 The next panel is called Radioactive. If you follow the music and technology issues, you've no doubt stumbled across this debate about internet royalty rates, which we started earlier today. We hear from Tim Westergren from Pandora, who's amongst some organizations pushing for a change in the standard used to determine rates for webcasters. During this panel, we'll hear from other voices who say this switch would have a huge negative impact on artist compensation. Like is the case with many pieces of legislation, there are a lot of moving pieces to the recently introduced Internet Radio Fairness Act, which is why we've assembled this panel to discuss it today, to not only bring the specifics to the bill would do, but also the concept of fairness in broadcast royalties in general. Please join us in welcoming Kurt Hansen, CEO of Accu Radio and the publisher of Rain, the radio internet newsletter. David Lowry from the University of Georgia and the band's cracker and camper van Beethoven. Michael Petrucone, Senior Vice President of Government Affairs at the Consumer Electronics Association. Patricia Pollock of Council at Breithofen Kaiser and Associate General Counsel of the American Federation of Musicians. And Colin Rushing, General Counsel of Sound Exchange. Chris Richards, pop music critic at The Washington Post. We'll moderate this discussion. Hi everybody, how you doing? I was asked to do this kind of at the last minute and this is an issue that I'm not as familiar with as I wish I was. So hopefully my ignorance will reflect your curiosity about how this works. So just imagine that a child is up here asking these people questions and then if that doesn't work out, like you know, make 10, 15 minute, you guys can show me the flag and we'll turn the questions over to you and we can get down to the bottom of this pretty, what seems like a pretty naughty issue. So K-N-O-T-T-Y. So, you know, Internet Radio Fairness Act. This is a bill that was introduced on Capitol Hill earlier this summer. It seeks to abolish the current royalty rate setting for webcasters and instead it wants to base those rates on webcasters gross revenue from what I understand. Pandora and Clear Channel are on one side, they're behind this because it's gonna save them money but artists might not be down with it. This could mean less revenue for them. Obviously streaming royalties are becoming a growing source of income for musicians in a struggling marketplace and climate. And basically it seems like maybe some folks are searching for some consistency among platforms. So I guess my first question, I will, since Michael is the first guy that I met today when I walked in the door, I'll turn it to him first. Can you just tell us, you know, from your vantage point, what is the Internet Radio Fairness Act? What will this legislation do? Do you support it? Do you not? And we'll kind of volleyball it around from there. Yeah, first of all, I represent the Consumer Electronics Association. We are the voice of the tech industry in DC. We represent manufacturers. We represent online services. We represent internet radio services. We represent retailers, brick and mortar retailers and online retailers. So pretty much if you're anywhere in the tech chain we represent you. We're also the ones that put on the international CES every year in Las Vegas, to which everybody's invited too. We'd love to see you there. It's a fantastic show. For us, we have an interest in seeing a vibrant online sustainable music economy, right? Because all of our members benefit with their hardware members, with their streamers, you know, we're interested in royalties getting paid, musicians getting paid, and in a sustainable, healthy online music economy. You don't have that today. You know, if you look at Pandora, who is one of our members, they have 75% of the online music market. In part they have that because they're good, but not just because they're good. It's because that under the current royalty system, you'd have to be nuts to get into this marketplace. And that that's not a healthy place to be. And what we hope to see is you rationalize the royalties, you make it more of a reasonable business proposition. There's more investment. There's more services. And you know, in the end, the objective isn't to have a Pandora, it's to have 100 Pandoras or 1,000 Pandoras, and to have an ongoing, healthy ecosystem of businesses that pay money to musicians. And we hope that by rationalizing the royalty structure, right now, the royalties were put into place when internet music had just come about. And the royalties were put into place primarily by record label lobbyists who at that point saw the internet music structure as a competing distribution platform. And they put in royalties that were discriminatory. So if you're cable, you're paying five or 10. If you're satellite, you're paying five or 10%. If you're an online streamer like Pandora, you're paying over 50% of your revenues and royalties. And you know, I'm not gonna opine as to whether that's like a sustainable business model, but a lot of smart people have, and I would encourage you to get on the internet and look around. It's very tough to have a sustainable business that way. And what we hope this legislation does is put things