Pandora seems to have gotten out of the gate early on its lobbying efforts, and now the recording industry is gearing up for a fight.
It all has to do with a pair of House and Senate bills -- dubbed the Internet Radio Fairness Act -- that would direct the Copyright Royalty Board to set Internet radio rates using the same standard applied to satellite and other forms of digital radio. Traditional broadcast radio doesn't pay musicians royalties for terrestrial broadcasts, and behemoth National Association of Broadcasters has backed the legislation, along with big radio station chains.
Ted Kalo is executive director of musicFIRST, a coalition that includes the recording industry. He told the Alley that they're beginning to ramp up their lobbying efforts given that Pandora "fired the first shot" with a mass email last week, and ads that play on Pandora that ask users to push their representatives to support the legislation.
Kalo said they're reaching out to musicians directly impacted by the bill, getting more analysts to show why the bill is bad (sort of like how BTIG analyst Richard Greenfield called the law "crazy") and reaching out to "online voices covering the music community." Kalo described such tactics as standing "in contrast to what Pandora is doing, which is kind of a one-click, very superficial, non-substantive appeal to Congress."
Maybe so, but it's a strategy that worked for Pandora before; in 2007, a new set of higher rates spurred the company to ask users to appeal directly to their representatives in Congress, and Congress eventually intervened. Kalo acknowledged that "they're getting impressive results on Twitter from their email," but added, "We expect to match their results with both volume and to provide greater depth."
Another tactic to be on the lookout for: musicians speaking out against the law, from the little guys to the heavy weights. It's a similar strategy to the one the recording industry employed back in 2009 during their push for the Performance Rights Act (remember when Billy Corgan of the Smashing Pumpkins and Chaka Khan hit the Hill to lobby?). There's nothing like a famous musician to draw attention to your issue.
MusicFIRST lobbied hard for the Performance Rights Act. The issue at the heart of that fight --the fact that broadcast radio doesn't pay artists royalties -- is something the coalition wants to revive again with this latest Hill battle.
"The [Internet Radio Fairness Act] bill purports to deal with fairness and parity, and to us the elephant in the room is there is one entity, terrestrial radio, that is exempt from paying," Kalo said. "When Aretha Franklin's 'Respect' is played on the radio, Otis Redding, as the songwriter, gets paid, but the Queen of Soul gets nothing."
Rep. Jerrold Nadler, D-N.Y., is circulating a draft bill that is more along the lines of what musicFIRST wants. It would have cable and satellite radio royalties set on the same standard currently applied to Internet radio and would make traditional stations pay more for online streams of their broadcasts.
And who's got the bigger war chest? MusicFIRST spent $290,000 on its 2009 lobbying efforts, and nothing since. But the coalition includes well-heeled groups such as the Recording Industry Association of America, which has spent $2.86 million on its various lobbying efforts thus far this year, according to the Center for Responsive Politics. Pandora has spent $90,000. NAB has spent $7.51 million on various lobbying thus far in 2012.
Much of the lobbying on this front will, essentially, set the stage for next year. Congress has quite a heavy, and serious load, to tackle upon its return (fiscal cliff, anyone?). So there probably won't be much appetite during the lame duck to take on radio royalty rates and listen to singers talk policy.