Pandora, Webcasting see victory in Senate

The U.S. Senate on Tuesday afternoon passed the Webcaster Settlement Act, the legislation that lays the groundwork for Web radio stations to negotiate reduced royalty rates for the songs they stream over the Web.

The bill passed through the House of Representatives on Saturday and is now headed to the White House, where President Bush is expected to sign it.

"I'm relieved, optimistic, and grateful to our listeners," said Tim Westergren, founder of Pandora, a Web radio station and music-suggestion engine.

Webcasters have long complained that the royalty rate to stream music is too high for Web radio stations to generate any profit. Representatives from Internet radio and the music industry have been in negotiations for more than a year. Recently, the two sides have gotten closer to an agreement and both say they are confident a deal is within reach.

The deal needs the blessing of Congress because the parties seek a statutory license. Under such a license, any Web station is allowed to play songs that fall under the license without seeking permission. In return, Webcasters are required to pay the negotiated rate.

Westergren, who emerged as a de facto spokesman for the bill, said that had it not made it through Congress, a long delay would have ensued before an agreement could be reached, a situation he says would have driven some Web stations out of business. That's why Webcasters and representatives from the music sector, including representatives of the Recording Industry Association of America, teamed up to get the bill passed.

Believe it or not, the RIAA was in there fighting shoulder-to-shoulder with Pandora and the Web radio stations to fend off any threats to the legislation.

The most imposing obstacle came from traditional broadcasters, who lobbied hard the past weekend to snuff the bill for reasons that are still unclear. Rep. Howard Berman (D-Calif.), who has a history of voting for pro-copyright-holder issues, helped mediate a settlement with the National Association of Broadcasters, and the group dropped its opposition.

"This is a welcome and encouraging development and a sign of the constructive working relationship between the music industry and Webcasters," said Mitch Bainwol, the RIAA's chairman and CEO. "Together, we want to make this marketplace work for both music fans and music creators."

It's important to note that the bill doesn't guarantee a settlement between the Webcasters and music industry. They now have until February 15 to reach an agreement.

See Kara Tsuboi's interview on Monday with Westergren, in which he explains why he's fighting to save Web radio.