on a sustainable footing so we can go forward with this business model in the future. Colin Ruschling, I met you second today. This is how we're doing it here. Four against this bill, and why? And from what you just heard, what's your stance on this? Sure, so we are against the bill, so I'll just say that. So here's the basic background for those who don't know. So we're talking about basically the rules of the road for the statutory license for the use of sound recordings. So what's a statutory license? It's something the government gave to services like Pandora. You know, for most digital, most types of digital music services like Spotify's on demand service, Apple for iTunes, they have to go and negotiate with thousands of different record labels to get the rights that they need to sound recordings. But for digital radio, Congress said, you know what, you do not have to go to thousands of individual record labels. We're gonna give you a license. So you have a one-stop shop to get all the rights you need to those sound recordings. So Sound Exchange's role in all of this is where the organization that collects and distributes the royalties that are owed by these services to this one-stop shop. We are, you know, in effect, the one-stop shop. And we also advocate for record labels and recording artists in the proceedings to set the rates that are charged by this one-stop shop. And all we say is, you know, the rate should be a market rate. It should be a willing buyer, willing seller rate. And that's what current law provides for webcasters. And really provides for everyone who uses the statutory license, except for three services, three grandfathered services. There are over 2,000 licensees who are under this willing buyer, willing seller standard. You know, our view is that everyone should be under the same rule. It should just be at a market rate, willing buyer, willing seller. What the so-called Internet Radio Fairness Act would do is it would lower everyone to a lower standard, to a below market rate. And we think that's fundamentally unfair. If you're stuff, you know, if you're an artist, you're a record label, if you don't have any choice and whether or not a service can use your recordings, at a minimum, you should be paid a market rate. Trisha, I'll move it over to you. And maybe you can also explain the artist's stake in this entire debate as well. Well, sure. So, Colin has explained the compulsory license, and I would like to just kind of go, not to talk so much about the rate, but to talk a little bit more about the compulsory license because I think that in part helps to explain the union point of view and the artist point of view on some other aspects of this bill. So, the compulsory license is something that the unions back in the early 1990s worked very hard and the artists worked very hard to shape into something that worked very well for the artist community. So, the digital performance right was established with the compulsory license that says by matter of law that 50% of the royalties are payable to performing artists on the sound recordings, 45% of that to the royalty artists and 5% to the non-featured or session musicians and vocalists. So, one feature of the compulsory license is that there's, you know, it's set up so that half of the royalties go to performers. That's obviously a really good thing for performers. Another thing that we set up and we worked really hard to obtain was that when the royalties would go to performers that they would be non-recoupable. That is, that this would be a new income stream from the digital performances that would go straight to artists, it wouldn't flow to artists through their labels or through any other, you know, kind of mechanism that would suck up some of the royalties but it would be something new that would go right to artists and they would have it, it wouldn't be recoupable. And to help implement the non-recoupability, we worked hard to obtain direct payment of the artist share to performers and we did that first through sound exchange kind of agreements with the labels and sound exchange and later in the statute we actually got a provision that said that there would be direct payment of the artist share to artists. So, the compulsory license along with all the benefits that it gives to the music services that is the one-stop shopping that Colin was talking about in the ease of licensing is also set up to provide all these benefits to performers, that is direct payment, non-recoupability and it's all administered through sound exchange which is an organization that artists have a 50% control over because artists sit on that board. One of the things that the builder, a couple of things that the bill does that kind of interrupt or undercut this whole structure that's really good for artists, okay? So, the bill, one piece of what it does is to talk about changing the rate standard in a way that will lower rates and Colin has talked about that but it does a lot of other things too. It sort of aims to disrupt the whole rate setting litigation structure so that the only evidence that the judges can look at is evidence of direct licensing that goes around the sound exchange compulsory license and is not subject to direct payment, is not subject to