New Bills Seek Internet Radio Royalty Parity

Pandora

(from Billboard.biz, September 21, 2012) On Friday, U.S. Representatives Jason Chaffetz (R-UT), Jared Polis (D-CO), and Senator Ron Wyden (D-OR) introduced versions of the Internet Radio Fairness Act to address the high royalties paid by some digital radio platforms, such as Pandora.

The bills were created with the goal of changing how royalties are negotiated for Internet radio services.  As of right now, Internet radio services pay a required royalty set by a three person Copyright Royalty Board.  These new bills aim to use the same method of determining royalties for satellite radio and cable, called an 801(b) standard, to create a new, fair royalty for Internet radio services. Satellite radio company, Sirius XM Radio, will pay SoundExchange 8% of its revenue for performance royalties in 2012, while Pandora paid over 50% of revenue for content in 2011 and nearly 63.9% of revenue in the six-month period ending July 31, 2012.

Pandora, specifically, has been active in Washington D.C. for the past few months, and has been outspoken about parity and fairness in royalties this year.  Founder of Pandora, Tim Westergren, wrote on the company’s blog this past Friday explaining how important the bill is for Pandora, “For the first time since 1998, it will finally bring fairness to the way performance royalties are determined for Internet radio.”

Pandora isn’t the only commpany voicing their support for the bills; various trade groups have voiced their support for the bills.  The Consumer Electronics Association claim it’s “a common sense bill,” and the National Association of Broadcasters said it “strongly supports legislative efforts to establish fair webcast streaming rates.”

There’s also a lot of opposition towards the bill, specifically from the musicFIRST Coalition, a trade group representing artists and performers.  They argue the Internet Radio Fairness Act would repeal the current fair market rate being paid by services like Pandora.  Ted Kalo, musicFIRST Coalition Executive Director, doesn’t believe it’s fair to “pamper” Pandora with their $1.8 billion market cap at the expense of music creators.  “Going from a fair market, ‘willing buyer, willing seller’ rate to a government mandated subsidy will break the backs of artists, while Pandora executives pad their pockets.  We support rate parity that addresses the greatest inequity of all, the lack of a performance right for terrestrial radio, and is fair to music creators.”