House Hearing on Digital Royalties Shifts Focus to Broadcast Pay for Music Airplay

Pandora pressed its case for lower
rates for music licensing to Capitol Hill on Wednesday, urging lawmakers to
support a bill that would put it in parity with cable and satellite radio but at
the same time reduce the amount it has to pay to artists.

But the legislation, backed by Pandora, Clear
Channel and the Consumer Electronics Assn., may have hit a roadblock, as
lawmakers on the House Judiciary Committee suggested that any action also
address the issue of paying artists when their music is played on broadcast
stations. The fight over a broadcast “performance right,” as it is called, has
dragged on for decades, and even as the music industry has won bipartisan
support, it has run into fierce resistance from broadcasters.

Rep. John Conyers (D-Mich.), long a champion of
such a broadcast performance royalty, said that the Pandora-backed legislation
“may be the catalyst to formulating an AM/FM performance right.”

“I absolutely think we are making it worse in
attempting to solve the problem piecemeal,” Conyers said at the hearing, held by
the House Judiciary subcommittee on intellectual property, competition and the
Internet.

Such a broadcast royalty is not even part of the
Internet Radio Fairness Act, which supporters say is aimed at ending an inequity
in music royalty rates. Cable and satellite radio pay a statutory fee that is
much less than the royalty paid by Internet radio outlets. Broadcasters do not
pay artists when their songs are played, arguing that such reach is valuable
promotion.

A coalition of artists is lobbying fiercely
against the Internet Radio Fairness Act, and they were led at Wednesday’s
hearing by Jimmy Jam, who said that the legislation would affect not just
current artists but new acts. “It affects everyone across the board,” he said.
Opponents say artists would see an 85% reduction in their royalty from Internet
radio.

Jam, too, took the opportunity to argue for a
broadcast royalty for artists.

“We need an industry-wide solution to the
problem, and really only Congress can make that happen,” he said.

But Joseph J. Kennedy, chairman and CEO of
Pandora, told the subcommittee that the currenty rate-setting standard was
unfair, and were it not for previous congressional intervention, Internet radio
would not exist. He said that Pandora will account for only 7% of U.S. radio
listening in 2012, yet will pay SoundExchange almost $250 million in royalties,
which is more than half of Pandora’s revenue. Satellite will pay 7.5% of their
revenue, and cable will pay 15%.

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