non-recoupability, is not subject to any sort of artist control and that's just something that's antithetical, I think, to artist interests and is not supportive of the artist community if the only kind of market that the judges can look at in setting a rate is a direct license that says okay, I can pay the compulsory license rate and I'll never have to pay more than that to get the music but I wanna go and enter into direct licenses with all these other individual labels to undercut that rate and I'm gonna do that direct license and then I don't have to pay the artist 50%, I don't have to have them pay directly and there is an artist supervision over how the artist payments are gonna work out or how any of the administration is gonna go, that is not good for the artist community and the other way in which the bill sort of undercuts the value of the compulsory license for artists is to essentially create a new antitrust provision that says anytime you speak against or try to act against a direct license or point out the deficits of a direct license, you are vulnerable to being found guilty of an antitrust violation. So from the artist's point of view, even getting beyond the rates, there are a number of kind of snake pits in this bill that are bad for the artist community. Before we get any further deep into the weeds, I'm wondering if maybe we can zoom out a little bit and Kurt, if you can help me with that. You know, again, imagine a child up here asking you this question, but terrestrial radio, from what I understand, it pays songwriters, it pays composers in the digital space, performers are paid for their work. How did this disparity begin and why is it, why? Well, I wanna go back even one step further which is the purpose of copyright law, which is not to maximize revenues for Pandora or maximize revenues even for labels or musicians, it's to maximize the availability of creative works to the public. That's what this is really all about and it's generally done by saying, if it goes to royalty hearing at the Kuiperite office, there should be a, there's a standard called 801B, not to be confused with NCC-1701D, that says it should provide a, set a rate that provides a fair income to the copyright owner and a fair return to the copyright user and that has worked terrifically and low in, now, I'll circle back to your question, I'm sorry, I got distracted. In terms of broadcast radio, there's never been a requirement to pay royalties to the label or the performer because they make so much money off of the airplay over the promotional value. So here's, I can tell the promotional value to you in the room who are musicians of airplay on Pandora, it's probably a hundred times what you could, what you're getting from the Check From Sound exchange. If that airplay is concentrated in markets where you are active, where you perform. Could you get a little closer to the microphone, sorry, thank you. So this requirement to pay royalties was extended in 1998 to digital forms of radio and no one on terms of webcast, that's cable radio, satellite radio, and internet radio and webcasters aren't objecting to that concept, but they are, but in terms of cable radio and satellite radio, they're using the normal standard, they're using fair return to copyright owners and fair income for copyright users and that's all we're asking for in this new bill is the ability to get that. Can I address the history of the lack of a terrestrial performance, that's the jargon that we use when we talk about the injustice that is the fact that over the radio stations don't have to pay anything for the sound recordings. There's a very simple explanation for why they don't have to pay and digital radio does and it's politics. Music is concentrated in Nashville, LA, and New York. Digital radio is concentrated in a handful of states. Broadcasters are in every single congressional district, it's very hard to get any sort of legislation that requires them to do what and the rest of the world has taken, for granted, as a normal thing, the United States is- Well, North Korea doesn't pay performance royalties. That's right, thank you. A terrestrial radio, we're the only country aside from North Korea, so we're- Thank you, I apologize for overstating of the injustice, so I think that's the political explanation and there was a time when everyone sort of at this table was in favor of a performance for terrestrial radio. We said, look it, the elephant in the room is the fact that the $17 billion a year industry that is radio doesn't have to pay for music. There was a time when everyone's sitting at this table, I think, agreed with that, that has changed. That's one of the other big problems with the Internet Radio Fairness Act, it does not address that fundamental problem. And I also just want to take a quick note with the promotion argument, you hear that a lot. If there was all this promotion going on, you wouldn't expect to see sort of revenues going to the record industry from the sale of recordings going down instead of up. And I am, the fact is that everything promotes everything and it's not an excuse for not paying for something that belongs to someone else. Let me move it over to David Lowry really quick here. You're a lot of people advocating for artists here. I'd