I’d read an article by a musician a few weeks ago about this issue, but this “Forbes” piece really crystallized the issue for me. In a nutshell:
Due to some vagaries in US law, Sirius XM is legally able to pay much lower royalties to musicians than Pandora. Pandora argues that this isn’t fair (I agree), and seems to have managed to get a US Senator to introduce a bill called “The Internet Radio Fairness Act” which, if passed, would lower the royalties they pay to the same level as Sirius.
Pandora has a lot to gain by this act: overnight, they would go from being unprofitable to profitable, since royalty payments to artists consume 63% of their revenues. Also, Spotify and other rivals notwithstanding, Pandora is far and away the only big beneficiary of this proposed legislation.
The key thing to note is that the law lowers Pandora’s royalty payments to make an even playing field, rather than raising Sirius et al.’s. So, if passed, this bill would represent yet another evaporation of revenue for artists, to the benefit of distributors.
It’s easy enough to see why the law is phrased the way it is. If Pandora had gone after raising everyone’s expenses, they would have faced the united opposition of a few well-heeled traditional and satellite radio companies. If, instead, they go after trying to get the same low rates the established guys do, they might still get some pushback from them, but it’s not going to be nearly as determined. Meanwhile, the mass of artists (the folks really losing out here) are too numerous to present a united front.
I’m a fan of Pandora as a music-discovery service, but I’m very disappointed by this move of theirs. They had an opportunity to show some “corporate social responsibility” and advocate for positive change, but instead looked only to their own bottom line.
Now, it must be admitted that without this law, they may very well go out of business in a few years. But then, they may go out of business even with the law; and in the meantime, all they’ll have done is permanently cripple musicians’ ability to earn a living from their work. “I don’t care who I have to kill in order to survive” may be a defensible agenda for running a business, but not for writing the nation’s laws.