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!

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

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?

AAF Government Report

AAF Government Report
March 7, 2007

Contents:

• Sen. Rockefeller to Reintroduce Bill Extending FCC Authority
• National Medical Association Supports DTC Advertising
• "Do Not Mail" Bills Gain Traction in State Legislatures
• Boston Considering Increasing Guerrilla Marketing Restrictions
  

Sen. Rockefeller to Reintroduce Bill Extending FCC Authority
Sen. Jay Rockefeller, D-W.Va., has announced he plans to reintroduce a bill that would extend Federal Communications Commission authority of indecent programming to include cable and satellite content. The bill Rockefeller introduced in 2005 would have also required networks to double the amount of required children's programming content and given greater control to local affiliates to reject offensive content. Rockefeller indicated that he will also seek to give the FCC the authority to regulate violent content on television, as the FCC requested in a letter to Congress last month.

National Medical Association Supports DTC Advertising
The National Medical Association (NMA) released the results of a survey indicating that their member physicians support direct-to-consumer advertising as a means of educating patients and enhancing the doctor-patient dialogue. The NMA, which represents over 30,000 African-American physicians, reported that the percentage of doctors who agree that prescription drug advertisements are beneficial to consumers jumped from 42 percent in 2001 to 65 percent today. Eighty percent of surveyed doctors cited advertising as a key reason patients learned about treatment options. The group recommended improvements to DTC advertising campaigns, including a call to provide information to doctors prior to advertising to consumers. Many of their suggestions have been adopted by the pharmaceutical industry.

"Do Not Mail" Bills Gain Traction in State Legislatures
Legislation creating "do not mail" registries has been introduced in at least 12 states this year. The bills would prohibit marketers from sending commercial mail to anyone who files an opt-out request with the state, in manner similar to the National Do Not Call Registry. Arkansas, Colorado, Connecticut, Hawaii, Maryland, Michigan, Missouri, Montana, New York, Texas, Vermont and Washington have introduced bills so far. While the popularity of these bills is rising with state legislatures, no hearings discussing the negative implications of the bills have taken place.

Boston Considering Increasing Guerrilla Marketing Restrictions
The Boston City Council is considering increased marketing restrictions following two high-profile guerrilla marketing campaigns that wrecked havoc on the city in the past few months. City Council President Maureen Feeney said she will discuss increasing fines for unsanctioned marketing campaigns and further regulating such marketing. The City Council plans to hear from marketers as well as public officials before deciding whether any action should be taken.

AAF Government Report

Jeff Perlman, Executive Vice President – Government Affairs
Clark Rector Jr., Senior Vice President – State Government Affairs
Robert Kohlmeyer, Coordinator, Government Affairs
AAF Government Report
March 1, 2007

Contents:

• Tobacco Bill Clears Senate HELP Committee
• House Commerce Chairman Expresses Digital Television Transition Concerns
• FCC Commissioner Tate Calls for Increased Media Ownership Diversity
• Missouri Senate Bill Aims to Ban Sexually Oriented Billboards
• Maryland Bill Would Tax Advertising-Related Services

Advertising Ban Legislation Introduced in Tennessee
Tobacco Bill Clears Senate HELP CommitteeThe Senate Help, Education, Labor and Pensions (HELP) Committee has given its approval to legislation that would drastically alter tobacco advertising regulation. The Family Smoking Prevention and Tobacco Control Act (S. 625), introduced by HELP Committee Chairman Ted Kennedy, D-Mass., contains several provisions opposed by advertisers. The bill proposes additional warning labels on tobacco advertising, limiting most magazine and store ads to black-and-white text and prohibiting outdoor ads within 1,000 feet of schools or playgrounds. The AAF sent a letter to Sen. Kennedy expressing opposition to the marketing provisions of the bill, arguing that it is unconstitutional to censor nondeceptive advertising for legal products directed at appropriate audiences. A copy of the letter is available here (pdf).

