LOS ANGELES (AP) -
Shares of Pandora Media Inc. rose Monday
after a group of federal lawmakers introduced a bill that could lower
the royalties the online radio service pays to artists and their record
labels.
THE SPARK: Jason Chaffetz, a
Republican from Utah, and Jared Polis, a Democrat from Colorado, on
Friday introduced a bill called the "Internet Radio Fairness Act" in
Congress that could lower Pandora's costs significantly. Similar
legislation was introduced in the Senate by Ron Wyden, an Oregon
Democrat.
The bills would put
Internet radio services such as Pandora's and Clear Channel's iHeart
Radio under the same royalty-setting standard that is applied to cable
and satellite radio services such as Sirius XM Radio Inc.
The current rate-setting
process for online radio has been discriminatory, Chaffetz said in a
statement. He maintained that the bill would "level the playing field
for Internet radio services."
Pandora founder Tim
Westergren said in a blog post Friday that the company pays about half
of its revenue out in performance fees alone, compared to 7.5 percent
for Sirius XM. "The anti-Internet bias in federal law is nothing short
of absurd," he said.
The bill has the support of
the National Association of Broadcasters, a powerful lobby group
representing nearly 15,000 radio stations in the U.S. The NAB's support
could be important, since Pandora competes with radio stations for
listeners' attention. But radio stations themselves are increasingly
streaming music through their own websites and are struggling to make
such businesses profitable.
MusicFirst, a lobby group
backed by the major recording companies, attacked the bill, saying it
amounts to a "government mandated subsidy" that will "break the backs of
artists."
The group said a greater
inequality is in the fact that terrestrial radio stations pay nothing at
all to recording artists for airplay. It again pushed for a bill that
would institute such a royalty, but the bill has been stalled in
Congress for years.
THE BIG PICTURE: Pandora
streams music along certain genres to mobile phones and computers and
generates revenue primarily through advertisements. It went public with
an initial public offering of shares in June 2011 at a share price of
$16.
THE ANALYSIS: Performance
royalties are Pandora's single biggest cost. Any reduction in those
costs could provide a significant benefit to its bottom line. It's
unclear if the legislation will become a priority after the November
election, however.
SHARE ACTION: Pandora
shares added 45 cents, or 4.3 percent, at $10.95 in afternoon trading
Monday. In the last 52 weeks, shares have traded between $7.83 and
$15.98.
