Westergren Argues Against Copyright Royalty Board’s Rate Hike At “The Future of Radio” Hearing
Tim Westergren, Chief Strategy Officer and Founder of Pandora Media, testified on behalf of the Digital Media Association (DiMA) during the recent Senate Committee on Commerce, Science and Transportation hearing on “The Future of Radio.” Westergren noted the threat to the continued existence of Pandora, and the internet radio industry as a whole, by the 30 percent increase in sound recording royalties when he argued against the Copyright Royalty Board’s rate hike.
According to Westergren, the rate effectively requires internet radio services to pay royalties equaling 50 to 300 percent of revenue. Westergren testified that Pandora paid more than $2 million in royalties to artists and recording companies in 2006. At the old royalty rate, the company was on track to pay out over $4 million this year; instead, he stated, “Our royalty in 2007 is now likely to reach over $6 million, almost 50 percent of our total revenue. And per listener per track royalty rates for internet radio are scheduled to climb an additional 27 percent in 2008, and 29 percent more in 2009.”
In contrast, broadcast radio pays zero sound recording royalties, satellite radio less than 3 percent of revenue and cable radio 7.25 percent of revenue. The increased royalty rates are viewed as a mechanism for the record labels to increase their revenue that they claim to be losing to illegal digital downloading and piracy.
Westergren countered that point by reiterating an August 2007 Nielsen/NetRatings research study, which concluded that “Pandora listeners are three to five times more likely to have purchased music in the last 90 days than the average [person]. Similarly, Pandora is one of the top referral sites for music purchasing from both Amazon.com and the iTunes Music Store.”