IRFA Failed Because It Excluded Terrestrial Performance Royalty, Say Bill’s Critics
Pandora’s ditching support for the Internet Radio Fairness Act was a product of poor strategy and marketing, said IRFA critics in interviews Friday. Aimed at reducing royalty rates for online music streaming, the critics said the bill abandoned seeking terrestrial royalty rights for which performers have long fought and so alienated advocacy groups that might have otherwise supported the legislation. The idea that Pandora is “pulling out of the legislative process” is a “misunderstanding,” as the company is preparing to go before the Copyright Royalty Board next year, said a Capitol Hill aide who backs what the company seeks.
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"Pandora will focus on other paths to resolution, including the upcoming CRB [Copyright Royalty Board] arbitration, for which we have been preparing intensively for some time,” said Chief Strategy Officer Tim Westergren in a written statement. Pandora’s effort to reduce its royalty rates by buying a terrestrial radio station earlier this year from Clear Channel sparked an outcry among record label and songwriters’ groups. They had said the station deal could broaden the royalty debate in Washington past IRFA (CD June 17 p16).
For years, Pandora had been seen as a supporter of terrestrial performance royalty, but “by pushing a bill also endorsed by Clear Channel, it sent a signal to the artist community that they aren’t so concerned about parity as they are getting more favorable terms for themselves,” said Future of Music Coalition Interim Executive Director Casey Rae, who didn’t support the bill. “There was probably another way to approach this that might not have left Pandora holding the bag,” he said. “But now they've apparently shifted strategies, so the whole thing is moot; at least for now."
The legislation could have been a chance to create “equity” for performers, while reducing royalty fees for Pandora, said Executive Director Ted Kalo of musicFIRST, which has members including RIAA and SoundExchange. Instead, “they chose to say, ‘The terrestrial issue is really hard and we don’t think it has legs, so we're going to walk away and try to get our own piece of pie,'” which Kalo called a “huge mistake.”
The criticism of the bill rested on a lack of vision, as well as a conflation of issues, said a spokeswoman for Rep. Jason Chaffetz, R-Utah, an IRFA sponsor. Some thought the bill would have increased the number of Internet radio companies, creating more streams of revenue for artists to account for reduced royalties, she said. “In the end, the artists -- because it [the bill] will open up their market -- will end up getting paid more, but that’s more of a long-term [view] and sometimes the artists only look at the short term.” Lumping together terrestrial rights and royalty fees would likely made the bill even more difficult to pass, said Chaffetz’s spokeswoman.
Pandora’s loss shouldn’t be cast as a “victory,” said Rae. “If Pandora went away tomorrow, I think it would be a loss in terms of revenue and consumer confidence in the legitimate marketplace.” Internet radio is the “only area of the industry where you can point to consistent and demonstrable growth,” said Rae.
Kalo doesn’t “dislike Pandora -- we want them to succeed,” he said. “We just don’t want them to succeed on the backs of our music creators.” The CRB could give Pandora a chance to reduce the company’s royalty rates, said Kalo. Pandora has “implied that they have good economic data that would say that they should be paying less than what they pay now,” he said.
Chaffetz’s office is waiting to see if and when Goodlatte and the House Judiciary Committee will bring up copyright reform legislation in the next year and whether music licensing will fall under its umbrella, said Chaffetz’s spokeswoman. Chaffetz will “see the best way to move forward” if any copyright reform is introduced by Goodlatte, she said. Goodlatte has been holding hearings and eyeing potential changes to copyright law.