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.
I 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 But the laws governing how these musicians are paid are outdated, and we need to level the playing field – for everyone.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.