House Commerce Chairman Expresses Digital Television Transition ConcernsHouse Energy and Commerce Committee Chairman John Dingell, D-Mich., has expressed concerns about the ability of the Federal Communications Commission to oversee the logistics of distributing digital-to-analog converter boxes to consumers receiving over-the-air television broadcasts. As part of the digital television transition legislation signed into law last year, the government plans to distribute converter boxes to all Americans without cable or satellite television subscriptions before the digital transition is completed, which is scheduled for February 17, 2009. Dingell said he thought the target date might not be realistic and warned that consumers might not be quick adopters of converter boxes, especially if they are too expensive.

FCC Commissioner Tate Calls for Increased Media Ownership DiversityFederal Communications Commissioner Deborah Taylor Tate announced that one of her goals as a commissioner is to encourage Congress, the FCC and the media industry to increase media ownership diversity. In an address to the Media Institute, Tate suggested several ideas that might increase the participation of minorities and women in media. Among these proposals is a plan to establish a tax break for companies that advertise on minority-owned stations, as introduced in a bill (H.R. 600) this year by Rep. Bobby Rush, D-Ill. A similar tax break existed until it was repealed by Congress in 1995.

Missouri Senate Bill Aims to Ban Sexually Oriented BillboardsA Missouri state senator has reintroduced legislation attempting to ban outdoor advertising of sexually oriented businesses. The bill, introduced by Sen. Matt Bartle, R-Lee's Summit, was originally passed in 2004, but was deemed unconstitutional by a federal appeals court. In its original version, the legislation prohibited adult-oriented businesses from using outdoor signs and billboards to advertise any products, including advertising for innocuous products. The modified bill is more narrowly tailored toward limiting the advertising of sexually oriented businesses but still raises serious First Amendment concerns. Some senators criticized the bill, saying that because the bill was already struck down in court, it was a waste of time and money to vote on the bill again.

Maryland Bill Would Tax Advertising-Related ServicesLawmakers in the Maryland House of Delegates have introduced legislation to extend the sales tax to numerous services, including advertising-related services such as public relations, business consulting, art services, photographic services and direct mail services. The bill (House Bill 448) currently has no Senate companion. It is scheduled for a hearing in the Ways and Means Committee on March 14. Jim Astrachan of the Advertising Association of Baltimore will be among advertising industry representatives testifying in opposition to the tax. A copy of an alert sent to Maryland ad club members is available here.

Advertising Ban Legislation Introduced in Tennessee
New legislation introduced in the Tennessee state senate would fine broadcast and cable stations up to $50,000 if they air advertisements for obscene matter. Sen. Doug Jackson, D-Dickson, named his bill "Girls Gone Wild Be Gone" after seeing a television commercial for adult videos. The Federal Communications Commission has jurisdiction over broadcast television regulation. Sen. Jay Rockefeller, D-W.Va., introduced a bill in 2005 that would have expanded FCC authority over indecency regulation to include cable and satellite programming, in addition to broadcast television, but the bill was never considered by the Senate Judiciary Committee.

Outdoor Advertising Alert

To: AAF Advertising FederationsFrom: Clark Rector, Jr., Senior Vice President – Government AffairsRobert Kohlmeyer, Coordinator – Government Affairs

Re: Outdoor Advertising

The Federal Highway Administration (FHWA) is currently assessing the billboard control program. Comments from the public will be received until Monday, August 21.

Time is short. Please encourage members of your advertising federation to write the FHWA as soon as possible to explain the importance of outdoor advertising. This is a valuable opportunity not only to show support for our friends in the outdoor industry, but demonstrate another benefit of their membership in your ad fed and the AAF.

The letters do not have to be lengthy. Specific topics that you may want to address are listed below. As a reminder, included below are some of the benefits of outdoor advertising.

Comments can be submitted by mail, fax or electronically. All comments must include the following docket number: FHWA-2006-25031.

US Mail:
U.S. DOT
Dockets Management Facility
Room PL-407
400 Seventh Street, S.W.
Washington, DC 20590

Fax: (202) 493-2251
Electronically: http://dms.dot.gov

Try to collect copies of the letters sent to the FHWA. Please send copies to us here at the AAF, and make sure your local outdoor members receive copies as well. Do not hesitate to contact us at (800) 999-2231 if you have any questions or comments. Thank you for your assistance with this important matter.

