RIAA May Get Its Wish: Pandora Leaning Towards Shutting Down Over Webcasting Royalties

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Last year, we noted that the new webcasting royalty rates pushed through by the RIAA appeared designed specifically to kill internet radio. These royalties are different and much higher than things like traditional and satellite radio, despite being much more fragile at this point in their development. As if to prove the point, Pandora, one of the largest and most successful online streaming radio providers is now saying that it’s going to have to shut down if the royalty rates aren’t changed shortly.

This is exactly what the RIAA wants, by the way. Even if services like Pandora introduce people to tons of music (personally, I’ve bought a ton of music I found on Pandora), much of that music is not from an RIAA-member label. The RIAA knew exactly what it was doing in pushing these higher rates: it was killing off alternative routes to promoting non-RIAA music. The RIAA labels have always thrived off a very limited distribution and promotion channel. After all, distribution and promotion are where record labels really make their money. Competing methods of distribution and promotion are threats to be killed off — and the RIAA may have succeeded here (with Congress’ and the courts’ help, of course).

Oh, and don’t think the solution is to only play non-RIAA music. The RIAA’s spinoff, SoundExchange, gets to collect money on non-RIAA music as well. Oh yeah, it gets better too: if SoundExchange can’t find the musicians to pay, it gets to keep the money. That’s why it has a history of not looking very hard for musicians in order to pay them.

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