Last week, after news that Pureplay Webcasters had reached an agreement with Sound Exchange on performance royalties, Internet radio industry darling Pandora made more news by announcing support for the Performance Rights Act before Congress. That bill would require AM/FM broadcasters to pay performance royalties as well.
Deep background, for those who don’t have it, is that in 1998 the Digital Media Copyright Act (DMCA) was passed requiring various forms of new media, including satellite and Internet radio, to pay performance royalties on digital media transmissions. Traditional broadcasters have not paid performance royalties. Broadcasters have maintained that the benefits that musicians receive from having their songs played on radio stations is substantial and therefore replaces the need for additional payments.
While I believe that’s true – that the value of playing a song on the radio is substantial – the fact remains that record companies are suffering from an enormous shift in the way music is purchased, and their business is way down. I’ve been saying for a long time that future of the music industry – both record companies and music services (AM, FM, online, whatever) is going to be one of sharing revenue. Radio stations can’t survive if record companies do not find a way to profit.
There are many ways to argue against Pandora’s stance. Just because they have to pay royalties, why does that mean broadcasters should. Isn’t that an eye for an eye mentality? Sure, I think that’s a good point – why should Pandora want broadcasters to be penalized in the name of fairness?
A much better point, also made by Pandora, is that they want to see musicians get their fair share. Because, whether broadcasters like it or not, if musicians and their labels can’t make money, the system is flawed, and the industry is doomed.