Conservative groups oppose ‘bailout’ for Internet radio

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Chuck Ross Investigative Reporter
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A coalition of conservative groups has come out against the Internet Fairness Radio Act in a letter to lawmakers obtained by The Daily Caller News Foundation.

The bill would reduce the per-song royalty rate that Internet radio companies like Pandora pay to artists and recording companies for the use of their music. It has also been opposed by recording artists and the NAACP.

The conservative groups signing the letter, which include the American Conservative Union and the National Taxpayers Union, claim the bill would “require the government to grant subsidized, below-market rates to Internet radio companies for their input costs.”

Americans for Tax Reform and Citizens Against Government Waste had previously expressed opposition to the bill.

IRFA was proposed last year by Utah Republican Rep. Jason Chaffetz, Colorado Democratic Rep. Jared Polis and Oregon Democratic Sen. Ron Wyden.

Wyden summarized the purpose of IRFA as removing “the barriers to innovation in digital broadcasting,” and to “promote more ways for consumers to hear and buy diverse music choices.”

Pandora Radio is seen as the largest proponent of the bill. The company claims that it is unfair that they pay 50 percent of their revenues in royalty fees while their competitors pay rates that range from 7.5 percent to 15 percent of their revenues.

IRFA seeks to create parity, according to its supporters. A special board designated by the Library of Congress sets royalty payment rates. Terrestrial radio companies pay no royalties while cable and satellite companies pay rates based upon their overall revenues. Pandora pays royalties on a per-play basis. IRFA would decrease the amount paid out by Internet radio companies by up to 85 percent.

A coalition of recording artists and music labels called musicFIRST wrote that IRFA adds “insult to injury” for performers who are not paid by terrestrial radio companies and are underpaid by satellite and cable radio.

The conservative coalition opposing IRFA supports a free-market alternative to negotiations between Internet radio companies and artists. “The best way to achieve parity among music distributors is to get the government out of the rate-setting business,” they wrote in their letter.

Jeffrey Eisenach of the American Enterprise Institute testified last year before Congress against the measure.

In a phone interview with TheDCNF, Eisenach said that Pandora is one of the most successful Internet startups in history. “If they wanted to be profitable tomorrow, they could be,” he said.

The company has invested in growth and new markets rather than focusing on generating revenues through traditional means such as advertising, he added.

Eisenach said that the royalty payment standard proposed by IRFA and supported by Pandora “tips the scales in favor of Pandora to make sure it’s going to earn a profit.”

“It’s corporate welfare,” he concluded.

Last year a group of over 125 musicians including acts as diverse as Britney Spears, Ted Nugent and rapper Lupe Fiasco signed an open letter criticizing Pandora’s push for the bill.

In their letter, the group of recording artists asked “why is the company asking Congress once again to step in and gut the royalties that thousands of musicians rely upon?”

In a June op-ed for USA Today, members of legendary rock band Pink Floyd wrote that Internet radio outlets like Pandora “should fairly pay the artists and creators who make the music at the core of their businesses.”

They cited data from SoundExchange which showed that “nearly 90 percent of the artists who get a check for digital play receive less than $5,000 a year.”

“Netflix pays more for movies than Pandora pays for music, but they aren’t running to Congress for a bailout,” wrote the band.

While the bill has not been debated in 2013, Pandora was seen attempting to revive IRFA when it sought support from smaller musical acts.

The company sent a letter to this group of musicians which stated that their “goal is to make something…that can materially impact the ability of artists to make a living.”

The letter received criticism after New York-based recording artist Black Morgan released an email exchange with Pandora founder Tim Westergren. Morgan was paid $1.62 for nearly 28,000 plays of his songs.

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