Government Picking Winners & Losers… IRFA

The Internet Radio Fairness Act of 2012 is likely to be reintroduced either this year or the next, and that’s a good thing. As the bill remains in a senatorial limbo, the fate of internet radio is something that’s uncertain to everyone. Outrageous royalty fees threaten to diminish even the most successful companies in the business, while other forms of radio remain afloat with little to no turbulence at all.

Cynical people will tell you not to trust the government with leveling these royalty fees, but trust isn’t the real issue here. IRFA is something that needs to happen for those of us who want to see internet radio stick around for the next decade or so.

With our current system, there is a lot of controversy over how fairly the fees are distributed. One of the most powerful arguments emphasizes the dichotomy between the 50% that internet radio pays and the 12% that satellite radio pays for royalty fees. Traditional AM/FM stations pay absolutely nothing. The music industry has come after AM/FM stations in the past, comparing their almost charitable exemption from royalty fees to piracy. In 2008, the recording industry pushed for bill HR 4789 to make AM/FM stations pay like everyone else. While IRFA functions on that same principle, the lack of strongarming when it comes to the business of internet radio apparently dissuades support.

But let’s forget for a second that Pandora paid 55.9% of its total revenues – $238.7 million — to SoundExchange for royalties at the end of the fiscal year earlier this January. What about the unknown artists and labels? As it stands, AM/FM radio is estimated to generate nearly $2 billion annually for the recording industry. It’s no secret that most of that $2 billion is eaten up by major labels that can afford massive advertising campaigns for their artists. On the lesser regulated internet radio, these artists are given more of a chance to be properly promoted. One band, Break of Reality, garnered a sales increase of 406% solely from being listed in Pandora’s music library. In killing internet radio, we do a disservice to far more than just Spotify or Rhapsody.

And what about SoundExchange: The non-profit company that supposedly represents the artist and their labels? Many argue that SoundExchange is collecting royalties that most of these artists haven’t asked them collect. Last year, it was reported that the company had amassed well over $100 million in royalties. SoundExchange was flooded with bad press when they threatened to hold many of the royalty checks for themselves and released a list of huge artists they could easily reach. The controversy surrounding this company is what can be expected with the Copyright Royalty Board entrusts a single entity with safeguarding hundreds of millions of dollars. There’s more than enough proof that this system is flawed.

Many multimillionaire celebrities enjoy the incalculably large profits that they get from extorting internet radio. The thought of getting less money is something that would be discouraging to anyone, but in this case it’s necessary. It’s not wise to kill off a potentially lucrative field of business because muscians, who earn most of their money from touring anyway, can’t do without a few extra dollars. All IRFA does is balance the distribution of royalty fees and reinforce the constitutionality of the Copyright Royalty Board by having its members properly appointed by the President. This bill could save internet radio and boost the careers of countless artists who’ve strayed away from major labels. If you’re against that, then maybe you should reevaluate your interests.

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