Internet Radio Bill Aims to Bring Parity to Music Royalty Rates

The Digital Millennium Copyright Act now forces Internet radio providers like Pandora to pay higher royalty rates for songs played over the Web compared to rates paid by cable and satellite broadcasters, said Sen. Ron Wyden, D-Ore., who authored the bill, which he said would rectify that. “This bill puts Internet Radio on an even plane with its competitors, and allows the music marketplace to evolve and to expand -- which will ultimately benefit artists and the Internet economy,” Wyden said in a news release. “It’s well past time to stop discriminating against Internet radio,” said Rep. Jason Chaffetz, R-Utah, who introduced the House companion bill with Rep. Jared Polis, D-Colo. “When I was in college, making a mix tape was the height of technology but fans can now legally make their own playlists in the cloud to share and enjoy. Our laws shouldn’t penalize the innovators who made that leap and created jobs by forcing them to pay outrageous royalties that are far greater than their competitors,” he said.

Pandora founder Tim Westergren said the bill will help reduce the “astonishingly unequal” royalty rates paid by Internet music providers. Last year the company paid roughly 50 percent of its total revenue in royalties, more than six times the percentage paid by Sirius XM, he said. “The bill addresses this discriminatory practice of favoring one form of digital radio over another by extending the common standard to include Internet radio. … This bill is a win for consumers, artists and technology innovation,” he said.

But “there’s nothing fair about pampering Pandora, with its $1.8 billion market cap, at the expense of music creators,” said musicFIRST Coalition Executive Director Ted Kalo. The coalition includes the RIAA, SoundExchange, American Association of Independent Music and American Federation of Musicians. “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.” MusicFIRST supports an alternative legislative proposal authored by Rep. Jerrold Nadler, D-N.Y., that would direct the Copyright Royalty Board to incorporate the price of artists’ intellectual property into broadcasters’ royalty payments related to music feeds they stream over the Internet (CD Aug 23 p13).

Nadler said the solution is “not to achieve parity at the expense of artists as Rep. Chaffetz’s bill proposes,” in a statement from his spokesman. “We can and should both level the playing field for Internet radio and ensure that artists are fairly compensated, at a fair market rate, which is what my proposal would do.”

The bills ignore the value that musicians bring to the marketplace, said Casey Rae, deputy director of the Future of Music Coalition. “Over-the-air broadcasters currently do not pay performers at all. When it comes to digital, it’s crucial that new innovations around music can grow and flourish. But not at the expense of the performers whose talents power the entire marketplace. Without the recognition of creators, it’s not fairness, it’s straight-up devaluation.”

NAB said it “strongly supports” the Internet Radio Fairness Act and said it would work to “create broadcast radio streaming rates that promote new distribution platforms and new revenue streams that foster the future growth of music.” Computer and Communications Industry Association President Ed Black also hailed the legislation: “We need to update the laws to ensure that new competitors do not face discrimination as they enter the marketplace. Charging different rates for different digital radio providers is fundamentally unfair and goes against the interests of an economy that has time and again chosen to boost competition and innovation.” CEA Senior Vice President-Government and Regulatory Affairs Michael Petricone lauded the “common sense bill” that he said would extend to webcasters “the same standard for determining copyright royalty rates used by all other forms of non-broadcast radio.”

Digital Media Association Executive Director Lee Knife said the bill will help “shed light on a Copyright Royalty Board system in need of meaningful reform,” in a news release. “New and emerging music platforms such as Internet Radio have revolutionized the way countless individuals enjoy music; and it is more important than ever that Congress update existing law to guarantee the continued development of these services,” he said. “Applying the existing 801(b) standard, which is already applied to all other statutory music licenses, is a key step towards achieving this objective,” he said. Clear Channel also said the bill will help repair the system that governs the sound recording licensing royalty rates, in a news release. “We believe that the rate setting process and royalty standard for the CRB’s determinations must support rather than stifle the growth of digital music for the benefit of consumers, artists and businesses -- helping consumers gain more access to their favorite artists, assisting artists in reaching as many listeners as possible and enabling the digital music industry to flourish with a sustainable business model,” a spokesman said.