The Internet Radio Fairness Act (IRFA), introduced by Congressmen Jason Chaffetz, Ron Wyden and Jared Polis who voted against the SOPA and PIPA laws, seems to be garnering a lot of good and bad press. Many musicians are coming forth because of a quote by Representative John Conyers that states, “A more appropriate bill title might be the paycheck reduction act, because what it would do is lower the royalties that Internet radio pays by more than 85%.” But the real question is what could justify such a figure? While the bill is currently in a political stasis, it’s important to understand its rationale and the ways it seeks to correct the Library of Congress in its current operations.
At the center of this controversy are two things: Money and unfair treatment. As of today, internet radio outlets like Pandora pay a company called SoundExchange that represents artists and their labels. Every five years, the Copyright Royalty Board (whose members are appointed by the librarian of Congress) decides the prices these radio stations will pay to SoundExchange. The current consensus is that internet radio outlets should pay a fraction of a cent per song, as each song is classified as a ‘digital public performance.’ This means that stations like Pandora pay over 50% of their revenue to SoundExchange while stations like XM Radio and Sirius only pay around 12%. Traditional AM/FM stations don’t pay at all.
Despite the company’s tremendous success, things are especially hard for Pandora right now, which is why the service provider is one of the bill’s main supporters. Just last year, Pandora paid 54% of its revenue — $149 million – to SoundExchange in royalties. While IRFA is internet radio’s way of fighting back, this isn’t the first time that they’ve tried. Live365, another online music outlet, challenged the board on constitutional grounds. As the Copyright Royalty Board works under the Library of Congress, Live365 alleged in a complaint that Congress overrode its authority by appointing members of the board, who the constitution says are supposed to be appointed by the President and the Senate.
To further exemplify the injustice of the Copyright Royalty Board, statistics from Kurt Hanson’s Radio And Internet Newsletter reveal that in 2006 AOL paid $20 million off of an old annual $.0008 per song rate. For 2011-2015, SoundExchange lists their current minimum rate as $0.0019 per song for commercial web-casters. Noncommercial web-casters, like others, will have to pay a $500 minimum for every station or channel they have. If that isn’t bad enough, then you should also know that if they go over 159,140 aggregate tuning hours then they will be subjected to the same rates as commercial web-casters. According to Washington Times, 150 million people are currently registered to Pandora. You can only imagine how much that station’s losing due to these jacked up rates.
IRFA seeks to correct all of this at the expense of a few labels and artists not being able to feed off the earnings of a struggling business climate. Not only does it seek to make satellite, AM/FM and internet radio pay for their royalties the same way, but it makes the Presidential and Senatorial appointment of Copyright Royalty Board members one of its top priorities. Some claim that the RIAA fears the ability of internet radio to challenge the status quo as a reason for all of this. Others allege that the Internet Radio Fairness Act only seeks to slash profits from artists who already get a small percentage of their royalties. One thing is clear: If we want to put an end to the ongoing discrimination against internet radio, then we need to hurry up and act as individuals before the Copyright Royalty Board puts an end to it as a whole.