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Coalition Opposes Reducing Royalties for Web Radio

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Perry is a member of a group of 125 celebrity recording artists that signed a letter complaining about legislation that would reduce the royalty rates Internet radio stations pay to play songs would gut artists’ incomes.

Westergren argues that artists could actually make more money under lower rates, because more Internet radio stations would emerge and prosper. He contended that the nascent Internet radio industry could go under if rates are not reduced, although Kalo’s coalition questions whether that is true, given Pandora’s market success.

Norquist, whose Americans for Tax Reform group has considerable influence among conservative lawmakers, wrote in a letter to lawmakers last week that the Chaffetz-Wyden proposal attempts to control prices rather than allow labels and radio outlets to negotiate in the free market. He urged lawmakers to “move toward a market solution.”

“Government should extract itself from this debate to allow an environment to develop among broadcasters, record companies, artists and other interested parties,” Norquist wrote.

The AFL-CIO and NAACP are also opposing the measure because reduced royalties could hurt struggling artists and musicians. Both warn of “a race to the bottom in performers’ compensation” if the legislation is enacted, a fair-pay argument that could sway Democrats against the bill.

The House Judiciary Committee is expected to discuss the rate disparity between Internet and other radio stations at a hearing next week.

In addition to the Chaffetz-Wyden bill (HR 6480, S 3609), Rep. Jerrold Nadler, D-N.Y., is likely to bring up a competing proposal, aligned with record industry interests, that has not yet been formally introduced. The differences between the two approaches are stark.

Chaffetz and Wyden, both of whom frequently back Internet companies in such fights, introduced their measure in September. It would require the Copyright Royalty Board to evaluate Internet radio stations using the same standard as applied to satellite and cable radio providers, which, in effect, would lead to lower rates for the Internet stations. Terrestrial radio stations would continue to have free access to songs.

Wyden said at a conference last week that he hopes the legislation will allow Pandora and other Internet radio stations to compete on equal footing.

“It is the job of policymakers to ensure that the law and public policy doesn’t favor one business model over another, and doesn’t favor incumbents over insurgents,” the senator said.

The National Association of Broadcasters tacitly backs the Chaffetz-Wyden effort, but the trade group has not formally endorsed it.

Nadler’s proposal, on the other hand, would leave current digital rate structures in place. The bill would require terrestrial radio stations to make up for their free access to music by paying extra if they decide to run accompanying online stations. Nadler has criticized the Chaffetz-Wyden bill for attempting “to achieve parity at the expense of artists.”

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