Going through congress now is a bill named, in classic Owellian Doublespeak, the Internet Radio Fairness act. This bill is being pushed by online "radio" companies, most vocally Pandora. The basic thrust of the bill would reduce an artist's royalties by 85%, but it goes beyond that to include censorship and eliminating a panel of copyright judges.
In old fashion radio you had to wait all day, maybe longer, to hear your favorite tunes, if they were popular enough to be on the radio to begin with. With Pandora you can hear them several times an hour. Many of my friends listen to Pandora and thus while I'm at their homes, so do I. When we select an artist on Pandora their hits keep being played over and over. Several songs an hour. Because of this we don't need to buy their recordings. This means that the artists are not earning a living wage from being played on Pandora. Not even close.
My last royalty check from BMI, for the first quarter of 2012, states that several of my songs were broadcast by Pandora. One song was aired 73,700 times on Pandora and my royalties totaled $1.88. That's only $0.00002550881954 per play!
Another song was broadcast by Pandora 165,500 times and my total royalties came to $4.81 or $0.00002906344411 per play.
These are not high royalties. SiriusXM pays much higher rates. One song of mine for example, was paid $0.135 per play. Significantly higher.
Pandora is pushing this bill hard because they claim that they have to pay more in royalties than traditional terrestrial radio. Rates that were set up by a panel of copyright judges. A panel of judges that the IRFA would eliminate. If Pandora has such an unfair burden compared to traditional radio, then why are giant terrestrial companies like Clear Chanel and other broadcasters be backing the IRFA?
Also, Pandora's business model is to not play too many adds per hour. This lack of ads leads to less revenue. It also turns out that those ads they do air are not generating much income, as internet ads are pretty much worthless. This business model was perfectly fine when they were selling their IPO to investors. But now, after they have racked in millions from going public, suddenly ad free radio is not working? Imagine how their new investors must be feeling duped!
The IRFA would also censor an artist's ability to voice descent about any royalty rate that Pandora and the record labels might agree to. In fact Pandora's own website states that, "This bill also muzzles any group that acts on behalf of ”rightsholders” (artists) by threatening prosecution under The Sherman act for “impeding” any direct licensing between broadcasters and record labels." Yeah, that sounds "fair". Plus if you are a small, independent label, like artist owned labels, you don't get to negotiate a rate, you have to take what they give you. Where have we heard this before? Oh right, from Spotify. We know how large their royalty payments are.
Personally I struggle with Pandora playing my material at all. Listeners get access to my songs for free and I am paid royalties that I consider pathetic. Some would argue that I'm receiving "exposure", but an artist needs exposure to generate a growing fan base and thus a greater income stream. Pandora's "exposure" does not do that. As the saying goes, "You can die from exposure". Given that Pandora plays songs by a given artist multiple times each hour why would Pandora listeners need to buy an artist's albums? They can hear them over and over for free.
Pandora needs to stop whinnying and pay artists more, not less. Their competitors do. If they can't earn a living through their current income model then they need to realize there is a new paradigm. That's what every one has been telling artists for years. That we need to find other ways to earn money other than from our core product, the music. One of the ways that is suggested frequently is through ads, or sponsors. But now Pandora has realized what all inde musicians know, ads don't make much, if any, money. Regardless, it is not the artist's job to subsidize Pandora's failed business model.
No surprise, I will not be supporting this bill.
If you are an artist, or just want artists to be paid a fair royalty rate then send Pandora your thoughts. While you're at it, let congressional backers of the IRFA know that here is nothing "fair" about the IRFA bill by writing to them:
Senator Ron Wyden (D-OR),
Representatives Jason Chaffetz (R-UT) and Jared Polis (D-CO)
Pandora wouldn't even exist without the music that artists produce. As they are in the business of using music to make money, they need to pay artists, their suppliers, a truly fair rate.