love to take about, not only I'm the artist on the panel, I'm the only person here speaking against my financial interests. You should always pay attention to that, okay? I make a third of my income from Sirius, Clear Channel and Pandora, okay? And I'm gonna piss them off right now, okay? That's what I've been doing for the last three months about, well, no, this bill, like the last six weeks, okay? So imagine, I'm also think I'm the only non lawyer to have read this bill, so let's just say this is the bill and this much deals with the rates, okay? And then this deals with all of this crazy stuff, crazy, crazy land stuff, okay? Like everything that doesn't have to do with rates, like for instance, I wanted to use this as a slide but I don't know if you could see this, I used this at a talk last week, but it said, this is corporate broadcaster SOPA, Sensors Free Speech. I'm gonna read the passage that I think is the most egregious, although I can do this with about 10 different things in this bill. Nothing in this paragraph shall be construed to permit any copyright owners of sound recordings acting jointly or any common agent or collective representing such copyright owners to take any action that would prohibit, interfere with, or impede direct licensing by copyright owners of sound recordings in competition with licensing by any common agent or collective and any such action that affects interstate commerce shall be a contract, combination or conspiracy in restraint of trade in violation of section one of the Sherman Act. Okay, so my question is, any copyright owners acting jointly, okay, is that, so obviously that's aimed at people like Sound Exchange, it's probably aimed at Sony Music, but the way it's written, it says any copyright owners. So this could be a musical group, what if my musical group, Cracker, Camper Van Beethoven decides that we wanna write something about a direct licensing deal going on. We would be threatened with prosecution under the Sherman Act. What does that do to free speech people? Any copyright owners, so is that an alliance between two indie labels? Is that a band? What is it? Okay, what is impede? In the case of the American Association of Independent Musicians versus Sirius, it was simply doing that, it was speaking out. This section in this bill is to codify a lawsuit between Sirius and the American Association of Independent Musicians. That's what this is. This has nothing to do with rates. If you've been around Washington D.C. long enough, you know what agency capture is. This entire bill, this is about rates. This is about agency capture. It's about the broadcast industry taking over the copyright board process. Kurt, you're trying to flag me down, what's up? Yeah, the point of that, as I understand, I think David's right that the language is imperfect, but what it says, what it's trying to do is say that, right now in the DMCA, major labels have a specific right to collude and are exempted from any antitrust if they do collude, to try and deny direct licensing. What that paragraph is trying to do is prevent them from having an antitrust exemption. But if it was fair, it would prevent the other side from doing that, too, and it does not. And I think it's actually really funny that a company like Sirius, which is a monopoly, is trotting out the Sherman Act, which is an antitrust act to use against its opponents. Come on, people, this is news speak. Anybody ever read Orwell News Speak? That's what this is. So in terms of views. I just don't think Sirius is even involved in this bill. I've never heard any word of support for them. What do you think? Anyone picked a differ? I mean, it's right here. You can look on my website and read it. I mean, it doesn't require a law degree to understand what it says. What it really does is it turns the regime upside down because the digital performance right and the compulsory license were set up where the basic majority regime is the compulsory license. The one stopped shopping. It's easy for services. They come, they pay, they register. That's all they have to do. They don't have to negotiate with thousands and thousands of people. And then the artist get the benefit of the certainty of the payment, the clarity direct payment and non-recruitment. That's the governing regime. But what David is talking about is trying to flip the regime and make the governing regime back into the dark old days of many, many, many individual negotiations between services and record labels and in ways that cut out the artist, cut out the direct payment to the artist, drive down the rates and reduce the pie for us. It's like flipped reality. And if we don't have that in there, like for instance, 75,000 albums were released last year. What were 800 of them released by major corporations? The rest were released by bands directly or independent bands or small independent labels. The big, it would prevent us from speaking out if the major labels had advantageous licensing deals with serious and stuff like that. Plus there's a whole matter of that digital doesn't prevent payola. So we're already at a disadvantage. This hurts the little guy and censors free speech. That's all there is to it. It needs to go away. Colin, can I just address the... I got you. Next. Colin, go