One of the biggest expenses for Internet radio stations are the royalty fees they pay to artists and publishers. The problem Internet radio stations have is that they are forced to pay a higher royalty rate than some similar services such as satellite and cable radio stations. A new legislation was introduced last Friday by Representatives Jason Chaffetz (R-Utah) and Jared Polis (D-Colo.) while Senator Ron Wyden (D-Ore.) introduced a similar legislation in the Senate.
The legislation is called the Internet Radio Fairness Act and is being backed by online radio service Pandora. The goal of the legislation is to lower the royalties paid by Internet radio stations so that they are on level with the rates paid by satellite and cable radio providers. The lawmakers argue that Internet radio stations unfairly pay higher royalty rates than cable and satellite stations.
The reason is that online radio stations are placed on a different royalty-setting rate than the other similar services. Internet radio providers argue that the royalty rules hamper innovation and discriminate against Internet-based radio stations. The bill proposes moving online radio services to the same 801(b) standard of the Copyright Act that is used to set royalty fees for cable and satellite radio providers.
The difference in royalty rates paid by Internet radio services compared to cable or satellite services is substantial. Internet radio services pay over 55% of their revenue in royalty fees while cable and satellite stations pay between 7% and 16%. The new bill has also received support from Clear Channel, Engine Advocacy, the Consumer Electronics Association, and the Computer and Communications Industry Association.
[via The Hill]