On The Internet Radio Fairness Act: Burn It All Down & Start Anew

Posted November 29

Welcome to the O Music Awards guest writer series, a place where we hand the proverbial reins over to qualified writers/musicians/etc and let them share their thoughts about music, technology and more. Today’s guest blogger is Jonathan Sexton, musician and co-founder of Artist Growth. This is the first part in a series of opinion pieces dealing with Pandora’s proposed “Internet Radio Fairness Act,” which would lower the royalty rates that Internet radio pays to artists. Currently, Internet radio pays the highest royalties, cable and satellite pay significantly less, and terrestrial radio pays nothing.

Sometimes in life there is a simple and clean way to make improvements. Other times you have to get out the gasoline and matches, burn it to the ground and start over. Sitting here reading about and watching the Internet Fairness Act (IRFA) hearings, I can’t help but think option 2 (gasoline) is the clearest path forward for all parties involved.

Full disclosure: It would pretty much take an act of God for me to support a pay cut for artists — ever. It’s one of the toughest jobs in the world for creatives to make sustainable living, and being an artist for so many years, I am sympathetic to that struggle.

There is basically no union, no retirement, no 401k, or anything resembling security. That’s the price of doing what you love, and no one is walked to the stage at gunpoint. Personal responsibility is the key to success in music. And although artists must continue empowering themselves with the business tools and skills necessary to succeed in order to improve their situation, the federal government doesn’t need to pass a short-sighted piece of legislation that is so in favor of one party over the other. That said, Pandora does bring a very legitimate perspective to the table, one that I believe points to an entirely different solution.

Pandora isn’t totally off base in their request. They are at an incredible competitive disadvantage as a result of outdated laws. According to their website, Pandora pays over 50% of their revenue to rightholders, whereas satellite radio pays only 7.5% and cable pays about 15%. I agree. This is “unfair,” and is the result of splintered legislation being passed slowly during the a time where technological innovation is at an all-time high. Pandora has proven the legitimacy of Internet radio as a “here to stay” force in the music community, and that should be legally acknowledged.

Pandora, in the end, is a financial play for their stockholders. I understand and want them to do well, make money, hire more people, and turn a profit. As a music tech founder, I absolutely believe in free enterprise and believe in their right to eliminate a competitive disadvantage. However, paying the artists less is the wrong way to go about it. Unless, of course, they wanted to reward artists with stock in Pandora instead, which is more than a longshot. Otherwise, the “it’s not fair we pay more than the other guys” angle is only in the benefit of themselves, and not best for the music community as a whole.

One doesn’t have to look further than the United States Constitution to see what the government’s role in this situation is. Their job is to decide what works best for all parties involved. Yes, we need a more equitable landscape for digital radio outlets. Yes, artists need to continue to generate as much income as possible from their copyrights. It’s obvious that Pandora should not be at such a competitive disadvantage, but the elephant in the room is that satellite and cable radio formats should be paying MORE. Forget Pandora paying less.

Pandora could leverage their strong position in the marketplace to alter the landscape in a way that is supportive to artists and levels the playing field across all digital radio formats. To provide an oversimplified version of how this could work, an act could be passed that streamlined royalty payment structure for all digital formats under one set of guidelines. Everyone pays 20%. There is no longer a disadvantage, artists could arguably make more money, and the government could actually do what it was created to do, which is create situations where everyone can get an equal piece of the pie. A Congress that is currently charged with creating jobs and boosting the economy wouldn’t have to create as many if it set the stage for certain citizens (artists) to continue doing what they do at a fair rate. I don’t usually support government regulation of business, but in this case, it’s already regulating the digital radio space, so why not regulate in a way that everyone has an equal shot at victory.

As the game evolves, the rules have to evolve, so instead putting a Band-Aid on a bullet hole and awarding Pandora special privileges, why not create a landscape that is equitable for everyone involved? That would be the REAL “Internet Radio Fairness Act,” and the one currently on the table could be ripped up, waded up, and burned, by the people, for the people.

Image courtesy of Flickr, matthewvenn