The modern music experience centers around the customer. Gone are the days when the household radio provided the main source of entertainment and listeners could only hope and wait for their favorite song to finally come on the air. Now, not only do people have the ability to instantly stream any song online, websites can also create specialized playlists based off personal preferences. Progress in the industry moved traditional radio closer to irrelevance, replacing it with technological innovations appealing to a younger, larger demographic. Unfortunately because of excessive fees, the current status of online radio as the vanguard of the modern-day music experience may cease to exist as we know it.
Pandora Internet Radio, an online company that creates user-specific music stations, sued the American Society of Composers, Authors and Publishers for more reasonable licensing fees. Currently, Pandora pays music publishers and songwriters more than twice as much as traditional and satellite radio stations do for the same rights to the same music.
Earlier this year, ASCAP negotiated a more practical deal with the Radio Music License Committee, which oversees most traditional radio stations, as well as one of Pandora’s top competitors: Clear Channel Communications Inc. online system, iHeart- Radio. ASCAP argues against granting Pandora the same deal it has made with similar online radios, placing it at a financial disadvantage.
The push for equal licensing fees isn’t exclusive to this lawsuit. Pandora is employing a two-pronged approach with the second battle being fought in Congress. The Internet Radio Fairness Act of 2012, introduced in Congress in September, would grant Internet radio stations fair licensing agreements equivalent to those of satellite radio stations.
All Pandora is asking for is to be treated equally to its competi- tors and be given a fair chance to succeed. It seems rather than welcoming and improving technology, ASCAP condemned this specific online radio provider for its rejection of traditional media. Innovation is being hindered by the targeted charging of large fees to institutions moving media toward the future of music enter- tainment. There is no reason to penalize the invention of new and improved services simply for the sake of keeping older methods in the game.
Songwriters Guild of America President Rick Carnes responded to the lawsuit, saying Pandora’s ambitions are based off pure greed and “to suggest that paying those creators 4 percent of their revenue is still too much should be an embarrassment.” In reality, Pandora’s attempt at equal licensing fees could be based more on self-sustainment than unreasonable ambition. In the first half of this year, Pandora reported losses of almost $26 million. This is only part of the $105 million losses during the past five fiscal years. The reason for this huge financial downturn is Pandora’s current business model. The more successful the company be- comes—as in the more listeners it acquires—the more expensive fees become. Obviously, Pandora cannot continue to expand at its current rate and hope to remain financially viable for listeners.
As for the financial rights of the songwriters, many would say Pandora is already doing more than enough. Although it only accounts for about 6.5 percent of U.S. radio listeners, Pandora pays some top artists as much as $3 million annually each for the rights to their music. Even significantly lesser-known artists take in more than $100,000. De- spite anyone’s opinion about the correct monetary contribution to artists and songwriters, Pandora still pays more than twice as much as most traditional radio stations. Therefore, it doesn’t make sense to claim Pandora is in some way placing monetary greed before its moral obligation to the creators of the product it provides.
If both the lawsuit and legislation fail to provide online radio stations any relief, the obligation may fall on the listeners. Already, it seems commercials can dominate the listening experience, but that’s only the beginning.
For those who cannot afford the common $1.29 per song cost on iTunes to actually own music, online streaming is the next best alternative. However, if groups such as Pandora cannot find a financially sustainable business model, advertising and user-based payments will have to make up the difference.
Pandora is a one-of–a-kind experience provider, promot- ing music entertainment on an entirely different level. While other websites allow for instant streaming of specific songs, Pan- dora creates stations specifically targeted for the individual. We are in an age of technological advancement in practically every area imaginable, which clearly in- cludes radio. In order to continue progressing, it’s necessary to even the playing field for everyone and end ridiculous prejudices against the ways of the future.