Topics you may want to address are:
How important is outdoor advertising as a medium for commercial and non-commercial speech? How important are billboards to the local economy and to small businesses? Explain that regulatory flexibility is a "win-win" for the public and for advertisers to embrace new technologies, to relocate and to adjust heights of billboards, and to repair billboards damaged by disasters. Describe the benefits of new technology for communities, law enforcement, and advertisers. Why relocation of billboards makes sense for taxpayers, road builders, government, and sign owners.

Some benefits of outdoor advertising include:
Small and local businesses rely on outdoor advertising to reach consumers. - Nationwide, 70% of billboard revenue comes from small, local businesses. Billboards are often the most affordable media option.

Outdoor advertising helps create jobs and economic activity in communities.
Billboards are important to the travel and tourism industry. - 90% of travelers rely on billboards to locate gas, food, lodging and tourist attractions.
- Approximately one out of every five dollars spent by advertisers on billboards is for travel and tourism.

Not only does the business community benefit from outdoor advertising, but so to do community service organizations. Outdoor advertisers donate millions of dollars worth of space to public service advertising.

AAF Government Relations Contact Info

Jeff Perlman
Executive Vice President – Government Affairs
jperlman@aaf.org

Clark Rector Jr.
Senior Vice President – State Government Affairs
crector@aaf.org

Robert Kohlmeyer
Coordinator, Government Affairs
rkohlmeyer@aaf.org

http://www.aaf.org/government/report.html

Tampa Digital Studios Armory Proposal

June 23, 2006

The following email is from George Cornelius, President of Tampa Digital Studios regarding an invitation for public comment by the City of Tampa. Ad 2 Tampa Bay supports the plans of Tampa Digital's team for development of the Armory and is passing this along so that others in our industry might be able to attend and extend their personal support via public comment.

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I apologize for the late notice on this, but I was just informed that it would be a good idea to try to have a lot of friends and colleagues that support our Creative Center/Film and TV studio concept for the Armory at the public comment meeting this Monday afternoon (details below).

Our team now consists of Tampa Digital Studios, DeBartolo Development, Newkirk Ventures and West Tampa Partners. DeBartolo Development is led by Ed Kobel, Bill Rain and Debra Roman. They are part of DeBartolo Holdings that moved their corporate headquarters to Tampa several years ago. Newkirk Ventures is led by Mark Newkirk. His family has been in Tampa for six generations. West Tampa Partners is led by David Lefevre. You probably remember that Mr. Lefevre worked very hard with our community to bring the Lightning to Tampa Bay, to build the St. Pete Times Forum, and was part of the group that was going to try to put an ice rink in the Armory. That group has now joined forces with Tampa Digital and DeBartolo on our creative concept, and we agreed to help them try to find another location in West Tampa to build the ice rink/entertainment complex.

Could you please consider coming to this event and filling out a comment card? Please feel free to forward this request to others that you think may support this effort.

Here are the meeting details ...

City of Tampa Invites Public Comment for Fort Homer Hesterly Armory.

Tampa, FL June 21, 2006 - The City of Tampa announced today that it will host an Open House for the public to review and comment on the six proposals received for the Fort Homer Hesterly Armory, located at 522 North Howard Avenue.

The open house will be held Monday, June 26, 2006, from 3:30 to 7:30 p.m. at the West Tampa Library, located at 2312 W Union Street, on the corner of Union Street and Howard Avenue.Comment cards will be provided.

Both the City of Tampa and the National Guard look forward to the revitalization of this historic property. All citizens are encouraged to attend and comment.

I really appreciate all of your support.

Sincerely, George

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Thank you all in advance for your support!

Sincerely,

Vinny Tafuro, President
Ad 2 Tampa Bay

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email: president@ad2tampabay.org
web: http://www.ad2tampabay.org