Why Did Pandora Sign Away Its Right To Petition The Copyright Royalty Board For Lower Rates?

from the well,-that's-obnoxious dept

It's already quite troubling that Pandora appears to be supporting the RIAA bailout tax against radios (Pandora's competitors), but now we have a better understanding of why, thanks to a little birdie who highlighted what's going on. Among the nasty little hidden gems in the recently agreed to webcaster settlement agreement (pdf) is that, if you want the lower rates in the settlement, you have to remove any objections to previous rate arbitrations and not participate in any future Royalty Board fights over royalties:
Article 6

Non-Participation In Further Proceedings
CPB and any Covered Entity making Web Site Transmissions in reliance on this Agreement shall not directly or indirectly participate as a party, amicus curiae or otherwise, or in any manner give evidence or otherwise support or assist, in any further proceedings to determine royalty rates and terms for digital audio transmission or the reproduction of Ephemeral Phonorecords under Section 112 or 114 of the Copyright Act for all or any part of the Term, including any appeal of the Final Determination of the Copyright Royalty Judges, published in the Federal Register at 72 FR 24084 (May 1, 2007), any proceedings on remand from such an appeal, or any other related proceedings, unless subpoenaed on petition of a third party (without any action by CPB or a Covered Entity to encourage such a petition) and ordered to testify in such proceeding.
Basically, this takes away the right of any company to fight for more reasonable royalty rates in the future -- which doesn't seem like it should be allowed. Based on this, there's basically no one left who can protest future rate increases -- which means that the RIAA/SoundExchange will easily be able to repeatedly push through greater rate increases.

Thus, since Pandora and the other webcasters won't be able to protest higher and higher rates, it needs to drag others into the fight to get help protesting constant massive rate increases: hence its support of the Performance Rights tax. In theory, if the NAB (who represents radio broadcasters) gets dragged into the fight, then there's a big dog who isn't subject to the draconian clause above, and can push back on the Copyright Royalty Board for lower performance rights taxes. Of course, that assumes that the NAB would fight for lower overall rates, rather than just focusing on rates for radio, and leaving the webcasters to fend for themselves...

No matter how you look at this, it's stunning that Pandora and other webcasters would sign away their right to state their own case in front of the CRB. RIAA/SoundExchange are laughing all the way to the bank. They get to make their case to increase royalty rates... while those who get stuck with the royalty rates have to shut up and take it. Regulatory capture at its finest. Again, we're left wondering why the Copyright Royalty Board even exists. Why are a group of old judges setting the price of music anyway?
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Filed Under: copyright, copyright royalty board, performance rights
Companies: pandora

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  1. identicon
    Michial Thompson, 15 Oct 2009 @ 5:55pm

    Ever Consider

    Is it possible that Pandora allowed this clause in the contract because it allowed them to get rid of past bills, or negotiate a lower rate or whatever... THEN they get this paragraph thrown out in court when they do testify or sue again in the future when things turn more friendly?

    It seems a little odd that a contract could be binding on them that would prevent them from defending themselves or legally testifying in future court cases. If they receive a subpeona to appear in court they are legally obligated to appear and testify, and if they are sued, they have every right to defend them selves in court against it. If they are wronged they have every right to sue the responsible party.

    I'm guessing that they looked at the current state of the legal system, somehow got this clause added which give the RIAA the "security" that the could do anything they wanted. While all at the same time the were thinking, if we shut them up and get them off our backs for the next few years until all these copyright issues work themselves off we have a much better chance of getting this paragraph thrown out while still legally enforcing the rest of the contract.

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