Pandora’s Tim Westergren

Pandora listeners may have recently heard a call to support a bill called “The Internet Radio Fairness Act” in place of regularly scheduled advertising. Tim Westergren, the Pandora founder, also sent a message to Pandora members on Friday asking them to urge their Congressional representatives to support the bill.

So what’s going on here?  The bill—one of two pieces of competing legislation introduced by lawmakers last Friday—seeks to level the playing field by reducing the royalty fees paid by Internet music-streaming services like Pandora to those paid by other digital and satellite radio stations.

Under the current system, internet radio is subject to much higher rates, with Pandora paying up to nearly 50 percent of its revenues in sound recording royalties, whereas preexisting subscription services like Sirius XM reportedly pay around 6-8 percent under the what’s called the “801(b)” standard.

The competing bill, introduced by representative Jerrold Nadler of New York, called the Interim First Act, would adopt what’s called the “willing buyer/willing seller” standard, thereby bringing services like Sirius up to the rate system currently imposed on internet radio. At odds are the percentage of revenues paid to artists and their labels. Unsurprisingly then, musicFIRST, a group backed by the Recording Industry Association of America, is throwing its weigh behind Nadler’s bill, which would be a something of a windfall for the increasingly irrelevant RIAA.

While the Act spurned criticism from musicFIRST and even market analysts about Pandora’s business model, it seems that services like Spotify and Rhapsody could stand to gain from the so-called Fairness Act, as it applies to “internet radio services offering digital performances of sound recordings.” Basically, any entity involved in the rather vaguely defined act of “webcasting.” It all depends, however, on the specific agreements inked between the labels and services, and how those services are defined under the law.

Sheesh, whatever happened to payola? Everything’s gone backwards from the ’50s. As for traditional radio stations, John Villasenor at Slate writes “AM and FM stations pay zero sound recording performance royalties for their terrestrial over-the-air broadcasts under a decades-old exemption (though they do pay royalties for their Internet streams).” My how things change.

Much of the existing law at issue here was introduced in and after the Digital Millenium Copyright Act of 1998, which instituted legal guidelines for a rapidly evolving set of industries that continue to outpace the laws that govern them.

Tangentially related side note: Dear public establishments: If you are running your ambient music on a service like Pandora, Spotify, or Mog, please do upgrade to the version without commercials. There’s nothing more jarring than really falling into a good book with a good beer and a good playlist, only be jerked out of your bliss by an ad for a car you can’t afford.

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  • Forrest Corbett

    Regarding your side note: legally just upgrading to the paid version is not enough. If you want to play Pandora in your business for customers, you need something like this (and I think that’s the only legit option for Pandora.)

    • Guest

      It’s enough for me: the sound quality and commercial-free programming sound great over a restaurant’s PA system. Plus, at only $36 a year, Pandora One is much cheaper than DMX at $300 a year plus $100 worth of hardware.

      • dave siegfried

        Unfortunately Pandora One does not provide the music licensing rights needed to legally play music in a business over a PA system. Forrest is right, if you stick with Pandora you need to choose the DMX plan. Happy to answer any music licensing questions you might have. Feel free to check out the Audiosocket storefront as well:

        • SiP

          here is a thought get the government out of it for the most part and have the owners of the copyright charge what they want and radio can just choose if they will pay if no one will then price will go down. court will only be play a part in breach of copyright/contract

          • bthomas

            wont fly. not after what we have seen RIAA & MPAA do even with government oversight and intervention… go cry to tea party. u probably dont even listen to any internet readios

  • James

    But wouldn’t the 6-8% paid by Sirius be vastly more then 50% paid by Pandora? The revenue difference between the two must be huge

    • bthomas

      no shit

  • Todd Dupler

    There’s a lot more going on here. The Pandora bill doesn’t level the playing field, it lowers the playing field. The bottom line is that it will take money away from artists so that Pandora can make their shareholders happy. Only 3 services pay the below-market 801(b) standard that Pandora wants; over 1800 services, and every new entrant, pay the “willing buyer/willing seller” standard. Let’s raise the 3 grandfathered services to the fair standard. And let’s make broadcast radio pay for the music they use too. THAT is the real inequity.

    • Lacrossestar Eighty-three


    • Cam

      Exactly. It’s the artist who is hurt here. As long as artists keep getting screwed on royalties by these big companies just trying to make a few extra cents per play, new, quality artists will never be able to emerge and beloved former artists will stop recording. Just pay them what they deserve! They wouldnt have a product if it weren’t for the artists. Commercial industries have to pay suppliers an adequate price for products, why shouldnt music distributors?

      • Eric

        Actually artists would gain with the internet fairness act being passed because the current royalty rate system creates an entrance barrier into the online music industry.and would allow for more competition and more sources of revenue for musicians. It’s a win-win-win bill. Its good for the music industry. Its good for the consumer. And finally its good for pandora and other already existing internet radio.

  • Warren Crum

    Where in the Constitution does the Federal Govt derive the authority to oversee this industry, or to regulate industries beyond the purpose of creating normalcy in interstate commerce.

    If you can find their authority, then you should start debating all these other points.

    • bthomas

      your being irrelevant here. go take it to supreme court.

    • Filippo Goodman

      what the hell does this have to do with the constitution?

      • Snoman75

        That’s Warren’s point.

  • Rich

    I am so fed up with the RIAA and the MPAA trying to bully the people and buy out our representatives that I would honestly support anything that would cut their throats. On the flip side, I don’t want to harm artists, I just have something against corporate bullies who would use corrupt methods to screw people.

  • Rich

    I am so fed up with the RIAA and the MPAA trying to bully the people and buy out our representatives that I would honestly support anything that would cut their throats. On the flip side, I don’t want to harm artists, I just have something against corporate bullies who would use corrupt methods to screw people.

    • Erbo

      The RIAA and MPAA are the same snake with different scales. They should just merge their operations and become the Music And Film Industry Association of America (MAFIAA).

  • Mike A.

    I am so sick of the poor starving artist cry. A lot of these musicians are lucky they get air time at all. A service like Pandora gets them visibility they otherwise wouldn’t get. How about Youtube? Do they pay a royalty? I’ve bought more obscure stuff after hearing it on Pandora then I ever would have before. Lastly, I do agree with “Warren Crum” – There’s no place for government intervention here. Shouldn’t have stuck their worthless attention in this medium in the first place. Their wonderful laws are what have helped exacerbate the problem.

  • bthomas

    i unfortunately have boycotted my southern governors and representatives altogether cuz for 1 they dont in any way shape or form represent any of my ideals nor do they give a flying melinda about people who are not the same as them… why bother writing a total moron… he’ll take the other side of it.

  • bthomas

    someone should create a petition for this on wethepeople project of white house

  • Ladie Gladney

    This is simply ridiculous and a way to make Pandora raise their prices for consumers to enjoy this wonderful invention. My thoughts are these individuals are either paid or trying to get paid off this and the fact of the matter is that FCC allows it its been within regulations and I support the fair hearing act. Pandora is a wonderful tool at cheaper rates and you greedy people just need to stop. Try investing instead of repressing. This will sure help us ALL out. Not just you!!

  • ChronicWhiner

    I find this incredibly confusing. With the word “fairness” in the name and Sherod Brown urging me to call my representatives, I think something smells. To quote Shakespeare “Me thinks not.”

  • edward

    What about songza or spotify??

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