Last week the Electronic Frontier Foundation, which tasks itself with protecting the public interest with regard to digital rights, got my attention by coming out in support of the Internet Radio Fairness Act. That’s the bill that has been introduced in congress to equalize the performance royalties that various streaming platforms pay around one standard. Currently, different standards are applied to streaming services based on who owns them and the type of services they provide.
From their post on the topic, here’s an excellent explanation of the issue at hand:
Music services aren’t all treated the same, though – Congress gave older, more established companies a leg up. For satellite and cable radio, the judges set prices to give the labels and artists a “fair return” and the music service a “fair income.” In practice, the judges tell these services to pay about 10% of their revenues to the artists and labels. For Internet radio, though, the judges are supposed to set rates based on what a “willing buyer and a willing seller” would do in an open market.1 This sounds pretty good, except that there is no open market, so there’s no consistent benchmark. As a result, judges have set Internet radio royalty rates at cripplingly high levels. Internet stations went to Congress twice, in 2008 and 2009, to get temporary relief from rates that would have put them out of business. Today they pay about 50% of their revenues to SoundExchange.
In case you got lost, they explain that satellite and cable services pay 10% of their revenues in performance royalty fees, while streaming services pay 50%. Simply because the technology is different. These are services that do not provide on-demand access to songs. You can’t download anything.
An article yesterday in the NY Times quotes Clear Channel’s Bob Pittman and Pandora’s Tim Westergren in support of the bill. The two companies compete fiercely as brands, but have paired up to support the bill as leaders in the Internet Radio Fairness Coalition.
MusicFIRST meanwhile, is the coalition of record labels, artists’ representatives, and unions that would like to bring the bill down. They would like fairness, but they’d like everyone to pay based on that “willing buyer/willing seller” arrangement that nets them 50% of revenues. Which would likely drive streaming out of business. And what would happen then you might ask. Would all the younger demos that have gotten so attached to streaming stop listening, or would they go underground and start listening to services that pay nothing? I’m just saying..