House lawmakers on Friday introduced a bill aimed at lowering the fees paid by
The bill proposes to change the way the U.S. Copyright Royalty Board calculates how much money Internet radio services must pay music labels and artists.
Pandora has actively lobbied Congress to make the change, arguing that the current method is unfair because it charges Internet radio services disproportionately more than similar services provided by cable operators and satellite radio. Titled the Internet Radio Fairness Act, the bill would make it so that the royalty board must apply the same calculations to Internet radio as it does for satellite and cable radio.
The Oakland-based company lauded the bill, saying in a statement that the legislation would "establish a level playing field for Internet radio by putting it under the same rate standard of the Copyright Act as cable and satellite radio."
But artists and labels objected to changing the royalty structure, saying it will hurt musicians.
"There's nothing fair about pampering Pandora, with its $1.8-billion market cap, at the expense of music creators," said Ted Kalo, executive director of the MusicFIRST Coalition, a group that represents musicians.
The bill, sponsored by Reps.
For Pandora, the 2 pennies is adding up to hundreds of millions of dollars a year. In the second quarter alone, Pandora paid $60.5 million in royalties, or roughly 50% of the company's revenue. The rate for satellite radio is set at 8% of gross revenue, while cable music service providers pay 15% of gross revenue.
"If Pandora was not burdened with these punitive royalties, the company could introduce music services that could grow the industry and grow royalties," said John Villasenor, a senior fellow at the