Legislation Seeks To Lower Online Radio Royalty Rates

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A bill introduced to Congress Friday (9/21) is designed to put streaming radio royalty rates in line with satellite radio royalty rates. Under the Internet Radio Fairness Act, a panel of federal judges would set rates, which would likely lead to lower rates for Pandora, iHeartRadio, Slacker and similar non-interactive online radio services.

Under current circumstances, a high percentage of company income goes to pay artist and songwriter royalties. These royalty rates are based on individual song plays, and though they are fractions of a cent, can add up very quickly to large sums. In Pandora’s case, the artists’ share alone cost the service half of last year’s revenue, according to CEO Tim Westergren.

By comparison, SiriusXM pays about 8 percent of its revenue for artist performance royalties.

Terrestrial radio stations only pay songwriters and publishers, not artists. The recent exception to this rule is the deals made by Big Machine Label Group with terrestrial radio broadcasters Clear Channel and Entercom. The model has BMLG and its artists being paid terrestrial performance royalties in exchange for a lower rate for digital performance royalties, which will distribute the royalty cost more evenly between both kinds of radio.

The Internet Radio Fairness Act was introduced in the House by Jason Chaffetz (Rep.-Utah), and Jared Polis (Dem.- Col.), and in the Senate by Ron Wyden (Dem.-Oregon).

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