Aram Sinnreich at TruthDig.com has an interview with Tim Westgreen, founder of Pandora.com, a popular internet radio website that has caused my wife to buy more than a handful of CDs she wouldn’t have otherwise purchased.
In short, the music labels, through the RIAA and their subcompany Sound Exchange, have been able to convince the government that internet radio must pay license fees so high so as to shut down independent internet radio.
The new rates go into effect May 15th, and this will force many changes in the way that internet radio works. The rates are so high that you either
A) pay the high rates and be forced out of business.
— the high rates are split 50/50 between the music labels and the artists.
B) cut a deal with the devil and make direct deals with the RIAA for a lower licensing rate where MOST of that money goes to the labels, and a pittance to the artists.
Gee, you’d think this whole setup was rigged or something!
No, it’s business.
(Pandora.com‘s) Westergreen: […] But there’s another piece of the story. Half of the money we pay to SoundExchange each month goes to the labels, and half goes directly to the artists. If these new rates do stick, then the only way webcasters will stay alive is to start striking direct licensing deals, at lower rates, with the major record labels. If those deals are struck, then all of that money goes directly to the label, and goes under the umbrella of traditional record deals, where only a very small percent ends up going to artists.
Sinnreich: So you believe that one of the strategic reasons the RIAA has for supporting these higher rates is so labels can offer a competitive lower rate directly to webcasters, which would mean more income overall for labels and less income for artists?
Westergren: That’s exactly right.
Sinnreich: That sounds pretty nefarious.
Westergren: It’s business. These are businesses that are struggling, and they’re trying to maximize revenue.
Sinnreich: Have you seen any evidence of labels making direct deals with webcasters?
Westergren: SoundExchange just announced that they’re happy to let the RIAA deal directly with webcasters. Labels, throughout this process, have also been soliciting deals on the side. And they’ve already signed some—[popular webcaster] Last.fm signed a couple.
Sinnreich: Some have argued that the labels might also negotiate lower rates in exchange for promotional concessions from webcasters—the kind of thing that’s sometimes referred to as “payola” in terrestrial broadcasting. Would Pandora consider such an arrangement?
Westergren: Pandora has never, ever taken money to play music, and we never will. Labels have certainly offered, and I don’t think that’s nefarious—it’s the same as buying a billboard, or an end-cap [a type of display] in a record store. I think that is undoubtedly part of the motivation for direct licensing deals, and I wouldn’t be surprised if there were a promotional element to many of those deals. And that’s just business.
Me again, talking to myself and me answering: Payola? Wasn’t that illegal in radio? Why yes! Yes it was!
And now, payola is legal for internet radio and encouraged because of these new laws and backroom dealings?
So, we’ve gone from freedom to music choices forced upon us?
But isn’t Internet Radio just a small time operation with no real money involved? Does it matter if internet radio dies? Who cares?
Sinnreich: Some people would argue that if the market won’t support webcasting, it’s no great loss. If Pandora’s going to go out of business, who cares? This is an age of booming consumer access to a broad range of content. There’s digital terrestrial radio, mobile music services, satellite radio—why do consumers need Internet radio on top of that?
Westergren: That’s a fair question. The only answer to that is to look at how consumers respond. We’ve grown like a weed, and the only reason that’s happened, considering that we don’t advertise the service, is because there’s a need for what we’re offering. And I think that it’s going to grow faster and faster. And if you want to shut off these kinds of services, sure you can force people to be happy with what they have, but that doesn’t mean there’s not an appetite for a lot more.
Sinnreich: What’s Pandora going to do if the new rates stick?
Westergren: There’s a pretty good chance we’ll just turn it off, and give the money back to our investors.
Is it too late? Probably. What can a regular internet user do?
Sinnreich: Fortunately for you, there are still some options on the table. You were involved in the recent launch of SaveNetRadio.org. Tell me a little bit about it.
Westergren: It’s a coalition led by webcasters—us, AOL, Yahoo, Live365, RealNetworks and a huge slew of smaller sites—and it includes many musicians and listeners as well. Its intention is to collectively solve the problem, and to marshal our respective audiences, directing that energy into congressional pressure to get a bill passed that will create parity between Internet radio and satellite radio.
We launched it on April 16, and had a quarter-million people sign the petition and contact their congresspeople in the first three days. And it’s continuing to grow. Pandora listeners are very energized.
Remember that’s SaveNetRadio.org
Only YOU can prevent another Britney Spears.
UPDATE: A bill introduced in Congress Thursday aims to overturn a controversial royalty fee increase that Internet radio advocates say threatens to cripple their services.
The “Internet Radio Equality Act,” introduced by Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.), would invalidate a March 2 decision by the U.S. Copyright Royalty Board that calls for raising royalty rates paid by Net radio operators.