Internet Radio Fairness Act would lower rate Web radio pays artists

The knives are out for legislation that would lower the royalty rate that Internet radio services like Pandora pay to artists, as more than 100 musicians on Wednesday urged Congress to reject a bill expected to be debated soon in a House subcommittee.

The Internet Radio Fairness Act, backed by Pandora, Clear Channel and the Consumer Electronics Assn., would drop the rate that Web radio pays to artists so that it is the same as those paid by satellite and cable music services. Cable and satellite radio pay a statutory fee that is much less than the royalty paid by Internet radio outlets.

Artists including Common, the Dead Kennedys, Jimmy Buffett, Jackson Browne, Sheryl Crow, Jason Mraz, Missy Elliott, Don Henley and Maroon 5 signed an open letter to be published this weekend in Billboard. Titled “A Musicians’ Perspective on Pandora,” the letter asks, “Why is the company asking Congress once again to step in and gut the royalties that thousands of musicians rely upon? That’s not fair and that’s not how partners work together.”

Pandora and other backers of the legislation say that it is needed to bring into parity rates that are stifling the growth of Internet radio, and that the bill would end “the discriminatory practice of favoring one form of digital radio over another.”

The legislation was introduced in September, sponsored by Jason Chaffetz (R-Utah) and Jared Polis (D-Colo.) along with Sen. Ron Wyden (D-Oregon). It has six co-sponsors in the House, and a hearing before a House subcommittee is expected by the end of the month.

Pandora says that it paid more than 50% in revenues to performance royalties in 2011, while SiriusXM paid less than 10%. Radio broadcasters pay no performance royalties, long a source of friction between stations and the music business.

Another opponent of the proposed legislation also emerged: Grover Norquist. The president of Americans for Tax Reform sent a letter on Tuesday to the leaders of the House and Senate Judiciary committees, saying that “both the existing and proposed models pick winners and losers, rather than allowing free market negotiations.”

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