for it. I just want to address the policy argument behind the antitrust exemption that Kurt was talking about. He talked about the existing law allowing record labels to collude. Well, collusion happens when people can get together and set a price. That's what antitrust law is directed to. If you have competitors getting together and setting a price, well, under the statutory license, record labels do not get to set the price. They don't even get to say no. The price is set by the Copyright Royalty Board. We participate in proceedings as to what the price should be and we present evidence from competitive markets where there is competition as to what the price is, what the market price should be. But at the end of the day, the government sets the price, not the record labels. And so one of the... Kurt talks about, describes this provision as just eliminating the ability of record labels to collude. What he's really saying is that the bill gives services all the benefits of a rate court, which is basically a cap on prices while eliminating the or trying to eliminate the ability of record labels to actually participate in a fair way and a process to figure out what that rate is. So I just want everyone to understand, no one is saying that record labels should be able to collude. We have a rate court that sets the price. Michael. A couple of quick points. Number one, there is no intent in this bill to step on anybody's free speech. If you look at it, congrats. But it does. But it does. But let me finish. I didn't throw up. I read the text. You can't just make shit up. But you can't make shit up. Okay. Wait, wait, wait. Let me know when I can talk. Can I talk to him? Yeah. Okay, thank you. So if you look at the sponsors of this bill, people like Senator Wyden, you heard from this morning, people like Congressman Chavitz, they're among the bigger free speech advocates in Congress and the ones that led to the fight against soap and pepper. So if there's anything in the bill that inadvertently does that, we can look at it and it gets fixed. There is a larger issue here, which kind of gets lost in the minutiae of the copyright talk if you're not a copyright lawyer. Which is you got a number of services that pay royalties at very low rates. Whether it's cable or satellite or whatever. And then you have one service, it's an internet radio, that pays royalties at a very high rate. So the system is discriminatory. That's a fact. So Pandora, no, no, let me, when I'm done, you can talk. I'd love to hear you talk. Let me just finish. So Pandora is a publicly traded company. It is not a secret. They're not making money. I think what, so that's our problem is that you currently have an unsustainable situation. And if I may add, and I've been somewhat taken aback by the vituperative nature of this debate. And Dave has been very articulate about why people downloading music and not paying for it is a bad thing. Pandora's one of the good guys. They pay hundreds of millions of dollars in royalties. They pay five or six figures in royalties to bands you've never heard of. And I'm talking to an audience full of music geeks. So that is the kind of service that we want to keep around. And the debate, the actual debate here isn't between should Pandora pay like at this level or should Pandora pay at that level? It's do you want royalty paying internet radio services like Pandora around or not? Because that's the choice. And I would hope that we could collaboratively come together and figure out how to make this business model a sustainable business model so that this business stays around and grows for years and years. Kurt, do you think that internet radio becomes, it becomes, you know, it goes into jeopardy. It becomes imperil. Yes, it is definitely imperil. For one thing, you know, it was interesting to hear Michael talk, internet radio plays far more independent artists and working musicians than any other former radio. This is the form of radio you should most want to support. It's got the ability to geotarget the songs placed to the markets in which you perform, for example. But right now it's in big trouble. It's gotten virtually no venture capital investment in the last few years. There's a single webcaster including Pandora who can afford to market to grow the audience. A thriving internet radio segment with reasonable royalty rates that are good for everybody is the best thing that could happen to working musicians. This is the thing you should be on, you know, on the side in favor of, not opposed to. If internet radio went away tomorrow, if Pandora went away tomorrow, there's still plenty of other choices out there. You can, artists can stream their own songs with their own websites, this is a false argument. I would, but personally what I want to say is that, is that I would rather have free speech than the money if you're gonna get down to it, right? I would rather have, I would rather like to preserve my right to free speech, to be able to negotiate, to speak about that, and to speak about with that with other artists. And I think it's completely disingenious to say there's one service that doesn't pay this rate. There's 1800 webcasters and there's three people that play the lower rate. This is something, this is kind of a