Web Radio Darling Pandora Breathes Easier, For Now

Peter Kafka

Who says our elected officials can't get anything done? In addition to hammering out a $700 billion Wall Street bailout deal over the weekend, lawmakers extended a lifeline to Internet radio companies like Pandora, who are trying to lower the fees they're supposed to pay for streaming music rights.

Last night the House passed a bill that essentially gives Pandora and other Webcasters the ability to negotiate with the music business over royalty rates (see press release below). It's expected to clear the Senate in the next few days. Webcasters, led by Pandora's Tim Westergren, have warned that if the bill didn't pass, many of them would end up pulling the plug.

But the bill itself doesn't ensure that Internet radio will survive. Assuming it goes forward, it will simply give Webcasters the ability to continue haggling with the music industry over "performance royalties" -- the fees they're required to music owners each they stream a song. Tim and other Webcasters won't actually tell us what they're willing to pay, except that it's less than what Congress signed off on last year.

And the Internet radio business also has to resolve something that can't get fixed in Washington: How to generate real revenue from their services, since advertisers have so far shied away. If that doesn't happen, it won't matter what how much Internet radio pays the music business: The costs are always going to exceed the revenues.

UPDATE: We're stuck in 2005, says Tim. His full response:

We're going to generate over $20M of revenue in just our 3rd year. I think it's fair to say that we're rapidly solving the monetization issue. Advertisers love the medium, it just takes some time
to break through when you're still growing your comscore numbers.

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Webcasters and Recording Industry Welcome
Passage of H.R. 7084

Bill Would Enable Implementation of Negotiated Agreements

Washington, DC – The House of Representatives last night approved by voice vote must-pass legislation that would benefit all webcasters -- large, small, non-commercial and simulcasters. The Digital Media Association (DiMA), SoundExchange, National Public Radio (NPR) and the Recording Industry Association of America (RIAA) all applauded the swift action taken by the House. It now moves to the Senate where supporters are hoping for quick passage.

The legislation (H.R. 7084) sponsored by Reps. Inslee, Berman, Smith, Conyers and Manzullo authorizes SoundExchange, on behalf of copyright owners and performers, to negotiate new royalty agreements for Internet radio through February 15, 2009 with Digital Media Association (DiMA), National Public Radio (NPR) and any other Internet radio service. It will benefit all webcasters, including broadcast simulcasters. This modification to existing law was introduced because Congress will be out of session as discussions between the parties continue, and it enables implementation of an agreement in the event the parties can reach an accord.

“Everyone is grateful to the sponsors of the bill and to Chairman Berman for getting this through the House last night,” said John Simson, Executive Director of SoundExchange. “This bill favors all webcasters and simulcasters – large and small. It paves the way for SoundExchange to use the coming months to pursue helpful solutions that allow all services to focus on business development. And, although there are no agreements yet, I am hopeful.”

Jonathan Potter, Executive Director of DiMA was also encouraged. “This is an important step. Hopefully the Senate will follow suit and we can return, energized, to negotiations.”

“This legislation benefits all music webcasters and excludes none," said Michael Riksen, NPR VP of Policy & Representation. “Passage will facilitate closure of an agreement to enable all public radio stations to continue their public service through the webcasting of music.”

Nothing in this bill affects the scope of sound recording performance rights or any underlying copyright law.

Supporters are hopeful the Senate will take up the bill prior to adjournment and it will be sent to President Bush for his signature. The parties expect negotiations to resume upon enactment of the bill.

Original here