In a letter sent to Reps. Bob Goodlatte (R-Va.) and Mel Watt (D-N.C.), the three groups say the 801(b) royalty-setting standard that Pandora is pushing for in the bill would underpay recording artists and music labels for streaming songs their songs over the Web. They argue that songwriters and music publishers are already underpaid by Pandora and other Internet radio services.
Pandora believes being placed on the 801(b) standard could lower the royalty fees it pays to compensate musicians and recording artists and become more in line with the fees paid by cable and satellite radio stations.
The three groups argue that Pandora and other Internet radio services should continue to pay royalty fees to musicians and artists according to the royalty-setting standard it's currently placed on, known as the "willing buyer willing seller" standard. They added that songwriters and publishers should be also be compensated by Internet radio services according to that rate standard.
"In making their case that artists should be compensated under the willing buyer/willing seller standard for their copyright, artists and labels … have noted that the 801(b) standard is a 'below market, government mandated subsidy,' " the heads of the three groups wrote.
"As we make the argument that artists and labels should enjoy the more generous willing buyer/willing seller standard, the same should be applied for songwriters and publishers," they said.
The Pandora-backed royalty bill, the Internet Radio Fairness Act (IRFA), also "contains numerous troubling changes to the Copyright Royalty Board and its proceedings" to set royalty fees, they added.
The heads of the organizations say what's lost in the royalty debate is the fact that songwriters and music publishers already receive a "low level of royalties" from Internet radio services like Pandora. They contend that "Pandora pays only 4 percent of its revenue to songwriters and music publishers, while it pays nearly 50 percent of its revenue to labels and artists."
They argue that comprehensive music licensing legislation is needed instead of the IRFA, which is sponsored by Sen. Ron Wyden (D-Ore.) and Reps. Jason Chaffetz (R-Utah) and Jared Polis (D-Colo.).
"Put another way, for every dollar paid in music royalties by Internet radio, only 8 cents of it is going to songwriters and publishers, while 92 cents is paid to record labels and artists through SoundExchange," they wrote. "This disparity is not defensible."
The letter is signed by National Music Publishers' Association President David Israelite, Church Music Publishers Association President Elwyn Raymer and Barton Herbison, executive director of Nashville Songwriters Association International.
Goodlatte and Watt are the leaders of the House Judiciary Committee's sub-panel on intellectual property, which has jurisdiction over music royalties.
Pandora has argued that it's hard to stay profitable because of the royalty fees it pays and it unfairly pays higher rates than cable and satellite radio. The fight over royalties is heating up as the settlement terms of the current Internet royalty rates are set to expire in 2015.
-- This post was updated at 2:19 p.m. to correct the songwriters' arguments against the bill.