Webcast allies wary of b'dcast royalty issue in efforts for reform of rate-determining standards

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Issue Date: 
Aug 16 2012 - 1:15pm

From Issue:

Leading webcaster Pandora, Utah Republican Congressman Jason Chaffetz, and now the Brookings Institution (see yesterday's RAIN here) are all calling for the use of a consistent standard for determining sound recording performance royalties across Internet, satellite, and cable radio. (Currently, webcasters pay a rate significantly higher than other forms of digital radio, since the legal reference determining judges are instructed to use is dramatically different.) Even the NAB's Dennis Wharton says he "appreciate(s) (Chaffetz's) interest in reforming the current Interet radio rate structure."

But, no one among this group is arguing that broadcasters should be paying this fee too.

The reason: it's simply been proven to be far too difficult a task to accomplish such a major change in an established and powerful U.S. industry.

For webcasters and their allies, their immediate goal is relief from the controversial "willing buyer/willing seller" standard -- which might reasonably be considered an achievable end. The broadcast radio royalty issue would be like an anchor tied to the foot of a drowing man.

Congressman Chaffetz's proposed "Internet Radio Fairness Act" (in RAIN here) would compel judges deciding royalty rates for Internet radio to base their decisions on the same legal standard they use for satellite and cable radio rates. It would not address the matter of broadcast royalties.

The National Journal writes that Pandora argues that the radio royalty debate has dragged down efforts to get the webcast royalty standard changed from "willing buyer/willing seller" to the more widely-accepted "801(b)(1)." "We’ve been held hostage to that for years," Tim Westergren, Pandora’s founder and chief strategy officer, told the news source. "The reason nothing has been fixed is we’ve been stuck behind [radio-station] royalties. We're victims of a fight that’s not ours."

John Villasenor, author of the Brookings paper covered yesterday, in it wrote, "Any new legislation should not include a provision to end the AM and FM over-the-air 'terrestrial' broadcasters’ longstanding sound recording performance royalty exemption... every one of the dozens of legislative attempts to end it since 1926 has run up against extremely strong opposition from terrestrial broadcasters and has failed. New legislation including a provision ending the terrestrial broadcasters’ exemption would be likely to fail as well." Without the provision, he continues, legislation "may even garner the support of the National Association of Broadcasters," whose current streaming royalty deal with SoundExchange expires at the end of 2015, "meaning that terrestrial broadcasters, like pureplay webcasters, would benefit from a more reasonable digital broadcast statutory royalty framework."

It may not be so simple, however. Ray Hair, international president of the American Federation of Musicians, writing in The Hill, says it's not that Internet radio's royalties are too high, it's that other platforms (especially broadcasters') rates are far too low! He says Chaffetz's bill "would allow the digital platforms to pay musicians less... at rates far below market value. The bill would effectively unleash a race to the bottom, with radio platforms competing to see which can pay musicians the least." It's the Internet radio platform which he seems to think is giving "artists their fair share," and writes, "People I know are already calling the bill by a more appropriate name: the 'Internet Radio Rip-off Act.'"

Vigrinia Congressman Bob Goodlatte, vying for the top Republican spot on the House Judiciary Committee (he currently heads its Intellectual Property, Competition, and the Internet Subcommittee), told the National Journal he expects his panel will take up the matter of music-royalties, and is open to calls for requiring traditional radio stations to pay performance fees.

Read more in the National Journal here and The Hill here.

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Tim Westergren says it quite well

When he says "We're victims of a fight that’s not ours."

While "Broadcast neutrality" is the goal, that does not mean we can't make the problem smaller. Normalizing the rates between digital services is the first step.

While I suspect it is too late for something to get done in this legislative cycle I hope it is something that can get done soon.

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