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Pandora Is Poster Child in Music Biz Fight Over Internet Royalties

Ad placed ahead of House hearing

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Pandora has become the poster child in the fight over royalties for music streamed over the Internet. As the debate heats up in advance of a House Judiciary hearing at the end of the month, more than 125 musicians and singers signed an open letter that will be published in the Nov. 24 issue of Billboard (Adweek's sister publication) singling out Pandora for its relentless campaign in Washington, D.C., to pass legislation that would "gut the royalties that thousands of musicians rely upon."

Despite a lame-duck Congress, the Pandora-backed bill, called the Internet Radio Fairness Act, has gotten some bipartisan traction from House Judiciary members where it was introduced by Rep. Jason Chaffetz (R-Utah) and on the Senate side by Ron Wyden (D-Ore.), one of the champions of Internet causes in Congress.

"There is no functioning market here," Wyden said yesterday about Internet radio during a Future of Music Summit in Washington. "Webcasters pay five times the royalties paid by other digital broadcasters."

The open letter argues that Congress has better things to do than to take on a bill that would slash royalties paid to musicians and artists by 85 percent.

"The proponents of the bill intended the last couple of weeks of the lame duck session as a curtain raiser to mobilize their user community," said Ted Kalo, executive director of musicFirst, a coalition of organizations representing musicians, recording artists, managers and music businesses, which took out the ad with Sound Exchange. 

Both sides of the debate have built up impressive coalitions. Pandora's Tim Westergren has been all over Washington these days arguing that the disparity in royalties has prevented his firm from turning a profit. The Internet radio company recently put together a coalition of radio groups, Internet webcasters and organizations such as the Consumer Electronics Association. Pandora also set up a web page to mobilize its users to contact members of Congress, which resulted in 50,000 tweets.

Opponents of the bill also carry some clout. MusicFirst and Sound Exchange, the two groups that took out the ad in Billboard, are joined by the AFL-CIO, NAACP and soundExchange. They organized a campaign to Congress that delivered 11,000 emails in one weekend.

Kalo believes they have the upper hand. "IP legislation only passes Congress if it represents a consensus view. This bill is so one-sided, it has zero chance of passing," Kalo said.

In statements, both Pandora and the Internet Radio Fairness Coalition said that artists and Internet radio want the same thing, a sustainable Internet radio business. "Internet radio and the artists whose music is played and listened to on the Internet are indeed all in this together.... When the digital music sector is allowed to grow and innovate, everybody wins," said Westergren, Pandora founder and chief strategy officer.