Online radio services have taken a hit, as it seems the proposed Internet Radio Fairness Act has all but failed. Pandora, the largest representative of ouch services, has basically quit its campaign to get the law passed, according to its co-founder Tim Westergren, acknowledging the cold reality that it won't pass.
"We are pragmatic and recognize the low probability that Congress will address this issue in the near term," he said in a statement.
So what went wrong? First of all, the Internet Radio Fairness Act was designed to allow internet radio services the only require the same licensing as traditional AM/FM radio programs to play music. Pandora and others are required to obtain licenses from both songwriters and performers, while traditional radio only pays songwriters for the music it plays. Considering that Pandora pays a reported 70 percent of its revenue to get those licenses, it seems a bit odd that the music industry blames services like Pandora for killing it.
The failure of the act is likely to cause problems for Pandora in 2015, when its current licensing contracts end. The service will have two choices for negotiating a new contract: A) Negotiate with the music labels. As you can guess, this is the less popular option, as the last group that wants to give Pandora a good deal is the music labels. B) They can try negotiating with the Copyright Board instead, but that organization hasn't been generous either.
Other streaming services, such as Spotify, won't need to worry about the act so much, as they pay bands based on a subscription service. Pandora's biggest competitor, Apple and iTunes Radio, aren't as bothered by licensing costs thanks to the company's overall profit margin.
