Pandora, Copyright Royalty Board, And Soundexchange

The landscape of royalty distribution has changed significantly in the last two decades in large part due to the internet. Downloads replaced physical copies of music and webcasters are quickly replacing downloads. The future of music and revenue made from music is in flux. Just before the beginning of the millennium, artists and record labels realized the industry could not rely on physical sales much longer and lobbied for performance royalties in the digital frontier. Since then, tech companies and copyright owners have debated performance royalty rates extensively and the cost of a song played in its ephemeral form has defined revenues for many webcasters. Pandora is a webcaster positioned in the middle of the old and new music industry

Copyright laws and subsequent royalty distribution have evolved considerably in the last decades, growing more complex. In 1971, Congress granted copyright protection to recorded music, but excluded public performance as infringement. Terrestrial radio, the previous gold standard for royalty rates, operates based on the older, physical music market. When terrestrial radio markets first defined royalties, physical album sales were considered primary income and radio was considered advertising for the physical product. After exposure to an artist on the radio, the listener needed to purchase a physical copy in order to hear more of an artist. Terrestrial radio still pays royalties to publishers for the music and lyrics of the song, but the actual recording of a song was not issued royalties. Technology in the last two decades has rendered the terrestrial radio royalty model obsolete. Physical sales are decreasing each year and even downloads appear to have peaked. The new model for listening to music is through a variety of webcasting services. The revenue from recorded music now principally lies in performance royalties, which pay the owner of the recorded music its