Pandora founder Tim Westergren testified before the House Energy and Commerce Subcommittee on Communications and Technology this morning. His big message: That the same guidelines should be used to determine the royalty rates for all forms of radio.
I didn’t see Westergren’s testimony, but Pandora has sent up a summary and some quotes from his remarks, and I also interviewed him yesterday about what he planned to say. As an example of the disparity, Westergren told the House subcommittee that last year, Pandora paid $137 million in performance fees on $274 million in revenue (50 percent), compared to Sirius, which paid $205 million in performance fees on $2.74 billion in revenue (7 percent).
“It is time for Congress to level the playing field and to approach radio royalties in a technology neutral manner,” he said.
Why the difference? According to the account that Westergren gave me, the criteria for setting royalty rates in broadcast, satellite, and Internet radio were all determined at different times. So when Pandora is making the case for lower loyalty rates, even the arguments that it can use are limited. For example, he says even though Pandora is “a massive driver of sales” for iTunes and Amazon (suggesting that hey, maybe artists get more benefits from Pandora than just the direct payments), it’s not allowed to offer that data as evidence. Satellite radio companies, on the other hand, can.
“It may lead to different rates, who knows?” Westergren told me. “But it all needs to start from the same place.”
This isn’t a one-off appearance. Westergren has testified in front of Congress before, and Pandora has spent $50,000 on lobbying this year, according to OpenSecrets.org. As you can see from the numbers that Westergren provided, these rates can have a huge effect on Pandora’s bottom line — in fact, the company famously said that a royalty decision in 2007 could kill online radio. Eventually, royalties were lowered, and Westergren the current debate isn’t as much of a “hair-on-fire moment.” Nor does he expect anything to happen soon — instead, he wants to make sure the issue is on Congress’ radar, and that it’s familiar with his perspective when the time comes to make a decision.
In Westergren’s view, there’s one big change in Washington that may help with Pandora’s case: “Most members on the Hill use Pandora or some form of Internet radio.”