is a digital media producer in the area, and one of the most prominent members of Tampa's Digital Media Alliance.
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We did a little something different with our last segment. No film here; just funds. Josh Crum is a Business Development Assoicate for Raymond James Financial, and one of this month's Rising Stars. He came on to tell us about his work with financial advisors and independent contractors that's brought him to Rising Star status.
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You know we're eternally greatful to the sponsors. As always, it simply couldn't happen if it weren't for the folks at Tampa Digital Studios, and the help of La Casa Dolce and tbt*. And for this month, "props" to Tampa Theatre and the Gasparilla Film Festival for letting us team up with them.

Until next time, make good choices!

Ad 2 Road Show

The Ad 2 Road Show is a presentation we developed to spread general awareness of Ad 2 Tampa Bay and the Student ADDY Awards to advertising, communication, media and design students. Jeff Morrow, Ad 2 Tampa Bay's Membership Director, and Kate Whatley, Ad 2 Tampa Bay's Education Director and Student ADDY Chair spoke to hundreds of students from six area colleges over a three week period. Over the course of the tour the presentation was given at the University of South Florida's weekly AdClub meeting, the University of Tampa, the Art Institute of Tampa, the International Academy of Design and Technology, Eckerd College, and ITT Technical Institute.

With the visual assistance of a projected powerpoint presentation, Jeff started by explaining what Ad 2 is, what we do for the community, and types of the events Ad 2 puts on. He also discussed the value of networking and different types of opportunities Ad 2 has to get involved in. Kate then spoke specifically about the upcoming Fall Media Tour and the importance of participating in the Student ADDY Awards. Students were shown a reel of the local Student ADDY Award winning work from the last two years. Students were greatly encouraged to enter their work and attend ADDY Gallery Night, an evening showcasing all of the ADDY entries in both the professional and student divisions. Each Road Show presentation ended with a question and answer session.

Strategically timed to take place right before the Fall Student Media Tour, we credited the Road Show as a major factor in selling out the fall tour. In the months preceding the Road Show we noticed a dramatic increase in student attendance at our monthly meetings. There was also a large student presence at other various Ad 2 and advertising community events including AdBash, ADDY Gallery Night and the ADDY After Party. The Road Show has also been credited by students and professors as a main factor in the dramatic increase in Student ADDY entries this year. In previous years the Tampa Bay Ad Fed has received between 30 to 40 Student ADDY entries. This year they received a record breaking 109 Student ADDY entries and had more Student ADDY winners than ever before.