Internet music royalties: what's fair?

Two proposed bills aim to make royalty payments more fair for internet radio - but only one has musicians' best interests in mind

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Here’s one thing (I think) we can all agree on: royalties paid to recording artists for music streaming aren’t fair. What would be fair, though, is where the arguments begin. Here’s a quick recap of the current state of affairs:

* Anyone streaming copyrighted music in a “non-interactive” manner (e.g., internet radio stations like Pandora) must pay royalties that go to labels and performing artists. Broadcasters do not pay these royalties for the music they stream over the air (they do, however, pay them for whatever music they stream).

* Satellite radio and cable TV systems that play music also pay royalties to labels and performers, like streamers do. However, they pay at a much lower rate than streamers, based on a fixed percentage of their revenue (e.g., SiriusXM currently pays 8 percent). Music streamers generally pay based on the number of people listening to their streams; the more people that listen, the more they pay. In reality this means a much higher rate of revenue goes to these royalties; in Pandora’s case, more than 50 percent.

Internet-only stations (e.g. Pandora), as well as satellite radio and cable TV, are unhappy because they pay royalties that broadcasters don’t have to. Music streamers of any sort (whether they also broadcast like Clear Channel or not) are unhappy because satellite radio and cable TV pay less than they do. Labels and artists are unhappy because they don’t get paid for music that gets broadcast, and they don’t get paid as much for music played on satellite radio or cable TV.

So nobody’s really happy: artists, labels, broadcasters, streamers, satellite radio or cable TV providers.

Some of those frowns are about to get turned upside down, though, because recently two competing bills have been introduced in Congress to level the playing field. The thing is, they each level the playing field in a very different way.

On one hand you have the Internet Radio Fairness Act, which would lower the royalty rates that music streamers pay, to be more comparable with what satellite radio and cable TV pay. This bill is supported by music streamers, such as Pandora and Clear Channel. It does not propose to make radio stations pay these royalties for music they broadcast. Needless to say, artists and labels are against this bill.

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