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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On the other hand, you have the Interim Fairness in Radio Starting Today Act, which would increase the rates paid by cable and satellite TV to be more in line with what the streamers pay. In addition it would also remove royalty exemption for broadcast music. Not surprisingly, this bill is supported by labels and artists and opposed by music streamers, broadcasters, and cable/satellite radio.

In a nutshell, if you want artists to get paid more, you support the Interim Fairness in Radio Starting Today Act; if you’d like Pandora to pay less in royalties, you support the Internet Radio Fairness Act.

To be honest, I’ve had trouble to trying to decide which way I lean. I love Pandora and the service they provide to me, so I’d like to see it survive. I’ve also worked with many radio stations over the years (public broadcasters) and know that they are very burdened by the costs of streaming music (not to mention the work involved around royalty reporting - that’s a whole other matter). But I also believe the artists really should be getting paid when their music is played, whether over-the-air or online, and more than just a token payment.

To help clarify my thoughts, I gathered some recent data on music streaming royalties and did some quick back of the envelope calculations to see what amounts of money we’re talking about.

Performance royalties in the United States all get collected and administered through a single organization, SoundExchange. Looking at their most recent annual report we see that they received a grand total of $377,551,216 in royalty payments for 2011. 5.3% of that, or $20,134,135 went to administrative costs. The remaining $357,417,801 was to be divided up like so:

50% ($178,708,541) to record labels

45% ($160,837,686) to the featured performers on the recordings

5% ($17,870,854) to non-featured performers and vocalists

In order to get paid by SoundExchange, featured performers must register with them. Currently, there are 70,000 such artists. That means that, on average, those featured performers each earned $2,298 in 2011 from music streaming (and satellite radio and cable TV). That’s not a whole lot of money.

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