Wednesday, September 26, 2012
Reps. Jason Chaffetz, R-Utah, and Jared Polis, D-Colo., have introduced a bill in the U.S. House of Representatives. Sen. Ron Wyden, D-Ore., has introduced the same bill in the Senate. The bill? The Internet Radio Fairness Act of 2012. A competing bill is trying to make its way into Congress, pushed by Rep. Jerrold Nadler, D-N.Y. This second one is the Interim Fairness in Radio Starts Today (FIRST) Act.
Both acts have the same goal: leveling out the economic playing field for Internet radio. The royalties for digital music broadcasts are determined by the Copyright Royalty Board (CRB), which uses two standards to decide how much a radio company should pay the recording artist and record label for the rights to play a song.
The first standard used by the CRB is called 801(b), which is used for older services, such as Sirius XM satellite radio. New Internet music services, such as Pandora or iHeartRadio, fall under the second standard, called Willing Buyer/Willing Seller. Companies under rates set by the 801(b) standard currently only pay about 8 percent of their gross revenues for the use of sound recordings. Those companies which fall under the Willing Buyer/Willing Seller standard have to pay a lot more — during Pandora’s 2012 fiscal year, it paid 50 percent of its revenues for the use of sound recordings.
The FIRST Act wants to put all Internet radio companies under the Willing Buyer/Willing Seller standard. The Internet Radio Fairness Act of 2012 wants to put all Internet radio companies under the 801(b) standard. To put it another way, the FIRST Act is looking out for music artists and the Internet Radio Fairness Act is looking out for Internet radio companies.
It is very hard for Internet radio companies, which allow listeners to listen for free as radio is wont to do, to make a profit. According to Pandora, “Since our inception in 2000, we have incurred significant net operating losses and as of April 30, 2011, we had an accumulated deficit of $92.1 million.” According to Forbes, they made a profit of $622,000 in the 2012 fiscal year.
Everyone who loves music loves free listening on the Internet, and maybe that’s why the University Journal Editorial Board sides with the Internet Radio Fairness Act. We don’t want these companies to die.
But there are other reasons. Largely due to advances in technology, the music industry is growing. Recording artists and their labels don’t need saving, and they will still make plenty of money if Internet radio companies pay them the same as other types of radio. They would undoubtedly make more money if they helped keep Internet radio alive.
The opinions expressed above are the collective perspective of the University Journal Editorial Board. The editorial board meets Mondays and Thursdays at 5:30 p.m. in room 176C of the Sharwan Smith Center.