More disputes over US internet radio royalties
The operator of Pandora, a popular US webcaster and music service, thinks the ongoing dispute about performance royalties puts the entire industry branch in danger. "We're approaching a pull-the-plug kind of decision," said Pandora's founder Tim Westergren in an interview with the Washington Post adding "This is like a last stand for webcasting." Streaming radio services say they feel they are pushed into being defensive, by the music industry and by royalty representatives, whose royalty demands put too much strain on their type of business.
The dispute with internet radio stations about the compensation for performance rights has been smouldering for some time. Despite ongoing negotiations and various proposals, no common ground has been found between the webcasters and SoundExchange, an organisation representing artists and record labels. The disagreement is not about the royalties paid by all the radio stations – that is the same whether they broadcast via aerial, satellite or the internet. What is creating conflict is the different royalty levels charged for the performance rights, that is the rights to a certain recording owned by musicians, singers and labels.
While terrestrial radio stations don't pay any performance royalties, satellite radio stations pay six to seven percent of their revenue. However, a US government panel decided last year that webcasters are to pay a higher rate per song and listener, increasing the original fee of 0.08 US cents to 0.19 US cents by 2010. Smaller web radio providers complain that their royalty payments could exceed their earnings using this formula. For 2008, Pandora has to pay about $17 million in royalty fees, said Westergren in the newspaper interview. At a projected revenue of $25 million this could doom his company, he said. Pandora allows its listeners to create stations tailored to their own tastes. Unlike traditional radio, Pandora 'broadcasts' thousands of songs simultaneously – not just one song at a time.
This is one of the reasons why the copyright owners feel they have a right to a bigger slice of the internet cake. The webcasters, on the other hand, think that the regulations put them at a disadvantage and are pressing for a more balanced legal situation. They would accept paying a clearly defined proportion of their revenue like satellite radio stations. Last minute mediation attempts by Democrat representative Howard Berman have not come to fruition. "Most of the rate issues haven't been resolved", Berman told the Washington Post, "If it doesn't get much more dramatic quickly, I will extricate myself from the process". Westgren complained, "We're losing money as it is. The moment we think this problem in Washington is not going to get solved, we have to pull the plug."
An attempt to resolve the dispute with legislation is currently held up in Congress and Senate. The "Internet Radio Equality Act" is designed to correct the Copyright Board's decision and put internet radio stations on a par with satellite and cable radio. This would mean that webcasters either pay 0.33 US cents per hour and listener or 7.5 percent of their annual revenue. Whether the act will pass through the Senate is doubtful, recent reports suggest it has been abandoned in Senate committee stage and wether the act will be passed in time for Pandora is unclear. Pandora is funded by venture capital and "They're not going to chase a company whose business model has been broken" said Westgren, "So if it doesn't feel like its headed towards a solution, we're done."