By Tim Westergren, Founder, Pandora

Rarely in the world of technology and music can you find a true win-win opportunity—one that meets consumer needs and expectations, generates opportunity and value for artists, and nurtures innovative entrepreneurship and the creation of new businesses. That opportunity is here in the form of Internet radio.

Radio is our pipeline to music. It accounts for roughly 80 percent of the 15–16 hours a week the average American spends listening to music. It remains the number one source for music discovery and the number one medium for promotion of new music. And this medium is undergoing a fundamental transformation—the first since the switch from AM to FM.

By taking advantage of unicasting over the Web, personalized Internet radio has created a new and completely different experience for listeners. And connected devices, be they smartphones, Blu-ray players, connected TVs, set-top boxes, automobiles or even refrigerators, are making it possible for consumers to access this new experience anytime and anywhere. It is bringing tens of millions of listeners back to music, and pulling tens of thousands of otherwise unknown and invisible artists into the mainstream marketplace. Pandora alone plays the music of more than 100,000 artists, 70 percent of them independent and stretching across hundreds of genres.
Unfortunately, the laws that govern digital radio royalty payments have not evolved at the same pace, casting a dark shadow over the business, and discouraging new investment that could propel the category forward. Current copyright royalty law discriminates against Internet radio by requiring webcasters to operate under a different, more punitive rate-setting standard than is applied to other forms of digital radio. This double-standard is the result of piecemeal legislation that was enacted as each new technology was invented, without a clear vision of the future. It has driven many webcasters out of the business and threatens to suffocate the few remaining players.

A bill now before Congress called the Internet Radio Fairness Act will correct this problem by extending to Internet radio the same rate-setting standard used by all other forms of digital radio. The legislation, sponsored by Sen. Ron Wyden and Reps. Jason Chaffetz, Jared Polis, Darrell Issa and Zoe Lofgren, replaces the current discriminatory standard with the more widely accepted 801(b) standard to determine royalty rates. The 801(b) standard is balanced to encourage both the creation and promotion of creative works and the growth of robust and sustainable markets for these works.

The Internet Radio Fairness Act doesn’t set or change royalty rates. It simply encourages the Copyright Royalty Board (CRB) to have access to, and take into account, all relevant information when they make their decisions about royalty rates.

Internet radio is a vital outlet for music that has no other voice—jazz, blues, classic country, reggae, klezmer, punk, classical and more. Imagine what the future could be for musicians and consumers if this medium were truly allowed to reach its potential? The audience is there. The infrastructure is there. It’s time for a technology-neutral legislation that brings fairness to the modern radio business.

A fair royalty rate standard for Internet radio will drive investment and innovation into webcasting, which ultimately means more choices for consumers and more revenue and opportunity for working artists.
When the digital music sector is allowed to grow and innovate, everybody wins.