Pandora, music labels gird for Web-radio battle

Music labels plan to meet Tuesday to discuss plans to oppose bill designed to cut Webcasting royalty rates, CNET has learned. Meanwhile, Pandora is forming new alliances in effort to see bill passed.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
2 min read
The music labels are meeting early next week in preparation for a legislative battle over Webcasting rates. Greg Sandoval/CNET

WASHINGTON, D.C. -- Pandora and the major record labels were busy this week drawing up battle plans and forming alliances in preparation for a coming Capitol Hill fight over the royalty rates Webcasters are required to pay for music.

Pandora founder and Chief Strategy Officer Tim Westergren at the Web 2.0 Summit in 2011.
Pandora founder and Chief Strategy Officer Tim Westergren at the Web 2.0 Summit in 2011. James Martin/CNET

CNET has learned that representatives from the three largest music-recording companies, Universal Music Group, Sony Music Entertainment, and Warner Music Group, plan to meet early next week with some of the industry's top artist managers in New York to discuss strategy about how to block passage of the Internet Radio Fairness Act.

The legislation seeks to reduce the rates Webcasters pay to play music and make them more equitable with fees paid by satellite and cable radio services. The large record companies, numerous indie music labels, and artists unions favor a separate bill that would instead raise the rate satellite and cable radio services pay.

Web radio is a growing in popularity with the public and is becoming an important source of revenue for the music industry, one that only promises to get bigger as new players, such as Spotify and Apple, enter the market.

Many in the music sector note that the labels gave Pandora a break on the royalty rates five years ago and now, after Pandora filed for a public offering and leaders have banked personal fortunes as a result, they're coming back for a double dip.

Opponents of the bill argue that the industry is just now getting its footing in the digital era but can't afford to take any more financial hits, as evidenced by the shrinking number of record companies. A decade ago, there were five major labels. Now, there are three.

Pandora, the top Web radio service, is leading the charge to pass the bill. Oakland, Calif.-based Pandora announced yesterday that it has helped create a new consortium intent on seeing that the royalty rates Webcasters pay for music is reduced.

According toThe Hill, the consortium is made up of traditional broadcast powers and technology firms, including Clear Channel Media and Entertainment, the Computer and Communications Industry Association (CCIA), the Consumer Electronics Association, Engine Advocacy, AccuRadio, and the Digital Media Association.

Tim Westergren, Pandora's co-founder, argues that the legislation is good for Webcasting and therefore good for the music industry because Pandora and others pay hundreds of millions to artists and labels. Opponents say this is nonsense. They ask how is Pandora a friend to the music industry when it seeks to take money out of artists' pockets?

They claim Pandora is looking to cut the rate it pays by 85 percent. It's important to note that this isn't one of those deals where all the money being fought over will end up in the labels' coffers. The royalties paid by Pandora are split 50-50 between artists and labels.