A power struggle has been raging within the music industry recently, and as with so many such struggles, smaller industry players and consumers – if they’re being considered at all – are little more than hostages.
In one corner we have Sony and Universal, and in the other we have Pandora. Pandora never made a direct bid for control, per se, but rather was one of several interested parties throwing their support behind the Internet Radio Fairness Act (H.R. 6480). Proposed on September 21, 2012, this bill aimed to create a more balanced atmosphere for royalties; Pandora claims to pay upwards of 50% of its revenue in royalties while SiriusXM paid under 10% of revenues in royalties. Opponents of the bill, which include many artists (despite its high revenue percentage going to royalties, artists receive considerably less per dollar of royalties than they do from terrestrial or satellite radio) and labels point out that a far lower percentage of Pandora’s revenue would go to royalties if they would allow more air time for ads, as terrestrial radio does – that is to say their revenue would increase considerably without that new revenue going to royalties. Opponents also took issue with the bill itself, particularly its amendments to U.S.C. Title 17, conveniently available here on the grounds that it’s anti-competitive and anti-free speech, and would potentially cripple small labels and distributors. The Internet Radio Fairness Act was ‘defeated’ in 2012, but many, including Billboard News believe that we’ll be seeing it again this year.
2013 has seen the majors striking back. Beginning January 1st, Sony/ATV has pulled its licensing rights out of BMI and ASCAP, groups which negotiate royalty rates to be applied for all of its members. This meant Sony/ATV was free to negotiate for itself (a luxury Sony can afford – and profit from – due to its size power), which it did. The result? Pandora will have to pay approximately 25% more in royalties to Sony than it did when Sony’s licensing went through BMI and ASCAP. And now Universal Media Group is looking to follow Sony’s example, as reported here. Some now fear that Pandora won’t survive, especially if it remains steadfastly opposed to increasing advertising. The effects of Pandora’s failure wouldn’t be limited to Pandora execs. While there are some prerequisites to getting music on Pandora, meeting those requirements is far from impossible for small labels and groups, and once accepted, Pandora represents considerable potential for broader discovery, an invaluable asset for smaller players in the music industry.