grander point that I'd like to get to. It sounds like everyone on this panel agrees that the artists need to be involved in this conversation and maybe they're not, would everyone, how do we get musicians involved in this? Well we're not gonna be involved in a conversation if we're threatened under the Sherman Act from actually having that conversation. That's what I'm getting at. Under the Sherman Act, we can't have that conversation. That is censorship of free speech. But again, kind of point away from the thicket that we're in right now. You are an artist and you are here speaking your voice. How do artists get in the act on this and express themselves? By letting people, by basically either your, I mean you gotta be specific, wait a second. I don't know what, I'm going off in a different direction. David, musicians are 50% of the sound exchange board and correct, so they, that's a pretty significant role. Thank you, Kurt. No, that's true. And unfortunately they would be muscled under this agreement too, so. Yeah, I mean I would say so in terms of artist involvement through sound exchange, Kurt is right and thank you for pointing that out. And as Trish also said, our board is controlled half by artists and artist representatives. And that's a very real thing and it makes sound exchange a sort of unique part of the music industry. The unions have also been very active on this issue. The Music First Coalition is active on this issue and that's a collection of a broad range of artist advocates as well as label advocates. And so there are a number of different outlets, but we could use all the help we could get, getting the word out. Yeah, and I would add from the proponent side, educate yourself about the issue, like look at their website, look at our website, figure out the facts. David I think comes at it from a very principal point of view and he says there's this business paying artists over a hundred million dollars a year and if it goes away, you know something, it goes away. Other artists made disagree. And the different business model is capitalism. Yeah, but I think this is a business model you may want to promote. They could add another minute of advertising an hour and raise their advertising revenue 40%. Maybe they could. My sense is that a lot of people who listen to Pandora have gone away from broadcast radio and the reason they've gone away is because of the ads. But I think it's incumbent on all of us, like come together and figure out how to make this thing sustainable because right now it's not. Okay, well it's a little hard when one side is being muzzled. I would love to open this argument to our everybody here. Let's all get in the act here. Who has questions for our panel today? Do we have a microphone? Jean is gonna help you out. Hi, I'm a- You're on. I'm Elizabeth Fraze with TwinLegic Strategies. I'm a little confused by some of the vitriol against the 801B standard. Isn't that the same standard that the record labels use when they're purchasing rights from the music publishers and from the songwriters? I think I'm asking you, Colin. Okay, you're addressing that to me. So I think that is the standard under current law. My understanding is that in the past, when there have been discussions of changing the standards, people are moving towards something other than that. I don't work for the record labels in that capacity. The world of mechanicals is very, very different than the world that we live in. There's a much different history. A lot of it's built on direct licensing that is sort of in this shadow. And it's very general. It's 9.1 cents a track. Publishing. It's 9.1 cents a track. It's very general. But back to the point, I mean, we're not talking about setting a rate with this legislation. I thought what the legislation did was create a standard. There was a standard that had been used for 30 years for- First things like, it says that you can't consider anything that's happened before 2012. I'm not sure how you're going to set it. I mean, that is. There's this he who controls the past, controls the future clause in this bill. And one of the things is maybe you could elaborate on that, how we're not allowed to look at what- The judges are not allowed to look at- I mean, it's sort of like you're getting towards that standard, but then there's all these other things added to it. You're not allowed to look at anything that's happened before 2012, right? Do you want to get on that right there? I actually, I'd also like to hear a little bit from Kurt. One thing that we haven't heard about is the history of how we got to this point. And the CRB is, you know, every time the CRB has taken an action, Congress has had to step in to intervene or to encourage a private settlement. The Pandora rate, the pure play rate, was set by a private settlement because the CRB rate was so high. So can you talk about that a little bit, Kurt? Thank you. I guess it's to Kurt. We may have the same view or different views, I'm not sure. Kurt and I go way back in this fight. Can we give Kurt a chance to answer that one? That was for him, so. Well, in my opinion, the phrase, what a Willing Byron, Willing Seller would agree on is kind of shiverish, that it's, I'm going to try and boil this down to 20 seconds. If I have an elderly