Washington D.C.: Establishing a Level Playing Field

Yesterday I was in Washington testifying before a congressional committee on “The Future of Audio.” In addition to sharing our perspective on the evolution of radio, I took the opportunity to address the issue of royalties – specifically the dramatically high royalties paid by internet radio.

Tim at Congress.bmpI wanted to take a minute to share both my testimony itself and offer some explanation around why this is so incredibly important for us.

Radio as you know is going through a profound transition, driven by the arrival of personalized internet radio. Technology has put internet radio alongside broadcast radio everywhere – in the car, at home, on the go – and we all seek to attract the same listeners and build our business from the same advertisers. It’s the new ecosystem of radio.

But, when it comes to compensating performers for the music, huge discrepancies exist in the royalty rates paid by the different forms of radio. Internet radio pays a far higher rate than both satellite and broadcast radio. To be more specific, last year Pandora paid over half of all of its revenue in royalties, while XM/Sirius paid 7.5% and AM/FM paid 4%. It’s an astonishingly unfair system that was created years ago, at a time when internet companies were too young and powerless to defend themselves.

As a musician myself, I am proud of the fact that we pay royalties to musicians and support their careers. But the laws governing how these musicians are paid are outdated, and we need to level the playing field – for everyone.

We will be working hard in the coming months to bring greater parity to royalty across all forms of radio – hoping to encourage the adoption of technology-neutral laws that don’t discriminate against newer mediums like the internet.

Ultimately a healthier, fast growing internet radio industry is good for everyone. Much of the music we play does not get played anywhere else. In fact, over 95% of the 100,000 artists in our collection play every month. It is truly a more inclusive and democratic form of radio that, if it is allowed to reach its potential, could perhaps give rise to a musicians’ middle class some day. That’s a vision we can all get behind!

If you’re interested, you can read my full testimony here. There will be more to come on this important issue and as always, thank you for listening.

Tim (Founder)

Tim Westergren

Founder http://www.pandora.com/profile/tim

12 thoughts on “Washington D.C.: Establishing a Level Playing Field

  1. Tim,
    I appreciate your candor. And I am sure the rules for radio are completely screwed up. But, while your rates are high, Spotify’s are low, as are You Tube’s. Are you wanting your rates to be that low? Also, standard radio gives a listener very little control over what he hears, whereas the Internet gives listeners a lot. I would argue that the Internet royalty should be higher because a listener is not simply hearing a song by luck, it’s almost like being able to call the radio station and get it to play exactly what you want it to (yes, I think Spotify should pay more, You Tube, too!). If you’re the artist being requested, you should get more than the artist no one is requesting. Last, in your testimony you say “But if the song is delivered using internet transmission over 3G or 4G, then the effective percentage of revenue that must be paid by the company delivering the song goes up six fold.” This is not the Internet as most people would understand it, but wireless, which relies on a massively expensive infrastructure. Can you elaborate on this more? As I read your statement, this is not about Internet vs. satellite or terrestrial, but wireless (or mobile) vs. these systems.
    Jeff

  2. Just want to say I am in love with Pandora. I think it is hard for some of us to keep up with technology however, Pandora has made it so easy for people like me and I appreciate it.
    I am from Puerto Rico but don’t live there but I just discovered Pandora with the help of others of course….wow I can’t say enough wonderful things about Pandora. Heard some oldies from my beautiful island that has brought back memories OMG keep it coming please.
    Thank you ever so kindly for thinking of us the music lovers.
    Best,
    Marisol

  3. Just read the whole thing. Alls I have to say is: “Rock on Tim W.” Radio is my first love. As a broadcaster, I got to see firsthand the utter opulence the two major publishing houses present to the world at their Music Row locations in Nashville. The only thing missing there was the people! I would only gather it’s the same at their other locations. I agree wholeheartedly that musicians, composers and producers need to get paid, but this is the 21st Century, and the FCC needs some fresh blood and a new perspective. I am excited about the kick in the pants your company is bringing to both satellite and terrestrial radio. I hope the needed changes aren’t at the expense of your company.

  4. Well said Tim! Your well chosen words and clever analogies surely must have made an impact on the committee members. The inequities are painfully obvious and pose a threat to all forms of online audio. If logic prevails and on rare occasions it does see the light of day in Washington DC, the impact of your testimony will be felt for years to come. Thank you for making such a clear, well thought out case for Internet radio listeners, the Internet radio business and online audio fans across the planet. Pandora rocks! Cheers, MN

  5. I love Pandora as it helps me find artists I would never get to hear on mainstream radio. If I find a band I like, I’ll either buy their songs on iTunes or purchase their entire albums. Doesn’t the government have more important things to do, like fixing our economy?

  6. I agree with your statements and would like to thank you for testifying on our behalf. I am an online internet radio station owner who do pay royalties as well and I must say the rate we pay do eat up a lot of the revenues that we generate. Our station also gives traditional radio a run for there money because we too play indie artists that don’t get spins on traditional radio. Our station http://www.wsuionline.com and http://www.onlineinternetradio.com allow listeners to program the music they like for our library. So the listener becomes the program director. We too are also making a push to get to radio devices to directly compete with traditional radio which is an up hill battle because of the rate in which we are charged by the licensing companies! I am staying tuned to this issue as it directly affects our daily business. Once again Thank you for fighting for us little guys much love!

  7. I truly agree that the radio playing field should be equal and if it doesn’t, the only people that suffer are the artist. I know that as a radio station owner, it may cause some financial setbacks, but at the end of the day, their are thousands of unknown artist out there struggling to make ends meet with their music, but have no means of getting it to the masses.I realize that nothing is done for free and both the artist and internet radio station owner need to be compensated fairly, so please let me know what I can do to support your cause. I want to start my own internet radio station, but I don’t have enough resources to draw from in order to make it happen, so if their is any information you can offer, please feel free to contact me. Thank you and keep fighting Tim!

  8. I truly agree that the radio playing field should be equal and if it doesn’t, the only people that suffer are the artist. I know that as a radio station owner, it may cause some financial setbacks, but at the end of the day, their are thousands of unknown artist out there struggling to make ends meet with their music, but have no means of getting it to the masses.I realize that nothing is done for free and both the artist and internet radio station owner need to be compensated fairly, so please let me know what I can do to support your cause. I want to start my own internet radio station, but I don’t have enough resources to draw from in order to make it happen, so if their is any information you can offer, please feel free to contact me. Thank you and keep fighting Tim!

  9. I love Pandora as it helps me find artists I never get to hear on mainstream radio. If I find a band I like, I’ll either buy their songs on iTunes or purchase their entire albums.thanks

  10. Tim,
    I want you to know that I take the time to listen attentively to every add that your advertisers place on Pandora. I feel that I owe it to you and your advertisers for supporting such a musical miracle…aka Pandora.
    Thank you for giving us choices. Also, I have purchased music that I would otherwise not have had the opportunity of hearing.

  11. I discovered Pandora only about a year ago. Being from the vinyl era, it is hard for me to get used to hnviag all my favs in electronic form. I miss hearing my tunes rock the roof rafters in my home through my Klipsch speakers sputtering away under the crackle and pop of a drop needle. I did graduate to a CD jukebox when they first came out, but it broke down and my collection is still stuck inside. Getting a screw driver out to dismantle the box so I can get my collection back into play is on my list. But, getting music off the Web? That is on my list too.

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