In a move to insure that all forms of digital radio, whether satellite, cable, or internet, compete against each other on a level playing field, Congressmen Jason Chaffetz (UT-03), and Jared Polis (CO-02) introduced HR 6480, the Internet Radio Fairness Act. Companion legislation will also be introduced in the Senate by Senator Ron Wyden (OR).
While Internet radio services compete directly with all audio platforms for listeners in every place you find music -- at home, in the car, at the office, and on the go -- they are subject to a surprisingly disproportionate royalty burden compared to these other formats. These rules discriminate against Internet radio, hamper innovation, and frustrate the goals of the Copyright system. As a result Internet radio companies today pay more than 55% of revenue in royalty rates when other forms of digital radio such as cable and satellite pay between 7 and 16% of revenue for performance royalties.
"Internet radio should be a boon to the entire audio market -- from the creators, to the distributors, and of course to the consumers -- but instead it is barely hanging on," Chaffetz said. "Congress enacted the royalty rate standard for Internet radio 14 years ago, when Internet radio was barely a concept. This bipartisan legislation levels the playing field for Internet radio services by putting them under the same market-based standard used to establish rates for other digital services, including cable and satellite radio. It's well past time to stop discriminating against Internet radio."
"When I was in college, making a mix tape was the height of technology but fans can now legally make their own playlists in the cloud to share and enjoy. Our laws shouldn't penalize the innovators who made that leap and created jobs by forcing them to pay outrageous royalties that are far greater than their competitors. We should pass the Internet Radio Fairness Act now because it's what's right for consumers and our economy," said Polis.
Under current law, the royalty rates prescribed for Internet radio are established based on what a panel of three copyright royalty judges determine to be the "marketplace" rate for musical licenses. But there is no functioning "market" for these licenses and these judges are left to determine rates based on different rights for dissimilar types of services. As a result, Congress was forced to intervene after every Internet radio proceeding to help the services lower the burdensome rates set by the judges. The current method these judges use to establish royalty rates for Internet radio has led to webcasters paying much higher royalty rates than other digital music broadcasters, like satellite and cable.
The long-established method (known as the 801(b) standard) that copyright judges use to determine royalty rates for satellite and cable providers enables a broader and balanced set of factors to be considered. HR 6480 puts Internet radio under this 801(b) standard. The 801(b) standard helps strike the appropriate balance to promote the creation of copyrighted works and encourage copyright users to develop new markets for these works. The 801(b) standard is used for all other forms of statutory royalty rate setting, including for cable and satellite radio and for determining the royalties paid by the recording industry to music publishers and songwriters, and has worked successfully since 1976.
The Internet Radio Fairness Act is supported by Clear Channel, Salem Communications, Pandora, the Webcaster Alliance, the Digital Media Association (DiMA), Engine Advocacy, the Computer and Communications Industry Association (CCIA), and the Consumer Electronics Association (CEA).