THE BLOG
08/23/2010 12:52 pm ET | Updated May 25, 2011

Those Who Cannot Innovate, Regulate: Old Media's Twisted Logic

It's no secret that old media is in trouble. Major metropolitan cities no longer boast multiple competing newspapers. Newsroom staffs are shrinking, and even landmark papers have quit the press for the Web or shuttered entirely. Fewer than 10 percent of Americans watch over-the-air broadcast television, opting instead for cable and satellite subscriptions. Tens of millions of consumers subscribe to satellite radio and Internet music sites rather than listen to broadcast radio.

In short, the expansion of digital media delivery platforms poses a threat to the viability of legacy media outlets - just look at the success of HuffingtonPost.com, which in the past year has blown past the storied WashingtonPost.com in Web traffic. Should we protect old media by hindering market competition? Should we deny consumer choice by rescuing obsolete business models? Of course not.

But try telling that to the National Association of Broadcasters (NAB) and the Recording Industry Association of America (RIAA). Rather than adapt their businesses to the new media landscape, the NAB and the RIAA will do anything, even resort to backroom wheeling and dealing, to protect the proverbial horse and buggy.

The NAB and the RIAA, two fusty trade groups that still hold a lot of power in Washington, have combined their resources to lobby Congress to pass a law mandating FM radio receivers be built into cell phones, personal digital assistants (PDAs) and other portable electronics.

Fortunately, broadcasters haven't gone further by asking Congress to require every Blu-ray player come with a VCR, every MP3 player run cassette tapes, and every netbook computer feature floppy disk drives. What the NAB/RIAA are demanding today would be akin to a century-ago-demand from buggy whip makers for Congress to require a horse be put in front of every car.

Some old media fail to keep up with the evolving market and consumer demands. The market picks winners and losers, and inevitably even a few stalwart brands fail or disappear entirely over time because they resisted change. It's a perennial cycle outlined long ago by celebrated economist Joseph Schumpeter, who popularized the notion of "creative destruction" to describe the radical business disruption that accompanies innovation. The need for constant innovation, disruptive to old ways of doing business as it may be, has been embraced by the technology industry, but not by broadcasters.

Rather, the NAB and the RIAA have decided to skirt the market by asking Congress to pass an outmoded law. Their philosophy is: if we cannot innovate, let's regulate. If successful, they would use the law as a tool to hinder innovation and hijack consumer choice.

The RIAA has been here before. Just a few years ago they sent 30,000 letters to individuals and families demanding payment for illegal music downloads. They even went so far as to sue a Boston University graduate student for $150,000 per song for online use of seven songs. The market - not the courtroom - eventually solved the RIAA's legal problem by introducing a host of sites, including iTunes, where consumers could download music for a low cost. Regrettably, the RIAA appears to be stuck in the same antiquated mindset rather than coming to terms with the digital revolution.

The NAB also seems to view the digital age as too much to bear. Late last week, the trade association advertised they would host a "virtual town hall" open to the public to discuss the Performance Rights Act, the bill in Congress that NAB would like to use as a vehicle to require cell phone makers to include FM radio as a feature. Then, in a reverse move when news of this backroom deal became public, NAB leadership closed the session to the public, granting access only to NAB member companies.

Rather than moving consumers "back to the future," old media players should move full steam ahead into the digital age. NPR is a great example of how traditional radio can dust itself off and embrace the Internet. NPR says that seven percent of its Web traffic comes from Facebook, where it boasts nearly 1.2 million fans on its community page.

Indeed, Internet streaming and podcasts could revive FM radio and help stations find new fans or reconnect with old ones all over the world. According to Bridge Ratings, a market research firm that studies radio: of those who stream, 47 percent spend more time listening to radio via the Internet than they did six months before. Of those who prefer AM/FM simulcasts, 51 percent have boosted their Internet listening.

Instead of misguided politicians and lobbyists, we want entrepreneurs to lead our economy. I'm a member of the Innovation Movement, a grassroots campaign of 65,000 Americans who are tired of Washington backroom politics placing power in the hands of a few. The Innovation Movement fights against backward-looking regulatory mandates that deny consumers access to the latest generation of technological innovation. In today's trying economy, it's time we all came together to rally for innovation - not regulation.

Gary Shapiro is the president and CEO of the Consumer Electronics Association (CEA), which represents more than 2,000 U.S. technology companies.