Digital Media

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.

Update at 7:28 p.m. PDT: Quotes have been added from the National Association of Broadcasters on why it no longer opposes the bill.

Web radio stations live to fight another day.

The House of Representatives has unanimously passed a bill that Web radio stations have painted as life or death for their services.

The Webcaster Settlement Act, which would allow Internet radio stations to negotiate with the music industry for a royalty rate lower than what Congress mandated last year, passed the House by a voice vote on Saturday.

Proponents of the bill had predicted a close vote.

Tim Westergren

(Credit: CNET News)

Tim Westergren, founder of Net music service Pandora, said he was elated about triumphing in the House, which came after traditional radio broadcasters .

Dennis Wharton, a spokesman for the National Association of Broadcasters, said Saturday night that Rep. Howard Berman (D-Calif.) had met with representatives of the group and addressed some of their concerns.

As a result, the NAB dropped its opposition in the House and will not oppose the bill when it moves to the Senate for a vote, either Sunday or Monday (I've written a story about the bill's chances in the Senate and how the NAB was persuaded to drop it's opposition).

"The bill having passed unanimously in the House certainly gives it momentum heading into the Senate," Wharton said.

Webcasters are fighting for the right to negotiate with the music industry to reduce the royalty rates they must pay to stream music over the Web. Any deal must be approved by the federal government.

Congress is expected to adjourn on Monday, and the Webcaster Settlement Act enables Internet radio stations to reach an agreement with the music industry while Congress is out of session.

Westergren, who has emerged as a de facto spokesman for the bill, said some Web radio stations can't afford a long delay in the talks. Right now, the law requires them to pay the older royalty rate, which Webcasters say will soon drive them out of business.

"It would be a killer blow," Westergren said. "If we don't get it passed now, it would mean waiting for a whole new Congress and administration and lots of uncertainty."

As for the legislation's chances in the Senate, Westergren said he's cautiously optimistic.

"I've become gun shy because I've been burned so many times before," he said. "We're waiting to see what happens and consulting with our friends (in Congress)."

Update at 5:50 p.m. PDT: The House actually did weigh in on the bill on Saturday, passing it unanimously by a voice vote.

Proponents of Web radio stations are predicting a very close vote in Congress on a bill that they paint as life or death.

The House of Representatives is set to vote Sunday on the Webcaster Settlement Act, which would allow Web radio stations to negotiate with the music industry for a royalty rate lower than what Congress mandated last year.

Companies like Pandora are seeking a reduced rate and say that they simply cannot afford to keep operating with the higher rate.

The bill was scheduled to go to the House floor Saturday morning but was postponed twice. Meanwhile, the National Association of Broadcasters, which opposes the bill, was also using the extra time to sway lawmakers.

Because the bill is being considered under a suspension of rules, it will require a two-thirds majority to pass.

Asked which way Congress was leaning, Pandora founder Tim Westergren said it is too close to call.

"NAB is gunning full bore to kill the bill," Westergren said. "It's become a straight up battle between NAB lobbying might and constituents. Calls from listeners have been raining in since last night. (It's) touch and go."

UPDATE Friday, 3:25 p.m PT: To include Pandora's letter to fans

Time is running out on a bill that could pave the way for Pandora and other Webcasters to pay reduced royalty rates, as traditional radio broadcasters are now trying to kill the legislation.

As Congress readies to adjourn, representatives of the National Association of Broadcasters are lobbying lawmakers to stop legislation that would allow anyone streaming music over the Web, such as National Public Radio and Pandora, to continue negotiating with SoundExchange, the body that collects statutory rates for the music industry.

SoundExchange and the Digital Media Association (DiMA), which represents Web radio stations, have been at odds over the fees required to stream music, but the two sides are "optimistic that a deal can be reached," said Tim Westergren, founder of music service Pandora. He has long said the music service won't survive unless royalties rates come down.

The bill, introduced late on Thursday, would allow negotiations between Web radio stations and the music industry to continue and reach a settlement while Congress is adjourned. The two sides need the government's OK before reaching a settlement because they're after a statutory license. Such a license gives Web radio stations the right to stream any copyright songs they want, but also requires them to pay a negotiated rate.

Without the legislation, the talks could come to a halt and the deal could fall through, Westergren said. The bill is scheduled to be voted on the House floor Friday. Congress is expected to adjourn no later than noon on Monday.

Westergren said the NAB's efforts to kill the bill is nothing more than an attempt to stifle the burgeoning Web radio sector, which many in terrestrial radio see as a competitor.

"This bill doesn't effect the NAB at all," Westergren said. "This bill is designed to give us the time to resolve what it looks we're close to getting resolved. The NAB is trying to suffocate the first viable alternative to broadcast radio and is reaching out of their industry to kill another."

Responding to Westergren's comments an NAB spokesman issued this statement: "NAB has concerns related to Congress attempting to fast-track a bill introduced less than 24 hours ago that could have serious implications for broadcasters, Webcasters, and consumers of music. NAB spent more than a year trying to work out an equitable agreement on webcasting rates, only to be stonewalled by SoundExchange and the record labels. We will continue to work with policymakers on a solution that is fair to all parties."

Westergren said that there is nothing in the Webcasting bill that would block traditional broadcasters from reaching their own rate agreement.

Friday afternoon, Westergren issued a letter to fans asking that they call their congressman to voice their support. He signed off: "Thanks for helping Pandora survive."