Tuesday, October 9, 2012

Pandora's Plea: Treats Artists Like Un-Royalty

You may recall our previous post that highlighted AFM executive Ray Hair's position against the recently proposed "Internet Radio Fairness Act" now floating around Congress. In short, the act aims to level the playing field for internet radio services such as Pandora by adjusting how the music licensing fees that they pay are determined. If passed, every internet radio service would pay significantly less money back to content owners for the use of their music.

Satellite (i.e. Sirius/XM) and cable radio services (i.e. the really high numbered channels that play music only)  currently pay much less than internet radio companies like Pandora, and terrestrial broadcast stations don't even pay the owners of master recordings. According to Pandora founder Tim Westergren, "last year Pandora paid about half of all its revenue in performance fees alone." He also states that, aside from Pandora, "no radio service anywhere in the world pays more than 15% of its revenue in such royalties." The new act would apply the same standards used for satellite and cable radio royalty rates to internet radio. Perhaps not surprisingly, Pandora is turning up the heat in an effort to get this piece of legislation passed.

Anyone with a registered Pandora account has probably seen at least a couple of notes from Pandora and Mr. Westergren in the last few weeks. The letters detail the points mentioned above and more or less paint Pandora as the undeserving victim of outdated and biased legislation, then ask users to contact their elected officials in support of this act. In the end, they say they just want to be treated "fairly", like everyone else.

The concept of fair treatment isn't really so much the issue here. In fact, it does seem fair that providers of similar services be held to the same standards. The issue is how this "fair treatment" is implemented. The rates that Pandora operate against now were set in response to a modern, evolving music economy. How does reverting back to even older standards seem appropriate? Any radio service relies first and foremost on the content that it plays. Squeezing this resource to the more immediate benefit of shareholders, advertisers or investors is short sighted and cannot be healthy for the industry in the long-term.

Services and content owners must find a healthy, balanced solution that allow each to develop, grow and re-invest in themselves. This will benefit everyone with whom they interact and not just certain interested parties. Today's artists are clearly not the wealthy rockstars they're sometimes assumed to be. In fact, the music industry's revenues have shrunk by "about half" ever since digital music first came onto the scene. Based on Pandora's complaints above, it seems they would agree that this is an unhealthy trend. The last thing content creators need is even less money coming their way. So with all this in mind, wouldn't it be equally "fair" to increase rates paid by all of the other radio businesses instead of decreasing those paid by internet radio? As a starting point, how about giving labels and artists the right to earn performance royalties when broadcast stations play their music? If everyone else pays a little bit more, Pandora could still pay a little bit less and EVERYONE in the industry would be a lot happier.

So yes, be sure to contact your elected official, but do so to push for a solution that is TRULY fair for everyone.

Pandora's side of the story:
Analysis against Pandora's efforts:

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