Artists Oppose Internet Radio Fairness Act Pushed by Pandora

A who’s-who of musicians and singers, including stars from Motown, Rock and Roll, Country, Rap and Jazz, today released an open letter to be published in this weekend’s Billboard Magazine opposing Pandora’s plan to cut artists’ pay when music is played over Internet radio.

The stars, who included Alabama, Sheryl Crow, CeeLo Green, Billy Joel, Maroon 5, KISS, Ne-Yo, Katy Perry, Pink Floyd, Megadeath and many others, praised Pandora, saying: “We are big fans.”  But with massive growth in revenues and a successful IPO under its belt, the artists are wondering why Pandora is pushing Congress to slash musicians’ pay.  “That’s not fair and that’s not how partners work together,” the open letter explains.

The artists’ letter also goes on to say: “Congress has many pressing issues to consider, but this is not one of them. Let’s work this out as partners and continue to bring fans the great musical experience they rightly expect.”

Frankly, with all the extraordinarily important issues facing Congress, such as the fiscal cliff, sequestration and a lackluster economy where 23 million Americans remain unemployed I can’t for the life of me understand how or why the Internet Radio Fairness Act is or should be even being discussed. Seriously, some of the things that occupy Congress make you wonder whether we really ought to have a Congress any more. Dodge all the big issues, allow America to be on the brink of another downgrade of our debt and kick the can down the road on the big issues of the day. But for heaven’s sake let’s make time to alter a negotiated landscape that significantly puts the Congressional finger on the scale of big business at the expense of content creators.

As a content creator myself I have to wonder sometimes what goes through the minds of those who are not creators. Those who are non-sympathetic, as well as those who are just flat out ignorant, seem to be of the tremendously naive view that content is just somehow magically created and that it will always be magically created. Of course, the creative process, whether writing, photography, music, sculpting or any other serious creative endeavor takes a great deal of time. That means it is only economical to do if there is a financial incentive to undertake the project. Why is it so difficult for so many to grasp what seems like it should be extremely easy to comprehend?

Of course, Pandora is mounting it’s own campaign to get the public to support the Internet Radio Fairness Act.  Their website explains:

An important piece of legislation has been introduced in Congress to help end the long-standing discrimination against internet radio. We’re asking that you contact your representative today to urge them to support the Internet Radio Fairness Act.

This bipartisan bill will end royalty rate discrimination against internet radio and bring greater fairness to our industry. Today, the discrimination is extraordinary. In 2011, Pandora paid over 50% of revenues in performance royalties, while SiriusXM paid less than 10%.

Internet radio brings millions of listeners back to music, plays the songs of tens of thousands of promising working artists, enabling them to build their audience while receiving fair compensation.

What Pandora leaves out, however, is that five years ago it negotiated royalty rates with music industry organization SoundExchange.  These royalty raters were subsequently codified into law in the Webcaster Settlement Act. At the time, Pandora praised the deal and exclaimed to its listeners “the royalty crisis is over!” [more details here]. But now that Pandora is a publicly traded company and valued at over $1.4 billion (as of October 31, 2012) and boasts “record” revenues to shareholders, the company is asking Congress to enact the Internet Radio Fairness Act, which once again seeks to lower the rates it must pay artists and labels.

Furthermore, while Pandora continues to lobby lawmakers to slash royalty payments to thousands of musicians and labels, top company management at the Wall Street giant have cashed out company stock worth over $35 million since Pandora’s $235 million IPO in June 2011, with some transactions occurring as recently as October 16, 2012.

Exactly how is it fair for Pandora to seek Congressional action to modify a deal they negotiated at a time when company executives are becoming extraordinarily rich and the company is wildly successful?

But wait, there is more.  Not only is Pandora looking for royalties to decrease, but the Internet Radio Fairness Act would slash royalties paid to musicians and artists by 85 percent when their songs are played over Internet radio.  While the who’s-who of musicians and bands that signed the letter have done quite well for themselves, what about the many musicians and singers across all musical genres depend on these royalties, which are often their only compensation for their work.

How many of you would accept an 85% pay cut at a time when your employer is bringing in record revenues and management is cashing out stock and being paid millions of dollars in salary?

“This issue is critical to the tens-of-thousands of recording artists we represent – all of whom rely on this digital performance revenue stream to make a living,” said SoundExchange President Michael Huppe.  “It is important that we protect artists and the long-term value of their music, which is, after all, the foundation of Internet radio.”

Indeed, it is easy in the class-warfare world we now live in for many to begrudge successful individuals the success that comes form their hard work. But what about the many musicians and bands that are not so lucky? These acts do not get played on over the air radio stations, and truthfully there is little that these unknown artists can do to get playtime on over the air radio stations. I learned this first hand many years ago when I was a co-owner of an independent record label.

We signed a band that was locally very popular and fans would call into the station to request their songs be played. Ultimately the radio station contacted us extremely upset and charged us with coordinating a call in campaign and ordered us to stop. We were not coordinating any such campaign and their songs never were played on the over the air radio station. Over the air radio stations simply don’t cater to listeners. They play what they are told to play knowing full well that listeners will still listen nearly regardless of what they play.

The reality is that musicians, bands, singers and artists will make no money if radio stations go out of business, and that includes Internet Radio Stations.  The copyright is an exclusive right, but one where the owner rarely if ever wants to flex muscle to get anyone to stop.  The content creators of music, for example, affirmatively do not want you to stop infringing activities.  They want to get paid a fair amount so you can keep on doing what you are doing. So there is incentive to engage in negotiated resolutions, which is the backbone of the entertainment industry, particularly the music industry.

Frankly, I don’t think the Internet Radio Fairness Act is one that Congress should approve. Even if I were in favor of the Act substantively it would be a hard to justify Congress spending any time on this matter given the cataclysmic problems facing our nation. But add in that this deal that Pandora now seeks to change is one they negotiated and I see no reason for Congress to weigh in whatsoever. The parties are well represented and well capable of coming up with a workable solution that is mutually beneficial. We don’t need government getting any more involved in this dispute.