On July 29, 2008, Joe Kennedy, the President and Chief Executive Officer of Pandora Media, Inc., gave a testimony on “Music and Radio in the 21st Century: Assuring Fair Rates and Rules Across Platforms.” Pandora has become the largest internet radio service in the US with more than 15 million registered users. It is located in Oakland, California, and employs about 140 people. Pandora uses a unique music taxonomy known as the Music Genome Project, which aggregates songs with musical similarities. Pandora treats all artists equally and relies only on musical relevance to connect songs.
Kennedy testified on behalf of Pandora and the Digital Media Association. He urged a revision to the Copyright Act that would ensure fairness among all participants in the music industry. Kennedy’s testimony gave a description of the four main problems Pandora and other internet radio services currently face. The first is the matter of basic fairness in determining royalty rates. Kennedy strongly recommends the four factors standard test found in Section 801 of the Copyright Act, which has proven successful in the past. Kennedy emphasizes that internet radio services have the smallest of all radio revenue streams, but they are the ones who pay the highest royalties. Kennedy states, “There is no possible way that Pandora or our sophisticated investors would be a "willing buyer" of sound recording performance rights at a cost equaling nearly 70% of our revenue – because that royalty level is simply unsustainable and will bankrupt us and force the layoff of our 140 employees.”
The second problem Kennedy reports is consumer recording. SoundExchange and recording industries claim “streamripping” is an issue, although Kennedy states there is no evidence or justification for this. Pandora is a business aimed at programming and promoting music, and no additional technological fees should be made for this purpose. The third issue Kennedy brings up is resolving the confusion of “interactive service.” The definition of this term should allow programming based on the listener’s preference. Kennedy defends Pandora by explaining that listeners have no control over the song or artist that will be played, therefore they are not violating statutory law. The fourth point Kennedy discusses is the royalties on sound recordings reproductions. While typical radio stations require only one copy of the sound recording, webcasters need several copies in order to accommodate different technology services and access speeds. Kennedy remarks that internet radio services should not have to pay a fee for these copies, since they do not have any additional value.
Kennedy concludes his testimony with a last plea for the equalization of royalty standards. “…so that fair competition prevails and Pandora and other DiMA member companies can grow and realize the full potential that Internet radio offers.”
This testimony is an extremely useful source for my paper. It offers a complete description of the royalty issues Pandora is facing directly from the point of view of the president of Pandora. The four main points that Kennedy brings up are also key topics for my paper, since I am defending that the new royalty ruling is unfair. It was extremely interesting to read this direct testimony from Kennedy, and it will definitely help defend the argument of my paper.