This is the video I made as part of a larger Journalism assignment. You can read the full article below.
Local bands have a reputation of being on the short end of the stick when dealing with record companies. Currently Internet radio companies are pushing for lower royalty fees. If this happens, lesser-known artists may see that short stick shrink further.
Internet radio has been a growing medium over the last decade, but some say it has also been a failing business. Under current royalty licensing this popular media format may not stay available to regular listeners.
MTV, Yahoo and AOL have all tried to enter the Internet radio business and all have quit. Pandora Radio, leading the campaign for the Internet Radio Fairness Act a proposal that would lower royalty rates Internet radio pays to the rate terrestrial radio pays, says the problem is the percentage they have to pay in royalty fees to artists.
In a news release in September Pandora said it follows its “own, very discriminatory standard,” for royalty fees. Pandora claims that these royalty fees provide an unfair advantage to other radio companies. Terrestrial stations pay about 15 percent in royalties. Satellite stations, like Sirius XM, pay about 7.5 percent. Internet stations like Pandora must pay 25 percent of their gross revenue for royalties.
According to Pandora, the company pays over 50 percent of its revenue in royalty fees but according to public records, Pandora has total costs just over 50 percent of its revenue. Pandora made 7.76 million in 2011.
“Internet companies say that there is so much money in radio but there really isn’t,” said Morgan Grammer, chief engineer for Great Plains Media. “They act like we have these deep pockets but the truth is we have higher costs then they do.”
Grammer says that every few years someone else wants the rules changed. “There is only so much money to go around and everyone wants a bigger piece of the pie.”
Pandora says that changing current laws will enable musicians to be better paid. According to Pandora, if Internet radio companies do not pay as much money in royalties they will be able to better provide air-time for musicians. More air-time means more money.
Local musician and manager of music department at Kief’s, Steve Wilson said “digital payouts are 19/1000 of a cent per play.” For larger musicians, this format works but lesser-known bands currently have a hard time collecting money.
Wilson said, that “without a wall of managers and accountants to do business for you bands’ earnings often fall through the cracks.”
Ted Kalo, executive director of record company musicFirst, said in a September interview, “there’s nothing fair about pampering Pandora… at the expense of music creators.”
If the Internet Radio Fairness Act passed it would reduce the royalty rates Internet radio has to pay to the level of terrestrial radio. This means Internet radio stations would go from paying a minimum 25 percent of revenue to paying 10 to 15 percent.
Lesser-known local bands might feel the change of royalty fees more than others.
Wilson says that many musicians used to create an album to expose their band. Now bands produce singles to test the market.
Local artists use the Internet to test music before they produce a whole album. If royalty earnings increase, musicians may have more incentive to go through Internet radio.
While Pandora says they have the lesser-known artists in mind many musicians use Internet radio only as a means of getting out their name out.
“When it comes to smaller bands, Internet radio is a great thing,” said Morgan Grammer. “We have one channel with one show, once a week that caters to local artists because they don’t have as large an appeal to the masses.” In comparison, Internet radio listeners can have several stations dedicated to local groups.
“[Regular terrestrial radio] can lose listeners just because they don’t like a particular song,” Grammer said. “We don’t have a ‘thumbs down’ button people can hit.”
Terrestrial radio is unable to accommodate smaller bands as much as Internet radio may be able to but alternative means are used primarily for selling an image.
“What you have is college radio, community radio and Internet radio,” said Wilson. “All three, to one degree or another expand your opportunity to reach an audience. The amount you are paid is minuscule.”
Currently the bill is stalled in Congress
