The Webcaster Settlement Act Passes Through The House

Posted Sep 28, 2008

“We’re thrilled to let everyone know that the House bill passed! Thanks to your incredible support we were able to overcome the NAB’s efforts to derail us,” stated Tim Westergren, chief strategy officer at Pandora. “Phone calls rained into the congressional offices over the past 36 hours. Just amazing.”

Tim is referring to the House or Representatives passing the Webcaster Settlement Act.  The Act allows Internet music streaming companies to negotiate royalty rates for playing songs at a rate lower than the price that Congress decided was mandatory last year.  If the legislation doesn’t pass, it might set back Internet music companies like Pandora for months.  The phone calls from the public helped the legislation pass with the House of Representatives.

The National Public Radio (NPR) helped push the legislation through the House too.  The NPR is created and funded by Congress.  And since NPR supports the bill, companies like Pandora benefitted from NPR’s connection to Capitol Hill. 

The National Association of Broadcasters did not like the legislation because they feared that web streaming music companies would be able to make deals first.  SoundExchange, the royalty-collecting arm of the Recording Industry Association of America extended their deadline to negotiate with the NAB until February 15 (from December 15), so a settlement was made.

The only thing that is left for Internet music streaming companies are to push for the legislation through The Senate and reach a royalties agreement with musicians and label companies.

Pandora is expected to reach $25 million in revenue this year.  About $17.5 million is going towards paying royalty fees ($48,000 per day).  Throw in the cost of bandwidth and Pandora doesn’t come out with much profit.  This legislation is huge in order for Pandora to stay in business.

The Senate will be voting on the legislation tomorrow.