New legislation could level the playing field for online radio royalties, as Rep. Jason Chaffez (R-UT) is writing a bill that would lower Internet royalty rates. Chaffez told The Hill, "It seems screwy that royalty rates change so dramatically based on the platform" and said his potential legislation would even things out for online broadcasters.
“When you’re listening to music in your house or in your car, you may be listening to it on your iPhone, you may be listening on the satellite radio or the FM radio,” he added. “Does that mean the royalties should be so vastly different? It doesn’t seem to make sense to me. We need to play catch-up here.”
Pandora is already throwing its weight behind Chaffez's legislation, as its founder Tim Westergren is in Washington, D.C. this week to meet with lawmakers about the proposed royalty changes.
"The current royalty rate structure clearly favors some providers over others, and the discrimination against Internet radio must come to an end," Westergren told The Hill. "Congress has an opportunity to enact legislation that will not only establish fair royalty rate-setting standards for Internet radio, but also drive more innovation in legal digital music distribution and treat artists as stakeholders."
However, another industry source tells The Hill they beleive Pandora is going back on its 2009 royalty rate agreement and merely trying to cut a better deal for itself. "They’re making a lot more money, but they want a lower rate," the source said. "If this bill actually passes, all it will do is take money out of the pockets of artists by letting them pay less."
Chaffetz’s bill, the Internet Radio Fairness Act of 2012, proposes to put online radio under the 801(b) standard of the Copyright Act, which is the same standard used by the Copyright Royalty Board when setting royalty rates for cable and satellite radio. The bill is still in draft form and Chaffetz says it isn't ready to be formally introduced yet, but he will continue moving forward with the legislation. He added, "There’s plenty of money to be made by all the various interests, it’s just I think moving toward parity is an important principle."