Small Webcasters Defend Pandora Against musicFirst, SoundExchange In Royalty Row

Kurt Hanson

Representing the SMALL WEBCASTER ALLIANCE, a group of smaller pureplay webcasters that includes DIGITALLY IMPORTED, 977 MUSIC and RADIO PARADISE, ACCURADIO CEO KURT HANSON released a statement that took umbrage with the upcoming MUSICFIRST/SOUNDEXCHANGE ad in BILLBOARD and its accompanying press release that slammed PANDORA for trying to lower royalty rates.

"It’s ironic that the organizations are making an appeal for ‘fairness’ when, in fact, what they’re fighting for is specifically to keep the concept of ‘fairness’ out of the rate-setting standard for Internet radio," HANSON noted. "The ‘801(b) standard’ is the set of four criteria that CONGRESS has historically typically instructed the U.S. COPYRIGHT OFFICE to use to determine a royalty rate: (1) Maximize the availability of creative works to the public. (2) Insure a fair return for copyright owners and a fair income for copyright users.  (3) Reflect relative roles of capital investment, cost, and risk.  (4) Minimize disruptive impact on the industries involved

"801(b) is the standard used in other forms of digital radio, like satellite radio and cable radio, and it accurately the public policy goal of copyright law, which is to maximize the availability of creative works to the public, using the concept of ‘fairness’ for both creators and distributors," HANSON continued. "By prevailing upon CONGRESS in 1998 to change the rate-setting standard for Internet radio to the rate ‘which a willing buyer and a willing seller would agree to,’ the music industry has introduced confusion that has hamstrung the growth of Internet radio ever since. 

"Because of the difficulty of applying this standard -- since this is a marketplace in which a ‘willing buyer/willing seller’ rate has never been determined -- the judges in both rate-setting cases so far (2002 and 2009) ended up setting rates that were, for the majority of webcasters, greater than 100% of their revenues.  Such a rate is far higher than the 7% to 15% rates that other forms of digital radio pay under the 801(b) standard, and it’s far higher than any ‘willing buyer’ could actually afford to pay."

Subsequent actions following both determinations led to emergency legislation that eventually reduced the judges’ rates to some extent

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