The Internet Radio Fairness Act will get its first exposure in Congress today since its introduction, as the House Judiciary's Subcommittee on Intellectual Propery, Competition, and the Internet will hold a hearing called "Music Licensing Part One: Legislation in the 112th Congress" at 11:30am ET (10:30am CT). You can stream video here.
IRFA backers contend the bill is necessary to allow Internet radio to more fairly compete against other forms of digital radio (more details here). Joseph Kennedy, Chairman/CEO of leading webcaster Pandora will speak in support of the bill, as will Hubbard Radio President/CEO Bruce Reese, who'll appear on behalf of the National Association of Broadcasters.
Former eMusic COO/CEO and Apple Music Group cofounder David Pakman will also appear. Pakman is now a partner at Internet and digital media investment firm Venrock, and writes the Disruption blog.
Critics of the IRFA say the bill would only result in lower payments to copyright owners and performers. Some support a draft of a bill called the Interim FIRST Act (more here), which may also be discussed in the hearing. Representing copyright owners and the music industry will be producer, songwriter, and recording artist Jimmy Jam (who's also The Recording Academy Chair Emeritus). He'll be joined by SoundExchange president Michael Huppe. Also speaking will be economist Dr. Jeffrey Eisenach, Managing Director/Principal of Navigant Economics.
To get the most out of today's hearing, it may help to have a handle on a couple key concepts:
801(b): That's the section of the Copyright Act (you can read it here) that sets out four important criteria Copyright Judges are required to follow when they decide royalty rates. Paraphrasing, they are:
- Maximize the availability of creative works to the public;
- Insure a fair return for copyright owners and a fair income for copyright users;
- Reflect relative roles of capital investment, cost, and risk, and;
- Minimize disruptive impact on the industries involved.
"Willing buyer willing seller": This is the standard upon which Internet radio royalties are currently based, as per the 1998 Digital Millennium Copyright Act. With that law, Congress decided the webcast royalty process should eliminate 801(b)'s concern for the public's access to creative works, minimizing disruption, and fairness -- and instead require judges to devise a rate solely on what they think reflects the "fair market value" of the licensed works. That is, what a hypothetical "buyer" would be willing to pay to a hypothetical "seller" (the "buyer" being the licensing service, the seller being the copyright owner) in a free market.
The Internet Radio Fairness Act: The focus of the bill is to move webcast royalty determinations from the "willing buyer willing seller" standard to 801(b), the standard used for determining the royalties paid by Internet radio's two most-similar competitors: satellite radio and cable television radio. (It also happens to be the standard used to determine what record labels pay for the use of copyright song compositions when manufacturing recordings.)
The Interim FIRST Act: Draft legislation that's main focus would be to make all three digital radio platforms (Internet, satellite, and cable radio) use the "willing buyer willing seller" standard in royalty determinations.
Performance royalty: One final note that what will (most likely) be discussed will be the royalties these services pay for the use of copyright sound recordings (as opposed to song compositions). The beneficiaries of this royalty are copyright owners (usually record companies), and recording artists and performers.
We'll have follow-up coverage and analysis of the hearing later today. Please check back.
We're happy to announce our second-annual RAIN Summit Europe industry event, May 23 in gorgeous Brussels, Belgium. We'll gather with Internet radio leaders from across Europe and around the world at the Hotel Bloom for a full day of informative panels, presentations and networking.
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