Tim Westergren Goes To Congress To Battle Over Royalty Rates, Steve Newberry Represents The NAB's View

Tim Westergren

PANDORA Founder/Chief Strategy Officer TIM WESTERGREN told Congress TODAY at "The Future Of Audio" hearing before the HOUSE COMMUNICATIONS SUBCOMMITTEE, that music-royalty rules should be changed so PANDORA no longer pays half its revenue to artists and recording labels."

THE NEW YORK POST reports, "PANDORA's royalty rates are higher than for satellite radio company SIRIUSXM RADIO, which paid about 7.5% of revenue last year, WESTERGREN said in an interview in WASHINGTON. Traditional broadcasters don't pay such fees for over-the-air music play."

But if the song is delivered using internet transmission over 3G or 4G, then the effective percentage of revenue that must be paid by the company delivering the song goes up six fold. It’s the same song, same car, and the same sound system.

"It's a bizarre lack of parity that's grown up over time," WESTERGREN said.

WESTERGREN's commented, "To give you a sense of how absurd the current situation is, consider this example: Drivers of most current TOYOTA cars can receive AM/FM, satellite and Internet radio, all through the vehicle’s sound system. If a song is delivered over AM/FM, the associated performing artist and label receive no compensation. If the same song is delivered over satellite, the performing artist and label do receive compensation. But if the song is delivered using Internet transmission over 3G or 4G, then the effective percentage of revenue that must be paid by the company delivering the song goes up sixfold. It’s the same song, same car, and the same sound system."

"It is time for Congress to level the playing field and to approach radio royalties in a technology-neutral manner," WESTERGREN testified. "The current rate-setting law is unfair to performing artists, unfair to record labels, and unfair to PANDORA and Internet radio as we compete every day with broadcast radio and satellite radio for listener loyalty and advertising and subscription revenue. AMERICA’s obligations to our performers should be shared proportionally by all who use their music. What amounts to a subsidy of entrenched radio media stifles innovation, discriminates against the internet and adversely affects consumers. It is time to unshackle innovation and allow new technologies and new forms of audio consumption to compete fairly."

Steve Newberry Weighs In On Royalty Rates

COMMONWEALTH BROADCASTING Pres./CEO and NAB Joint Board Chairman STEVE NEWBERRY discussed royalty payments, and testified "YESTERDAY, a negotiated royalty deal between CLEAR CHANNEL RADIO and BIG MACHINE RECORDS was announced. As I understand the details, CLEAR CHANNEL has agreed to pay a percentage of advertising revenue for BIG MACHINE's songs whether they are heard digitally or terrestrially. It is a free enterprise transaction between two willing parties. With no government involvement. From NAB’s perspective, nothing about this deal changes our strong opposition to a Congressionally-mandated performance tax."

"What this announced deal really highlights is the major challenge we face as radio continues to grow online and into other new platforms," added NEWBERRY. "The current royalty structure for webcasting is broken. When initially set in 2007 and then built upon in 2009, the rates set by THE COPYRIGHT ROYALTY BOARD were universally decried as being ridiculously high. So high that radio stations cannot afford to be successful online -- the more music listeners you attract, the less profitable it becomes."

NEWBERRY noted, "Believe me, radio broadcasters want to take advantage of all the possibilities the Internet presents, but these royalty rates create a financial disincentive to webcast, and solving this problem for broadcasters is essential. If we want music streaming to survive, we need to find a way to strike a better balance between royalty payments and platform growth, which at the end of the day, helps broadcasters and artists."

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