'Internet Fairness Act' Introduced In House, Senate

Bills Introduced

As earlier reported (NET NEWS, 8/20), a trio of Congressmen have officially introduced bills in both the House and the Senate that would ostensibly "level the paying field" for Internet radio, which would put the royalties they pay for music at the same, lower level as other digital music providers, the NATIONAL JOURNAL  reports.

The "Internet Radio Fairness Act," sponsored in the House by Reps. JASON CHAFFETZ (R-UT), and JARED POLIS (D-CO), and in the Senate by RON WYDEN (D-OR), would require that the COPYRIGHT ROYALTY BOARD use the same standard for setting rates for paying performers as it does for satellite and radio -- and would require that COPYRIGHT ROYALTY BOARD judges have a minimum level of experience and be appointed by the president and confirmed by the Senate.

"CONGRESS enacted the royalty rate standard for Internet radio 14 years ago, when Internet radio was barely a concept," CHAFFETZ said in a statement. "This bipartisan legislation levels the playing field for Internet radio services by putting them under the same market-based standard used to establish rates for other digital services, including cable and satellite radio. It's well past time to stop discriminating against Internet radio."

The impetus behind this bill, not surprisingly, is PANDORA, which has long argued for more reasonable royalty rates. The CONSUMER ELECTRONICS ASSOCIATION also endorsed the bills, as did the NAB. Its statement read: "NAB appreciates the leadership of Reps. CHAFFETZ and POLIS and Sen. WYDEN and strongly supports legislative efforts to establish fair webcast streaming rates. NAB will work with the bill's sponsors and all interested parties to create broadcast radio streaming rates that promote new distribution platforms and new revenue streams that foster the future growth of music."

CLEAR CHANNEL MEDIA + ENTERTAINMENT also supported the bills, offering this statement:

"We share the view of Representative CHAFFETZ and Senator WYDEN that fundamental aspects of the system governing sound recording licensing royalty rates are out of sync with the realities of the 21st century marketplace and must be fixed. This legislation is an important part of that process.  We believe that the rate setting process and royalty standard for the CRB’s determinations must support rather than stifle the growth of digital music for the benefit of consumers, artists and businesses -- helping consumers gain more access to their favorite artists, assisting artists in reaching as many listeners as possible and enabling the digital music industry to flourish with a sustainable business model.

We look forward to working with policymakers and business leaders in the coming months to develop the kind of fair music licensing rate setting royalty standard that benefits artists while reflecting both consumer preferences and the business realities of the 21st century.

Pandora Approves

PANDORA quickly released a statement regarding the Internet Radio Fairness Act of 2012. The statement, from Founder/Chief Strategy Officer TIM WESTERGREN, reads:

"PANDORA applauds Reps. CHAFFETZ and POLIS and Sen. WYDEN for their sponsorship of the Internet Radio Fairness Act of 2012 and urges legislators to act quickly to extend a fair rate standard to internet radio. As written, the legislation would establish a level playing field for internet radio by putting it under the same rate standard of the Copyright Act as cable and satellite radio.

"Royalty rates for different formats of digital radio are astonishingly unequal. Currently, internet radio shoulders the largest royalty burden, far higher than any other form of radio. Last year, PANDORA paid roughly 50% of its total revenue in royalties, more than six times the percentage paid by SIRIUSXM. The Internet Radio Fairness Act of 2012 addresses this discriminatory practice of favoring one form of digital radio over another by extending the common standard to include internet radio.

"The discrimination against internet radio is not only fundamentally unfair, it also undermines the growth of an exciting new form of radio that listeners have embraced, and that provides unprecedented exposure and revenue for thousands of working artists. A more equitable rate structure would drive investment and innovation, bringing greater choice for consumers, and ultimately greater revenue for performing artists. This bill is a win for consumers, artists and technology innovation."

Lining up against the bills are the labels, both major and independent, who believe the legislation will cut into the revenue of musical performers. What's more, they believe the bills should also address the issue of terrestrial radio stations, which are currently not required to pay performance royalties.

However, action on the legislation is not expected to begin until the next Congress is in session in 2013, as lawmakers are prepared to recess this week and won't return until after the election.

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