Monday, December 30, 2013

What will be Pandora's next move?

You may recall my June 25 post in which I quoted extensively from a Pink Floyd statement (well, a 75% Pink Floyd statement) regarding Pandora Music - including an allegation that Pandora supported "an 85% artist pay cut."

Pink Floyd's statement had an effect:

This criticism was a tipping point in a long battle over artist royalties, said Ted Kalo, executive director of the musicFIRST Coalition. "That thing caught fire like nothing ever has on royalty issues," Kalo said of Pink Floyd's criticism. "This was a massive artist backlash."

Perhaps Pink Floyd's decision to place its music on Pandora competitor Spotify also had an effect. For whatever reason, Pandora has backed off on its support of the so-called "Internet Radio Fairness Act."

But there are still questions of fairness.

When an artist's song is played on a terrestrial radio station, the writer or composer of that song (not necessarily the performer) is typically compensated through performance-rights organizations such as BMI, ASCAP, and SESAC. The same is true if the song is played on satellite radio or Internet radio. However, terrestrial radio — that is, AM and FM — stations are exempt from paying performance royalties (i.e., royalties to the performer of the song), whereas satellite and Internet radio stations are not. And Internet radio stations pay higher rates than satellite and cable stations. The United States is one of the few industrialized countries that does not require terrestrial radio stations to pay performance royalties.

So while songwriters get a ton of money from terrestrial radio stations (which still dominate the music market), performers don't. This may please Randy Newman, but it wouldn't please Linda Ronstadt.

Among the ideas floating around is the proposal that terrestrial radio stations pay their "fair share" of performance royalties. Radio stations argue that performers benefit from the huge promotional capability of radio. Of course, Pandora tried that same argument, but failed.

With Pandora moving away from IRFA, some of the streaming service's most vocal opponents hope the company will unite with them around the issue of eliminating the AM/FM radio performance royalty exemption. For Pandora, it could mean a more level playing field, and for artists and labels, it could be a new source of royalty revenue....

Pandora did not respond to the question of whether it will lobby for terrestrial radio to pay performance royalties.

To be continued.
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