Pandora Users: An Explanation Of The Radio Law You’re Asked To Support

Pandora listeners may notice their regularly scheduled commercial breaks of Ford products and tight jeans were interrupted by a call to support a bill called, “The Internet Radio Fairness Act.” The proposed bill would reduce the royalty fees paid by Internet music-streaming services to those paid by other digital and satellite radio stations (the so-called “801(b)” standard). The Hill reports that online radio services shell out more than 55% of their revenue to pay off royalty fees, while satellite and cable companies only pay somewhere between 7 and 16 percent, according to co-sponsor Rep Jason Chaffetz’s office. Like Google and Wikipedia blacking out their websites in opposition to the Stop Online Piracy Act, Pandora has a captive audience of 150+ million users to broadcast their campaign, once again revealing how web giants can transform into powerful media outlets.

The irony was not lost on me that I heard this campaign while I was writing this post.

The Internet Radio Fairness Act revives an ongoing battle between the typical champions of web firms, Congressmen Issa, Wyden, and Polis, against those of the recording industry lobby, (RIAA-backed) musicFIRST, who are proposing a law to instead increase satellite radio royalties to the higher rates of Pandora. Both are arguing for equal terms, but one pays more to radio services and less to artists/record labels.

“Fourteen years ago, when online radio was in its infancy, the incumbent interests were successful at getting laws passed to discriminate against the Internet,” said Senator Wyden in a statement, who introduced a companion bill in the Senate. “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.”

Recording industry backed musicFIRST released a draft of their alternative bill, “There’s nothing fair about pampering Pandora, with its $1.8 billion market cap, at the expense of music creators,” said Ted Kalo, executive director of musicFIRST. “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.”

Unlike the recording industry, however, Pandora has that ready-made audience of a 150+ million users. Should it succeed in getting the bill passed, it will reaffirm how Internet giants can trasform from service providers into powerful media organizations.

The law is unlikely to come to a vote before the end of the year.