Competing royalty bills to come up in next Congress, reports Billboard

Monday, November 26, 2012 - 10:50pm

Word has officially come that the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet will hold its hearing on Internet royalties on Wednesday (as we covered here). The hearing begins at 11:30am ET in the Rayburn Building. The witness list hasn't yet been published (we assume it will be, here).

Billboard.biz reports the Internet Radio Fairness Act (covered in RAIN here) will be re-introduced in Congress next year. It was introduced to this Congress by Reps. Jason Chaffetz (R-UT) and Jared Polis (D-CO) in the House and Sen. Ron Wyden (D-OR) in the Senate. The news source also finds it likely the competing bill, Rep. Jerrold Nadler's (D-NY) Interim FIRST Act (more in RAIN here) will be introduced.

The IRFA will attempt to bring the Internet radio royalty process in line with those for other forms of digital radio (satellite, cable) by requiring the use of the 801(b) standard (more here). Internet radio rates are uniquely determined by trying to replicate a market rate via a standard known as "willing buyer willing seller."

Nadler's Interim FIRST Act would apply "willing buyer willing seller" to satellite and cable radio royalty settings. Additionally, it would require broadcasters to pay a royalty for streaming their online content that would, in effect, "make up for broadcasters not paying a fee when they play artists' songs over the air."

Billboard.biz's coverage is here.

Grover Norquist sides with record industry in opposing Net Radio Fairness legislation

Friday, November 16, 2012 - 11:00am

Opponents of the Internet Radio Fairness Act have a new ally: conservative activist Grover Norquist.

While he complains that the IRFA-proposed move to the "801(b)" standard for Net radio royalty-setting "moves... towards forced below market rates," he's not fan of the status quo either. In a letter to Senate and House Judiciary Members, Norquist gets a shot in at the "willing buyer willing seller standard," when he writes, "There is no way, ultimately, for a legislator to decide what the fair market value of a product or service is."

The 1998 Digital Millennium Copyright Act stipulated that judges determining webcasting royalties attempt to determine the fair market value of music based on what they believe a "willing buyer" and "willing seller" would agree to. Mandating this standard was a significant departure from the more commonly used "801(b)" standard, used for satellite and cable radio (among other applications). The IRFA would move webcasting royalty determinations to 801(b), which supporters say more accurately reflects the public policy goal of copyright law, as it requires judges to make decisions that maximize the availability of creative works to the public, using the concept of "fairness" for both creators and distributors.

"Both the existing and proposed models pick winners and losers, rather than allowing free market negotiations," he wrote.

His call for a completely open market for negotiations between copyright owners and services actually exists: any copyright owner and any service can negotiate individual deals. The "government intervention" against which Norquist rails comes into play only after sides fail to reach terms for an "industry wide" rate.

Read Norquist's letter here. More coverage in The Hill here. H/T to the Digital Libery blog here.

Founder Westergren links artists' digital fortunes to Pandora's

Wednesday, 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."

IRFA sponsor Wyden says public policy shouldn't favor one business over another

Wednesday, 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

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