In Wake Of 'Internet Radio Fairness Act,' BTIG Analyst Suggests Pandora Should 'Pay More'

Should Webcasters Pay More?

As ALL ACCESS reported last week (NET NEWS 9/21), 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 "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.

Many have come out to support the bill, but BTIG Analyst RICHARD GREENFIELD disagrees, and has penned a report named, "Congress Should Be Working to Raise Royalty Rates on PANDORA, Not Lower Them."

He writes, "On the surface, the rates paid by PANDORA and other online radio services appear onerous and in need of congressional relief. However, the reason why companies such as PANDORA pay such high royalty rates as a percentage of revenues is because they severely limit audio advertising to protect the user experience and keep people on the platform. If PANDORA ran several minutes of audio ads per hour (the way terrestrial radio does) vs. just a few 15 sec. spots, the % of revenues paid out as royalties would be dramatically lower and would be more in line with satellite radio or cable TV. Interestingly, SPOTIFY's radio product runs substantially more advertising per hour than PANDORA. We suspect this is a business decision focused on reducing royalty costs relative to revenues." 

GREENFIELD continues, "Just consider how crazy this Internet Radio Fairness Act really is: PANDORA chooses to not generate as much advertising revenue per streamed hour as it could to enhance the user experience and is capture share from terrestrial radio (based on lesser ad load), satellite radio and music downloading/playlist sites (iTUNES). So PANDORA is effectively asking the government to intervene and reduce its cost structure, helping it remain a viable business because it knows its business model only works while running limited advertising. Why should the U.S. government allow musicians to be harmed simply to help PANDORA and its investors generate enhanced returns?"

You can read the full posting here, after registering for free.

« see more Net News