Opinion

Chaffetz’s Push For a Government Handout to Wall Street Company Pandora

Photo of Mark Corallo
Mark Corallo
Contributor

I like Pandora. Being a middle-aged conservative guy with a wife and four kids, let’s just say I don’t get out as often as I used to. Internet radio services like Pandora allow me to plug in my favorite artists—Springsteen, Sinatra, you get it—and then get surprised by Pandora’s offerings that are tailored to my taste. Please don’t snicker at my taste.

A couple of years ago, Pandora agreed on royalty rates it would pay for the content it uses on its stations. Case settled, everyone happy, issues resolved—the copyright holders are reasonably compensated for their content, and innovators like Pandora get to make bundles of money (it raised $235 million in its Wall Street IPO with a valuation of $1.6 billion). A win-win for everyone.

So I was a little surprised, even taken aback, to see Rep. Jason Chaffetz (R-UT), a committed conservative, introduce a bill that primarily helps this one company receive a special government handout by lowering the standard the government uses to set the price for that company’s input costs.

What? If you just did a double take, you didn’t read this incorrectly. The digital music delivery company Pandora wants the government to lower the standard it uses to set the price that Pandora pays for the music it delivers on its service. The current standard is “what a willing buyer would pay a willing seller” in the marketplace.

And what’s wrong with that standard? It’s bad enough the government is in the price-setting business in the first place, but at least it has to try to set the price at a rate that tries to mimic the marketplace. Pandora is lobbying to replace that market-based rate standard with a subsidized below-market one. And Rep. Chaffetz is carrying their water.

You really can’t blame Pandora for trying.  They provide consumers with a high-quality product for free, and have become one of the best known and most widely used Internet services around. Despite the fact that Pandora has grown substantially over the past several years (99% year-over-year revenue growth), they, like any for-profit business, want to pay less and make more. Who doesn’t?

In the real marketplace, however, they would be stuck adapting their business to accommodate their input costs.  When the government sets the rates, however, you replace adapting with lobbying.  And here we go.

Chaffetz argues that three other cable and satellite radio companies, all of whom received the benefit of a “grandfather” provision (can you say more lobbying?), pay under a below-market rate standard, so Pandora should get to as well. That’s right – instead of removing the special exemptions and “gimmes” and bringing everybody up to a market-based standard, he wants to bring Pandora down to the below-market one. Seriously.

Of course all services should be under the same standard, but that should be a market-based standard. Or how about getting rid of the compulsory licenses altogether like Sen. DeMint (R-SC) and Rep. Scalise (RLA) want to do, and actually letting these mature businesses worth billions of dollars participate in the real marketplace to negotiate the price of the goods they deliver like the rest of America does?

To make this even more surreal, Rep. Jerry Nadler (D-NY) has released a discussion draft of legislation that would create real parity by applying the market-based rate standard to all digital radio services across the board.

Yes, the liberal Democrat from New York wants everyone to pay a market-based rate while the purported conservative from Utah wants to provide a special government handout for a subsidized below-market rate by transferring wealth from one industry to another. The world has truly turned upside down.

Like I said, I really like Pandora. I’m a music lover. I love all of these new platforms for experiencing my favorite music. But let’s let the marketplace work. It’s time that we stopped letting the central planners choose winners and losers. This should be a no-brainer for conservatives.