It is doubtful that I would ever have stumbled across one of my favorite bands, Storyhill, in a music store or major retailer like Target, much less on mainstream radio; yet a day does not go by that I don’t listen to their music. So what do I have to thank for this musical discovery? None other than Pandora Internet Radio.
My story is hardly a unique one. You would be hard-pressed to find a smartphone, tablet or laptop that doesn’t have Pandora, though users may be surprised to find out that the app has never turned an annual profit. However, that might be about to change if a bill called the Internet Radio Fairness Act passes in Congress. To understand how the act will benefit Pandora, we need to understand the “unfairness” faced by Pandora and other Internet radio stations. Last year Pandora paid more than 50% of its revenues in performance royalties, while satellite radio provider Sirius XM paid less than 10%, not including the royalties both companies pay to songwriters and publishers.
The reason for this difference is the way the two formats are governed. The royalty rates for streaming radio like Pandora are set by the controversial “willing buyer, willing seller” standard. This sets the rates at what the judges determine a willing buyer and a willing seller would find a fair price. But the actual seller, Pandora, does not think it’s fair for the company to pay so much more than satellite and cable radio, so the IFRA bill would put Internet radio under the 801(b) standard of the Copyright Act which sets the rates for cable and satellite radio.
Pandora founder Tim Westergren explained in an article on thehill.com that lowering royalty rates for Internet radio providers will encourage growth in the Internet radio industry. This includes stations that would play lesser-known artists who otherwise would not receive as much airplay, as proven by my aforementioned love of Storyhill. On the other side of the argument, members of the music industry have criticized the bill, saying it’s a way for Pandora executives and investors to pad their bottom line at the expense of songwriters, performers and producers. But what’s so wrong with Pandora wanting to make more money? Well, part of the problem is the way Pandora makes it’s money. For every hour of music it plays, Pandora aspires to sell one minute of advertising, a stark contrast to the thirteen minutes of music played by mainstream radio.
It seems Pandora could just sell more advertising, right? Again, this is part of the problem. Pandora is supposed to be YOUR radio. You create the stations, choose the artists, and are even able to like and dislike songs. Having to listen to more advertising essentially shatters the feeling of personal connection with the music that Pandora has created. Perhaps another reason listening to that much advertising on Internet radio is unacceptable is the way users listen to Internet radio: on their smartphones and mobile devices. For the modern college student, the smartphone is like an extra appendage. Having to see yet more advertising on our most personal of devices is intrusive considering our physical proximity to and, I daresay, emotional connection with, our smartphones. The advertisements can now literally be inside your head thanks to your ear buds and, for me, that’s a little too close for comfort.
If you find yourself on Pandora’s side of this debate, they are relying on you, the listener, to help them do something about it. The company is trying to start a grassroots effort to support the IFRA bill, encouraging listeners to write to their senators asking for support. Whether you support the bill or think Pandora has a bad case of corporate greed reminiscent the 2008 financial meltdown, is for you to decide. For me, there’s no denying that, without Pandora, there are plenty of artists I wouldn’t be enjoying.
Image Sources:
http://www.acousticmusic.com/fame/p04094.htm
Sources:
http://www.dailyfinance.com/2012/10/20/does-pandora-need-government-help-to-survive/