Pandora-founder Tim Westergren

Why you should not support the Radio Internet Fairness Act

Pandora founder Tim Westergren, has been urging Congress to pass a new legislation called the “Internett Radio Fairness Act” (IRFA), that will cut musicians’ pay by 85% and restricts rights-holders to negotiate rates like a union would…



The current US royalty rates were negotiated in 2009, after which founder Tim Westergen called the royalty crisis off. The current rates are not up for re-negotiation until 2014, but Pandora is lobbying around Congress to pass a legislation that proposing a change in how royalties are decided, that will reduce Pandora’s costs in royalties to 50% to 10%, and thereby cutting musicians’ pay by 85%. Pandora is a company based letting listeners stream music for free up to 40 hours a month, and 40+ hours for less than a dollar.


Union Busters

Pandora negotiated their royalty rate based on functionality. Pandora wants to pay a rate like other formats of digital radio, but these formats have different functionality, and therefore different rates. Other similar services, such as Spotify and iTunes, distribute 70% of their gross, keeping %30 for all operating costs, while Pandora, are paying about 50% of gross revenues.

The new legislation also outlaws collective bargaining over direct licenses. This means that IRFA prevents rights-holder of the music from negotiating as a union, with civil and criminal penalties as dictated in the Sherman Act.

This quote is taken from the proposed Internet Fairness Radio Act.


(B) by adding at the end the following: `Nothing in this paragraph shall be construed to permit any copyright owners of sound recordings acting jointly, or any common agent or collective representing such copyright owners, to take any action that would prohibit, interfere with, or impede direct licensing by copyright owners of sound recordings [including artists who own their own sound recordings] in competition with licensing by any common agent or collective, and any such action that affects interstate commerce shall be deemed a contract, combination or conspiracy in restraint of trade in violation of section 1 of the Sherman Act (15 U.S.C. 1).’.  [For which there are both civil and criminal penalties.]


Ulterior motives?

Another curious aspect of this, as noticed by the MusicTechPolicy Blog, is how Pandora founder and leading backer of the legislation has been selling of 85,000 shares per month every since the lockup of Pandora’s June 15 IPO. This is usually a sign of a selling plan, designed to allow insiders like Westergren to cash out their stock positinos, even if they’re in possession of material nonpublic information at the  time of selling. These stocks makes him $1 million richer a month over the next 2 years as he sells all his stocks. All this while keeping Wall Street focused on the IRFA legislation, this may be a scheme to keep his stock price up until he has cashed out.

… and let’s not forget how Pandora was fine with these rates, when presenting their IPO last year.


Have your say in the comments, or on twitter by using the hashtag #FairNetRadio or #IRFA

Further reading:

I. Pandora the Union Buster! Jail time for collective bargaining? (
II. Did Pandora lie during their IPO? Or are they just plain old greedy? (
III. Kangaroo Court (
IV. Tim Westergren’s million a month from music (MusicTechPolicy)
V. Four simple reasons why the Pandora Radio Act screws musicians (
VI. Crying to congress will not save Pandora’s investors (
VII. Pandora boss urges 85% pay cut for musicians (

Written by Peanut @ thehypeherald.

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