Pandora, an excellent Internet radio service of recent times was forced to stop broadcasting music outside of the US, but their problems don’t end there. PC Authority talked to Pandora founder Tim Westergren about the legal minefield of Internet radio.
Pandora is a music nerd’s dream. It’s a catalogue of music from a huge range of artists and genres that can be listened to for free, driven by the combination of Internet radio, which most people know about; and the Music Genome Project, which most people don’t.
The Music Genome Project created a new way to categorise music. It is sorted according to hundreds of criteria including tempo, key, melody, lyrics and so on. The ‘genome’ allows songs to be compared and classified, finding similarities and differences between songs that other musical databases would find impossible.
The beauty of Pandora, combining Internet radio with the Music Genome Project is that it creates a powerful tool for discovering music. Pandora can start with a single song, and by looking at its hundreds of measured qualities, find other music with similar qualities and play it for you. By ignoring popularity and broad categories like Genre, and by allowing you to ‘train’ it to ignore certain qualities or artists you don’t like, Pandora can take you on some interesting (and occasionally scary) musical journeys.
It’s too bad then that we in Australia can’t use it: in May 2007, Pandora stopped broadcasting its service outside of the United States because of legal concerns. “It was incredibly disappointing for us to turn the service off,” says Tim, “but it was either that or be in total violation of copyright.”
The problem is that Australia does not have the same capability to collect and distribute performance royalties that the United States does. If you run a theatre, radio station or any other place where music is performed or broadcast, you’ll need a license – the cost of this license pays the copyright-holding authors and performers of that music.
In the United States, Internet radio stations were legitimised by the Digital Millennium Copyright Act 1998, which required them to operate with a license. This led to the creation of SoundExchange, a body that collects royalties from Internet broadcasters and distributes them to artists.
In Australia, you can’t purchase a license for a dynamic Internet broadcast where the consumer is able to choose the content, which is what Pandora allows. Some Internet broadcasters don’t need a license because they deal directly with the labels themselves. But a broadcaster like Pandora, which plays music from a huge range of independent artists, can’t pay royalties to so many different artists without the aid of a centralised collection body like SoundExchange.
Without a collection body in the country it broadcasts to, Pandora had no way of paying its royalties and thus could not operate legally. With no other choice, it closed its services outside of the US. How were they able to broadcast to Australia before May 2007? “We weren’t supposed to,” says Tim sheepishly. The abrupt cessation of the service has left dozens of early adopters in Australia yearning for their fix of streaming music.
There is some hope. The Phonographic Performance Company of Australia Limited (PPCA), which collects and distributes performance royalties in Australia, is adapting to the changing media landscape. CEO Stephen Peach says that PPCA will be able to offer licenses for continuously streamed webcasts within weeks. The Australasian Performing Right Association (APRA), which deals with authorship royalties, already offers these licenses. While this still does not allow the dynamic streaming that Pandora uses, Stephen is hopeful that this method will eventually be licensable through the PPCA as well.
Unfortunately, Pandora has other royalty issues at home that could see the service shut down. Tim is one of many people trying to have reversed a recent decision by the US Copyright Royalty Board to increase the performance royalty fees paid by Internet radio by between 300 and 1200 percent.
Even before the increase, Internet radio rates were double those paid by satellite radio, while terrestrial radio pays no performance royalties at all. “I think there’s this perception that Internet radio is wildly profitable,” says Tim.
If the new royalty rates stay, many Internet radio services like Pandora might need to close down or operate with a separate licensing scheme offering a much smaller catalogue, negating one of the main strengths of the medium. Tim believes that this would hurt music sales as well. “Internet radio is huge promoter of record sales. Of Pandora’s users, 40 percent are buying more music since they started using the service – it’s like they’re killing the goose that lays the golden egg.”
For more in-depth digital music coverage on PC Authority, also read our feature entitled Listen Like Thieves: Digital music goes legit