Fight Builds Over Online Royalties

From The New York Times:

The debate playing out in Washington has echoes of a presidential race. One side says businesses will suffer unless the government steps in to lower costs. The other accuses jet-set industrialists of a ploy that will cheat the middle class.

These attacks, however, are not between candidates for the White House. They are being made in a battle over the obscure but increasingly vital issue of royalty rates for streaming music online. The issue pits the survival of Pandora Media and other Internet radio services against the diminished paychecks of musicians in the digital age.

This fight has raged on and off for more than a decade, and it was renewed recently with a bill in Congress that would change the way digital royalty rates are set. But with streaming music starting to account for a significant chunk of the music industry’s revenue, and Pandora now a scrutinized public company, the issue has touched a nerve as never before.

“This is not just about our present; it is about our future, our ability to make it in the digital age,” said Cary Sherman, chief executive of the Recording Industry Association of America. “Artists and labels and the entire music community need to earn a fair return on the creative works that are the reason companies like Pandora exist.”

Tim Westergren, the founder and public face of Pandora, has denounced the current system’s “discrimination” and urged the service’s 175 million users to contact their representatives in Washington. Music industry groups and labor unions have also gone public, casting it as a fair-pay issue.

Rates are set by three judges on the federal Copyright Royalty Board, but they apply a different standard to Internet radio services like Pandora than they do to satellite and cable radio outlets like Sirius XM and Music Choice.

Music industry groups also want one standard, but one that keeps rates high. For years they have also been pushing for laws that would require terrestrial stations to pay royalties to labels and artists. (In the United States — and almost nowhere else in the world — radio stations pay royalties only to music publishers.)

Representative Jason Chaffetz, a Republican of Utah who co-sponsored the bill, said in a phone interview that the bill was meant to encourage growth in the streaming business. But when Mr. Chaffetz, whose campaign committee has received $2,000 from Pandora, was asked to respond to complaints that the changes would hurt musicians, he could not resist taunting a bit.

“The old-school dinosaurs are trying to help, but they’re stuck in the tar,” he said. “They can go talk to the pterodactyls.”

Continue reading the rest of the story on The New York Times