Pandora, Webcasting appear headed for Senate victory

Technology companies are supposed to be wide-eyed novices on Capitol Hill. I've read that they don't spread enough money around or aren't hip to the ways of Washington.

Regardless of whether that's true, this weekend saw Pandora, a struggling music service, whip up enough support among fans of Web radio to help persuade the House of Representatives to unanimously pass the Webcaster Settlement Act on Saturday, according to multiple people associated with the bill. The proposed legislation is designed to give Internet radio stations added time to negotiate a settlement with the music industry on reduced royalty rates.

Lower rates are vital to the survival of Internet radio stations, according to Tim Westergren, Pandora's founder, who pleaded with the public on Friday to call their congressional representatives and demand they support the bill. Webcasters and the music industry are close to reaching an agreement, but if the legislation fails to pass it could push the discussions back months and deliver a financial death blow to some services, Westergren said.

According to one Washington lobbyist, phone calls from the public were one of the factors that helped the legislation pass in the House and now have it headed for a Senate vote within the next two days without any major parties gunning for it.

Two other factors, however, likely played larger roles in getting the bill through the House: the lobbying efforts made by National Public Radio and some 12th-hour deal making to appease traditional radio broadcasters, who were trying to kill the legislation, according to sources.

"You know," said a fatigued Westergren, "it was a nerve-racking day."

In crunch time, Howard Berman came through
Saturday started with lobbyists for the National Association of Broadcasters "making a huge press in the House, blasting every (Congressional representative's) office" with appeals to kill the legislation, according to a lobbyist with knowledge of the events.

NPR, the publicly and privately funded nonprofit organization created by Congress in 1970, has plenty of friends in Washington. The group, which produces Webcasts and supports the bill, e-mailed members of Congress on Saturday, explaining how much it needed the legislation and that a deal on a new royalty rate couldn't be struck without it, sources said.

The real deciding factor came when Rep. Howard Berman (D-Calif.) met with members of the NAB. They told him that they feared their Web competitors would get a deal done first. Under the terms of the legislation, SoundExchange, the body that collects royalties and is part of the Recording Industry Association of America, has until Dec. 15 to negotiate a new rate. The NAB apparently was worried that the deadline didn't give the organization enough time to strike its own royalty agreement.

"Berman said 'Fine, we'll extend the date until Feb. 15, which gives you two more months to talk,'" said one music-industry source with knowledge of the discussions. "There isn't anything in the act that prevents traditional broadcasters from reaching their own royalty rate."

That did the trick, according to the source. Dennis Wharton, an NAB spokesman confirmed Saturday night that the NAB met with Berman and that the deadline was extended. He said the trade organization has dropped its opposition in both houses of Congress.

This means that unless something unforeseen happens, the Webcaster Settlement Act should pass, according to insiders.

Then what? Internet radio stations must still reach an agreement with the artists and labels about how much to pay them for streaming their music over the Web. Sources on both sides say they are closer than ever before to a number, and should the Webcasting bill pass in the Senate, they predicted that a deal could be reached as early as next month.