The Internet Radio Fairness Act won’t solve the core problems in the music performance market, namely lack of true competition, said a new report by a group that sometimesopposes regulation. The Information Technology and Innovation Foundation said the royalty system envisioned by the bicameral bills introduced in September favors “the status quo over innovation in the music and broadcasting industries.” The bill “doesn’t address inter-platform competition, intra-platform competition, or inter-music competition, all of which suffer in the current royalty system,” ITIF Senior Analyst Daniel Castro wrote.
Pandora has supported the bills, while some musicians including those seeking a law that would for the first time require terrestrial radio stations to pay a performance royalty for songs they broadcast have opposed it (CD Nov 14 p13). Castro’s report is “balanced” because it recognizes that any royalty model should apply across platforms where music is heard, an official at a nonprofit that’s sought performance royalties told us. “I don’t think you can talk about fairness without addressing that fundamental inequity” between platforms, said Deputy Director Casey Rae of the Future of Music Coalition. “The idea that terrestrial radio will enjoy an unfair terrestrial advantage by not paying performers is definitely something that needs to be” addressed, he continued. The bills “could slash by 85 percent royalties paid to musicians and artists when their songs are played over Internet radio,” said a Nov. 14 news release from the MusicFirst coalition of groups including RIAA that seek terrestrial performance royalties and SoundExchange. Spokeswomen for the coalition and Pandora had no immediate comment Monday.
It’s not clear why the bill drops the current requirement that Copyright Royalty Board judges have expertise in economics and copyright law or why it proposes judges become presidential appointees, “since this would further politicize the process,” Castro said. Congress would be “favoring the status quo over innovation” in music and broadcasting if it approved the bill, because it seeks a rate-setting process that minimizes the “disruptive impact” on the industry, he said: “Historically, many technological innovations have resulted in substantial disruptions in the economy and society,” such as the effect of Netflix and Redbox on Blockbuster. The willing buyer/willing seller royalty standard, which the bills would pivot away from, is an area worthy of a “realistic discussion,” Rae told us. “No single technology should be bearing a disproportionate royalty burden, but no burden should be completely exempted” either, he said of terrestrial radio, satellite radio and Internet streaming. All those platforms are “important” for musicians’ careers, he said.