I can’t remember the last time I bought an actual music CD. In fact, I can’t remember the last time I bought a song on iTunes. Like most young adults, I listen (legally) to music through Internet radio or via the cloud.
While most Internet music platforms, like Pandora and Spotify, offer users music for free, the services still have to pay royalties to the copyright holders. The royalty rates that the services have to pay are set by a panel of three copyright judges and are based on the “marketplace” rate for musical license.
Under this scheme, music webcasters pay a higher royalty rate than other digital music broadcasters. “Last year,” says Pandora’s Chief Strategy Officer Tim Westergren, “ Pandora paid roughly 50 percent of its total revenue in royalties, more than six times the percentage paid by SiriusXM.”
Bipartisan legislation like Rep. Jason Chaffetz (R-Utah) and Rep. Jared Polis’s (D-Colo.) Internet Radio Fairness Act would address this disparity. It would put Internet radio on the same playing field as satellite and cable providers in terms of royalties, which makes sense given that Internet radio is now competing with cable and satellite for listeners at home, in the car, and at work.
Listeners, like you and me, would ultimately benefit from a more reasonable royalty structure because new Internet-based music services would be more free to innovate without having to guess what their royalty rate will be. Existing platforms would be able to expand their offerings with more revenue going to their product and technology instead of royalties.
But the music recording industry, which has been fighting innovation for decades, wants to raise royalty rates for cable and satellite to match the exorbitant rates applied to Internet radio. TechDirt.com is calling the bill the Recording Industry Association of America (RIAA) Bailout Act since the industry is hemorraging money to digital music.
If we want to see new, innovative Internet music platforms thrive, Congress needs to level the playing field for all music broadcasters. The recording industry should get creative and look for new ways to make money rather than relying on Congress to force consumers to pay more for something they don’t want.
