Congress Looks At Music Royalties

The Internet Radio Fairness Act is anything but fair, members of the music industry testified Wednesday.

According to Alex Yap at sfgate.com, Oakland's Pandora Media is lobbying for a bill to lower the royalty rates for Internet radio to the same level that satellite and cable radio services pay performers. But the largest online radio service is fighting an uphill battle that may yield unintended consequences: Instead of Internet radio paying fewer royalties, broadcast radio may end up having to start paying.

On Wednesday, the House Judiciary Committee's Subcommittee on Intellectual Property, Competition and the Internet held the first in a series of hearings on music licensing.

According to written testimony submitted by Pandora CEO Joseph Kennedy, "In 2012 Pandora will account for only 7 percent of U.S. radio listening, yet we will pay SoundExchange almost a quarter of a billion dollars - more than 50 percent of our revenue. By contrast, satellite radio will pay 7.5 percent of their revenue, and cable radio will pay 15 percent of their revenue."

Pandora pays $4 per year for each user who listens to 20 hours of music a month, said Michael Huppe, the president of SoundExchange. If the Internet Radio Fairness Act is passed, that would be brought down to less than 70 cents, according to Rep. Ted Deutch, R-Fla.

"All forms of digital radio should compete against each other on a level playing field," said Rep. Jason Chaffetz, R-Utah, the bill's sponsor.

Bruce Reese, president and CEO of Hubbard Radio, said many radio stations are reluctant to stream over the Web because of the royalty costs. He said Hubbard's 20 radio stations pay the high costs because "We believe our listeners expect us to be there."

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