cat I love, I'm not going to sell them for $2,000 because I love them, but the market, but you as buyers wouldn't pay 50 cents, so what's the rate that a willing buyer and a willing seller would pay for my cat? It's an unanswerable question. The 801B standard, fair, maximizing the availability of works of the public, fair return for the copyright, owner, fair income for the copyright user, that is interpretable. The CRB judges historically have struggled with this willing buyer, willing seller stuff, which I think is shiverish, and come up with rates that were always over 100% irrevenence, and that's why each time they've come up with that conclusion, there's had to be congressional intervention. Trisha, you wanted to get on the mic before we go to the next question. I'll go to Colin at this. Yeah, so I'll, I guess, thank you. So, essentially, the, Kurt has, it's a sort of a nice image of the cat, and I feel badly for his cat. It's a metaphorical cat. But in practice, this is how it's worked. The, under the willing buyer, willing seller standard, this copyright royalty board has looked at market evidence. It's looked at actual deals between record companies and digital music services, and said, okay, what does, what do these tell us about the market for digital rights? And that's been the foundation of their decisions. And digital radio, under 801B, the judges have done this. They looked at the marketplace evidence. They said the market points to, in this one direction, but based on these other factors, and in the serious, in the last satellite proceeding, the one that was ended in 2006, this is basically based on the testimony of the two satellite companies, CFOs, we're gonna set a different and much, much lower rate. So that's the way it's worked in practice. In our view, the copyright royalty board should look to market evidence. And so we think that's really the fair approach. Now on the revenue point, and on Pandora, and the pure play rates, it's right that the rates paid by the pure play services as well as the broadcasters for their simulcasting, like iHeart Radio, and all of those, those were all negotiated. They were negotiated after, and it is also right that they're sort of negotiated after the first webcasting proceeding was done. But here's what's sort of remarkable. The rates were not just for that term, they actually went all the way through the next term. So what we called webcasting three was fully settled with 99% of the market before the proceeding began. Those were all negotiated rates through 2015. And so the process essentially worked correctly there. On the revenue point, it's very hard to just look at this sort of new industry and make any judgments about what's gonna be successful and what's not. And if you're running an ad supported business, you have to run advertisements. And we're not gonna judge what people do to try to generate revenue, and that's fine in their business. But I personally think there's a huge amount of promise in this space, but it's sort of, I think we're sort of like assessing Facebook in 2004, Google in 2000, there's just a lot of growth. Let's ask another question from the audience. I need my candy-crowley light to flash up. Can I actually just jump in real quick? Real quickly, because I wanna make sure we have some questions from them. The rate standard question, I'm not a musician, but I spend all my professional life working with musicians. And all of them say to me, I do this thing, I make this thing that is incredibly beautiful, incredibly valuable, it's full of my creativity and is a wonderful creation. And then all around me, there are businesses that are trying to make money off of my thing, okay? That doesn't mean you hate the businesses that wanna make money off your thing, but they're all out there making money off your thing, whether it's radio or whether it's Pandora or what it is, they're making money off the thing that I created and what's wrong with a standard that says, I should get a fair payment, I should get a fair market payment for my thing that I created that is my work, my talent, my creativity. That's what the rate standard is all about, is just a fair market value for the thing that I created. And it's as simple as that, that's not what the, but the rate standard isn't what the vitriol is about, the vitriol, to the extent there's any vitriol or the heat is all the other things in the bill that take away the musician's right to speak up or to try to take away the musician's right to speak up for the compulsory license regime and the things in the bill that try to push the direct license regime to undercut those fair market rates. I'm gonna make everybody hug before the end of the panel, so let's keep going. A few questions from the internet and I'll try to synthesize and rephrase, but basically what about the other bill? There are two bills that have been put forward at this point and the one that we've been talking about is the one that changes the rate standard for Pandora and other similar services and takes it down to the satellite cable radius level and what about the option of bringing them up or is there some room for some compromise that allows Pandora to have a slightly lower rate that's some sustainable in some way while bringing