The intentionally misnamed “Internet Radio Fairness Act” (IFRA) should actually be called the “Pandora Greed Screwing Musicians Bail Out Act” and here’s four simple reasons that everyone can understand why the rate setting in this bill, is in fact UnFair.
1) Pandora negotiated their royalty rate based on functionality. Other formats of digital radio have different functionality, so they pay different rates. If Pandora wants to pay a rate like another format of digital radio, then Pandora should function like that format. They don’t. That’s why Pandora’s rates were fairly negotiated after carefully determining how Pandora actually functions. As Westergren said in 2009–“The royalty crisis is over!” Until it’s not, apparently.
2) Other online content services that are dependent upon music for their primary source of revenue such as Spotify and Itunes distribute 70% of their gross keeping a 30% margin for all operating costs. Pandora is complaining about paying only 50% of gross revenues and Tim Westergren wants to pay even less so that he can show Wall Street analysts that Pandora can make more profit. Not to mention propping up the price of his own Pandora stock for a little bit longer (that he’s selling for about $1 million a month.)
3) It seems strange that Pandora could sell investors on the profitability of its business model during it’s IPO but now seems to think that model doesn’t work. Is this incompetence, or a deliberately dishonest and greedy transfer of wealth in a Wall Street Style bail out by asking Congress to change the law and move the goal posts? A two year old could figure out this is UnFair. Did Pandora think they could make a go of their business at the current rates during the IPO when they cashed out, or have they abandoned that idea now?
4) Pandora uses recordings on a government-mandated compulsory license which means artists have no ability to remove their music from Pandora even if they feel the rates are unfair. (This is like the compulsory license and statutory rate for songs–aka, “prison”.) Again, both Spotify and Itunes allow artists to remove their music from those services if they so chose. Pandora will force artists into a deal they can not opt out of, this is UnFair.
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