Internet Radio Fairness Act undermines value of music and copyright

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Pandora, a vocal supporter of the legislation, alleges unfairness because they pay songwriters, music publishers and record labels differently than satellite or broadcast radio. Yet Pandora and companies like it have created a business model based entirely on the creative contributions of songwriters and the related artist recordings.

For the record, Pandora pays songwriters only 4 percent of their total revenue, a sum that is woefully inadequate.

The bill contains troubling provisions that not only change the Copyright Royalty Board but also effectively lower the total royalties Internet radio pays to artists and labels. It changes today’s market-based approach, commonly called “willing buyer / willing seller,” to the onerous 801(b) standard. This latter rate standard, by the way, is the same rate standard that grossly underpays songwriters and publishers for their copyright under section 115.

While I strongly believe H.R. 6480 is bad policy and would set a disastrous precedent, my bigger concern is how this Congressional effort stands to undermine the value of music. 

The music business is complicated in part by multiple copyrights: one for music compositions (belonging to songwriters and often owned by music publishers) and another for the recording of that composition (represented by record labels). These two separate and distinct copyrights are treated very differently under the law, have very different histories and business practices, and at times can even have conflicting interests.

Until recently, copyright holders held a fiercely competitive attitude, each side fighting for their piece of money to the detriment of other copyright holders. It is a toxic approach and one that assumes there is a finite amount of money in any given business model for music.

But in the last few years, the music industry has embraced a new approach, one I call One Music; recognition that working together we increase our industry’s value. The concept is a simple and realistic one. Voluntary agreements, cooperative licensing and collaborative negotiating benefit not one, but all. When copyright holders support the total value of music, destructive practices that push another’s rates down in hopes of increasing one’s own disappear. 

This month’s expected hearing is a test of One Music’s progress. The music industry must unite and oppose efforts to reduce what Pandora pays to record labels and artists. However, the united front must continue beyond H.R. 6480. That means songwriters and music publishers should oppose any effort to lower the rate standard paid by Internet radio to record labels and artists. And we do. But that also means record labels should be supportive of songwriters and music publishers being paid under the same standard.

I believe in the One Music philosophy, but for it to increase the value of music, the entire music industry must consistently adopt the concept. Music must be compensated in a way that enables it to receive the fair market value it deserves.  

Our future depends on it.

Israelite is president and CEO of the National Music Publishers’ Association.