We all love Internet radio. Services like Pandora play a diverse range of music and pay artists the royalties they deserve. But since going public, Pandora is acting like so many other companies on Wall Street- it's looking for a bailout. This time, the government subsidy would be paid for by artists.
Last year, Pandora asked Congress to pass the deceptively entitled "Internet Radio Fairness Act" (IRFA). This bill would have cut the music royalties paid by Pandora by as much as 85%, taking money away from music creators and giving it to Wall Street shareholders. IRFA would have allowed Pandora to pay royalties that are below a fair market rate, thereby increasing its profits while reducing payments to the featured artists, session musicians and producers that are the backbone of its business.
At a congressional hearing last fall, Members of Congress heaped scorn on IRFA, with one member derisively labeling it the "Paycheck Reduction Act" because of its impact on music creators. And just as importantly, the hearing shined a spotlight on the real inequity in radio - that while Internet radio services properly pay music creators, terrestrial radio broadcasters pay nothing. The Academy's witness at that hearing, Producer Jimmy Jam, drove the point home conclusively.
Pandora has had an enormously successful IPO and executives continue to make millions of dollars cashing in stock options. Pandora can afford to compensate hard-working artists and music professionals by paying fair market royalty rates. Instead of pushing this misguided bill, Pandora should support real radio parity by working with us to require terrestrial broadcast radio to compensate music creators just as Internet, satellite and cable radio services do.
Although IRFA died last year after facing broad bipartisan opposition, we know that Pandora plans to reintroduce this harmful bill again. This time, Pandora wants to try and use artists as their advocates - artists who would see their own pay slashed by IRFA - by encouraging them to sign a "letter of support" that they will use on Capitol Hill. The Recording Academy does not support any legislative effort by Pandora that will be used to reduce compensation to music creators.