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Internet Audio Music Royalty Rates at Center of Negotiations

Chaffetz drafting measure to place online audio services on same page as satellite, cable audio

Pandora has been lobbying lawmakers on Capitol Hill about changing the royalty rate structure for Internet radio, getting out ahead of its rate-setting negotiations with the music industry that are set to begin in 2014 before the current royalty deal expires a year later.

Some 50% of Pandora’s revenue is devoted to music royalties and the Internet audio service provider would like to cut that back.

Pandora Founder and Chief Innovation Officer Tim Westergren has lobbied to have Internet audio services pay the same music royalties as other digital radio services, like satellite radio and cable audio services, we’ve reported.

Now, Utah Rep. Jason Chaffetz is crafting a bill to level the playing field for all Internet audio services, causing consternation among the record labels, reports The Hill.

Called the Internet Radio Fairness Act of 2012, the measure proposes to put online audio services under the 801(b) standard of the Copyright Act, the same standard used by the Copyright Royalty Board when setting royalty rates for cable and satellite radio, according to a summary of the bill. The measure is still being drafted, according to the account. That standard is also used when determining royalties paid by the recording industry to music publishers and songwriters.

Music royalty rates for Internet audio services are higher than they are for satellite radio and cable audios services, according to Chaffetz.

“Congress has an opportunity to enact legislation that will not only establish fair royalty rate-setting standards for Internet radio, but also drive more innovation in legal digital music distribution and treat artists as stakeholders,” Westergren told The Hill.

However a music source counters that Pandora is “making a lot more money” since it went public last year, and is now trying to get a lower rate at the expense of artists, according to the account. Pandora disagrees with that assertion.