the other kind of services? If we have some kind of consensus around the idea of parity in the broad sense, why does parity have to look like this? Michael, I'd like to hear that one from you. What the other bill would do is essentially set all the other services under the same rate making standard that internet radio is now under. So what you risk doing is then creating a whole bunch of non-sustainable business models, which is not good for musicians, clearly. How do we do it in all of the other countries in the world except North Korea then if they're not sustainable business models? How do all the other countries in the world aside North Korea pay a performance royalty on terrestrial broadcast? And using typical principles of copyright law that's about three or four percent of revenues in most of those countries, which is sustainable. Okay. Who else? More than one question here, more than two questions I'm sure. And I think we only have a couple minutes left so this will be our last one. Hi, I'm Brian Gantman, I'm with EMF. I know most of the people on the board. Couple of things I wanna address and a couple of questions I wanna ask. When it came to the last rate setting proceedings and I know because I was one of the people who was dealing with calling on the last night trying to get a deal done for the non-coms. When you talked about the market rates, it was actually that I believe sound exchange though was picking and choosing which rates would go forward, which ones would be allowed in the future rate setting proceedings. The question I guess towards Patricia is if we're talking about the fact that under willing buyer, willing seller, the rates were so high that all these services would have shut down or a lot of them would have shut down. And now there are lower rates. My question is, and I know that David and I respect your passion, but if the rates are so high that none of these businesses are making money and they go out of business, how does that benefit artists? And if you talk about how these businesses are all making money and it should be shared with the artists, the fact is Pandora lost $8.2 million in the first quarter, $5.4 million in the second quarter. It doesn't sound like Pandora is actually making business. Pandora goes under, people are not gonna invest in this area, people are not gonna be putting internet radios and cars, people are not gonna invest in it, it's gonna go away and that's not gonna benefit artists in any way, shape, or form. If you'd like to respond to that and Colin, if you have any response to what I just asked. Go ahead. So, I don't, so I'll just say, I don't think internet radio is going away. I think Pandora's prospects are improving and you can look at what they say, and look, they are disrupting an existing radio industry. Any disruptive business, it takes a little while to get its footing. Fact is, they're making hundreds of millions of dollars, but the potential is so much greater. It's hard to assess now. They wanna make a run for radio, but they're only running two minutes of audio ads an hour. I think Dave's right. I mean, increase it by one minute and suddenly there's- They're running one minute right now. They're not running two minutes an hour, they're running one minute an hour. And part of that are ads for the Internet Radio Fairness Act to write your congressman, too, so. But maybe people don't want that. Again, I have no special knowledge of Pandora's finances, but let me simply say, it's economics 101. If you set up a context where a given business area can't make money, then that business area goes away. That's fundamental. And that's why again, if you look in the rear view mirror, the road is littered with all these failed web servers that either went out of business or got out of the business. Because right now the way the rules are set up, it is almost impossible to do well in that sector. And unless that gets changed, the sector goes away. It's how it works. Well, I mean, I could set up a business that gave away free Mercedes, right? And then I say, hey, the consumer could totally love it. And then, but it doesn't make any sense economically and stuff like that. So I run to the government and mandate that the car dealers provide free Mercedes. That is essentially what you guys are doing. That is what the problem is. It's your business model, not our business model. Suck it out, that was capitalism, this is America. Wait, wait, wait, wait, wait, wait, wait, wait, wait, wait. No, no, no, no, but what I'm saying is, I think you have an interest, like you have an interest in their business model working. Like we're in the same boat. What we did then, the quickest way to do that is to go privately to the record labels and the artist unions and the publishing companies and present your case. Instead of going to the nanny state to make them, I'm gonna borrow that word and I'm not a conservative, going to the nanny state to force us to fix their business model. If we really have an interest in it, then collectively we will fix the problem. We're out of time. I've gotta take my old cat and put him in the Mercedes and drive out of here. I want everyone to shake hands and give a hug and thank you so much for speaking with us today, y'all. Thanks a lot. Thank you.