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Tech / Congress

Pandora Taking Page From Broadcasters' Playbook

September 26, 2012

Taking a page from the playbook of more traditional broadcasters, Pandora is using its Internet radio platform to generate support from millions of listeners for legislation offered late last week that would likely lower the fees Pandora and other Internet radio stations pay to performers and record labels.

In both banner ads on its site and ads in-between programming, Pandora is urging the site's 56 million active listeners to contact members of Congress to support the Internet Radio Fairness Act introduced last week in both chambers by Rep. Jason Chaffetz, R-Utah, and Sen. Ron Wyden, D-Ore. The bill, which Pandora lobbied for, would require that the Copyright Royalty Board use the same standard for setting rates for paying performers as it does for satellite and radio, which pay a much lower rate.

In the ad running on Pandora, company founder Tim Westergren asks listeners to contact their members of Congress to support the legislation "It's a bipartisan bill that will create a level playing field across all digital radio allowing for much faster growth of Internet radio," Westergren tells listeners. Pandora used similar tactics in 2007 to push for lower royalty rates, which the company now says are too high.

The move is reminiscent of the tactics used by broadcasters a few years ago to defeat legislation strongly backed by the music industry that would have required traditional terrestrial radio stations to begin paying fees to performers for playing their music on air. Radio stations took to their airwaves to blast the legislation as seeking to impose a "performance tax" on radio. Broadcasters argued that musicians benefit from the exposure they get from having their music played on traditional radio stations.

During congressional testimony earlier this year, Westergren lamented the fact that his company pays as much as half of its revenues in performance royalties while traditional terrestrial radio stations pay nothing to performers for playing their music.

However, Pandora and traditional radio stations now find themselves on the same side in backing the Chaffetz-Wyden legislation. The National Association of Broadcasters, along with several big radio station chains such as Clear Channel came out in support of the legislation. While they may have a pass when it comes to paying musicians for playing their music on traditional radio, stations are required to pay performance fees when that same music is simulcast on the Internet.

"The current system has become an insurmountable roadblock to new Internet radio business models. Rather than facilitating a growing and dynamic new media environment, it has instead become an impediment to new Internet radio business models--models that could be bringing more music to larger audiences," Salem Communications, which operates 95 radio stations across the country, said in a statement last week. "A new model, as proposed by Senator Wyden and Congressman Chaffetz, could provide increased exposure and business models with long-term viability to our incredibly talented and creative American artists in all music genres."

With Congress gone until after this fall's election, the issue is likely going to have to wait until next year before lawmakers take any possible action.

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