RAIN 11/14: OR Sen. Wyden on royalty debate: "The future doesn't have a lobbyist"

Paul Maloney
November 14, 2012 - 11:50am

Oregon Senator Ron Wyden (D), who introduced the Internet Radio Fairness Act in the U.S. Senate in September, says the debate over Internet radio royalties is a battle between entrenched interests and a healthy future for music. His bill, he insists, is about ensuring a fair market that will help webcasting grow, leading to "more income for artists, and more music choices for consumers." Pitted against that future are "a few big record companies... (who) are using uncompetitive practices to crowd out the competition," Wyden told attendees of the Future of Music Summit yesterday in Washington, D.C.

He made a case that artists and independent labels should be siding with the webcasting industry in support of the new legislation, as they stand to benefit from a more robust Internet radio market his bill hopes to enable.

"The history of American music is one of artistic creativity, technological advancement, and particularly those innovators - the dreamers - who are willing to disrupt the status quo. And in my view, we've got to make sure that's what the future is all about," he said.

Wyden's Internet Radio Fairness Act (IRFA) seeks to reform the process by which Internet radio royalties are determined by requiring judges use the same legal standard they use when setting satellite and cable radio rates, known as 801(b). Currently, Internet radio is unique in that (as mandated by 1998's Digital Millennium Copyright Act), judges determine a rate based on what they feel a "willing buyer" and "willing seller" would agree to in a hypothetical market. While satellite and cable radio pay about 8% of their revenue for royalties, Internet radio rates have equaled 50-70% (or more) of revenue for webcasters. 

"It is the job of policymakers to ensure that the law and public policy doesn't favor one business model over another, and particularly that it doesn't favor incumbents over insurgents," said Wyden. "We've got to make sure that the past doesn't get a leg up on the future, and I think a lot of you remember that in these kinds of debates, it seems like the future doesn't have a lobbyist."

Read Wyden's speech in Digital Music News here

Paul Maloney
November 14, 2012 - 11:50am

Pandora founder and chief strategy officer Tim Westergren told Future of Music Summit attendees that you can already see what the "unfair" royalty structure has done to the Internet radio industry.

AOL, Yahoo!, and MSN were all major webcasters that have left the business. Pandora itself is "a Jekyll and Hyde business" that's doubled revenue every two years yet has struggled to make a profit. He says his company's 75% share of the webcasting industry shows "nobody wants any part of this business," and that includes some major broadcasters.

Royalty reform, such as the Internet Radio Fairness Act (more here), would bring investment and competition to the space, Westergren insists, which means more opportunity for artists to get exposure and royalties. Internet radio is "massively underinvested," Westergren said. "When we see a win-win opportunity, we should all embrace it... We're saying that if you reduce this burden, internet radio will grow a lot faster and a rising tide will raise all boats."

Paul Maloney
November 14, 2012 - 11:50am

Radio consultant Walter Sabo yesterday counted "Internet radio" among his list of "Five Trends About to Make a Buck," but the key will be shifting to "marketable, own-able, and profitable" original content.

In a Talkers.com column, he contends webcasters' real payday will come when they develop their own original, compelling programming, and not simply aggregate content that's also available elsewhere (especially if that other content is copyright music which "comes with insane, uncontrollable royalty fees.")

"HBO, Showtime, USA Networks, AMC, SiriusXM, were all aggregators of content made by other companies and distributed on other platforms," Sabo wrote. "The result was customers chose one 'movie' channel. HBO and its competitors had to distinguish themselves with original content such as 'The Sopranos' and 'Weeds' to give customers a reason to subscribe to more than one premium channel."

Read Sabo's column (and see the other four "trends about to make a buck") at Talkers.com here.