Only a few issues have been more contentious and controversial for online services than “willing buyer, willing seller.” Those four words are part of a federal judicial standard that is the basis of how royalty rates are set for Internet radio services like the Pandora Media. There have been complaints over the years about an unfair standard as well as results in burdensome rates that are regarded as higher than those paid by satellite radio.
Friday, a republican and one democrat Jason Chaffetz and Jared Polis, introduced in the House a new Congressional bill. The bill will move so called non-interactive online radio services like Pandora and Clear Channel Communications’ iHeartRadio app from the “willing buyer, willing seller” standard to the one used to determine rates for Sirius XM Radio.
With this model, the panel of federal judges that set the rates consider evidence both on the value of the music and on the effect the royalty rate would have on the industry over all. Supporters of internet Radio, Pandora believe that standard would yield lower rates. On the flip side of the issue are record labels and artists, who believe that existing rates are fair and accuse Pandora and others of planning to deprive copyright holders of the income they duly deserve.
It would be recalled that Pandora pays a fraction of a cent each time a user listens to a song; totaling a minimum of 25% of its annual revenue. In 2011, Pandora paid about half its revenue to labels and performers. Sirius’s current rate is 8 percent. (Both kinds of services also pay separate royalties to songwriters and publishers.). Reaction to the bill has also come from Tim Westergren; Pandora’s founder who wrote through company’s blog to saying the bill is long overdue. “The anti-Internet bias in federal law is nothing short of absurd.” Pandora’s position is supported by other digital services and by the National Association of Broadcasters.
The executive director of the MusicFirst coalition, a representative of several labels and artists, Ted Kalo; on Friday defended the current rates and said that the promised changes would unfairly benefit services like Pandora.
“There’s nothing fair about pampering Pandora, with its $1.8 billion market cap, at the expense of music creators,” Mr. Kalo said in a statement. “Going from a fair market, ‘willing buyer, willing seller,’ rate to a government-mandated subsidy will break the backs of artists, while Pandora executives pad their pockets.”
The issue is expected to be deliberated after the United States national elections in November.
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