Why IRFA Deserves Our Attention

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The Internet Radio Fairness Act (IRFA), introduced by Congressmen Jason Chaffetz, Ron Wyden and Jared Polis who voted against the SOPA and PIPA laws, seems to be garnering a lot of good and bad press. Many musicians are coming forth because of a quote by Representative John Conyers that states, “A more appropriate bill title might be the paycheck reduction act, because what it would do is lower the royalties that Internet radio pays by more than 85%.” But the real question is what could justify such a figure? While the bill is currently in a political stasis, it’s important to understand its rationale and the ways it seeks to correct the Library of Congress in its current operations.

At the center of this controversy are two things: Money and unfair treatment. As of today, internet radio outlets like Pandora pay a company called SoundExchange that represents artists and their labels. Every five years, the Copyright Royalty Board (whose members are appointed by the librarian of Congress) decides the prices these radio stations will pay to SoundExchange. The current consensus is that internet radio outlets should pay a fraction of a cent per song, as each song is classified as a ‘digital public performance.’ This means that stations like Pandora pay over 50% of their revenue to SoundExchange while stations like XM Radio and Sirius only pay around 12%. Traditional AM/FM stations don’t pay at all.

Despite the company’s tremendous success, things are especially hard for Pandora right now, which is why the service provider is one of the bill’s main supporters. Just last year, Pandora paid 54% of its revenue — $149 million – to SoundExchange in royalties. While IRFA is internet radio’s way of fighting back, this isn’t the first time that they’ve tried. Live365, another online music outlet, challenged the board on constitutional grounds. As the Copyright Royalty Board works under the Library of Congress, Live365 alleged in a complaint that Congress overrode its authority by appointing members of the board, who the constitution says are supposed to be appointed by the President and the Senate.

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