Fight Growing Over Online Royalties

The following is an excerpt from an article in:


The New York Times
Monday, November 05, 2012

Fight Growing Over Online Royalties

By BEN SISARIO

The debate playing out in Washington has echoes of a presidential race. One side says businesses will suffer unless the government steps in to lower costs. The other accuses jet-set industrialists of a ploy that will cheat the middle class.

These attacks, however, are not between candidates for the White House. They are being made in a battle over the obscure but increasingly vital issue of royalty rates for streaming music online. The issue pits the survival of Pandora Media and other Internet radio services against the diminished paychecks of musicians in the digital age.

This fight has raged on and off for more than a decade, and it was renewed recently with a bill in Congress that would change the way digital royalty rates are set. But with streaming music starting to account for a significant chunk of the music industry’s revenue, and Pandora now a scrutinized public company, the issue has touched a nerve as never before.

“This is not just about our present; it is about our future, our ability to make it in the digital age,” said Cary Sherman, chief executive of the Recording Industry Association of America. “Artists and labels and the entire music community need to earn a fair return on the creative works that are the reason companies like Pandora exist.”

Tim Westergren, the founder and public face of Pandora, has denounced the current system’s “discrimination” and urged the service’s 175 million users to contact their representatives in Washington. Music industry groups and labor unions have also gone public, casting it as a fair-pay issue.

Rates are set by three judges on the federal Copyright Royalty Board, but they apply a different standard to Internet radio services like Pandora than they do to satellite and cable radio outlets like Sirius XM and Music Choice.

Sirius, for example, pays 8 percent of its revenue to record companies and artists. Pandora pays a fraction of a cent each time a song is streamed, which last year amounted to about 54 percent of its revenue, or $149 million.

“The rate being too high dramatically depresses how much music gets played,” Mr. Westergren said in a recent interview. “It has really suffocated the industry.”

For more, visit www.nytimes.com.