Internet radio service Pandora is currently lobbying lawmakers in US Congress to change royalty regulations governing the rates at which artists are compensated by launching a lawsuit against ASCAP (the American Society of Composers, Authors and Publishers) in a bid to lower the royalties it pays artists to use their music.

As a symbolic gesture, Pandora’s lawsuit seemed like a declaration of war on songwriters and music makers who rely on the crucial revenue streams that royalties provide in a climate when dwindling album sales and traditional sources of income simply aren’t the earners they once were.

It was only a matter of time before the artists hit back at Pandora, and as BBC News reports, the likes of Pink Floyd, Beach Boy Brian Wilson, and Zeppelin vocalist (and forthcoming Bluesfest headliner) Robert Plant are among a long list of artists who have signed an open letter to Pandora over their proposals to change the royalty scheme laws.

Nearly 125 musicians, including everyone from KISS, The Doors, Guns N Roses/Velvet Revolver bassist Duff McKagan to Billy Joel, Rihanna and Missy Elliott – have put their name to the letter, titled “A Musician’s Perspective on Pandora”, opposing Pandora’s new bill, called the Internet Radio Fairness Act, claiming that the new act will cut royalties by as much as 85%.“Why is Pandora asking Congress… [to] gut the royalties that thousands of musicians rely upon?”

A section of the open letter reads: “Why is the company (Pandora) asking Congress once again to step in and gut the royalties that thousands of musicians rely upon? That’s not fair and that’s not how partners work together.”

American charts body and music stats bible Billboard intends to publish the open letter this weekend, in addition with an official signature by musicFIRST, a coalition of musicians and industry figures along with SoundExchange – a non-profit organisation that represents musicians and assists in collecting royalty fees.

Ted Kalo, Executive Director of musicFIRST, issued a statement saying: “These artists have joined together to tell Pandora it’s time to go back to the drawing board. We all want Internet radio to succeed, but it won’t if it tries to do so on the backs of hard working musicians and singers.”

American music publishing trade association NMPA has also condemned the internet radio company’s actions:

It’s outrageous Pandora would try to reduce the already nominal amount they pay songwriters and music publishers, when Pandora’s business model is based entirely on the creative contributions of those songwriters,” said David Israelite, president and CEO of the NMPA. “To file this suit at the same time that Pandora’s founders are pocketing millions for themselves adds insult to injury.

Israelite added: “Royalty rates should protect songwriters and compensate them for their significant contribution to the success of music services like Pandora. As this area of the market grows, we need to ensure that songwriters are protected, and that they are appropriately compensated for their work.”

Pandora, which has undergone a huge update to its mobile app to meet demand from its growing user base, recently reported revenue of $US 338 million last year, with a market cap of over $1.5 billion.

Despite their swelling profits, most of it supported by advertising, Pandora claims it’s had to pay more and more money for fees and rates to stream music as its user base grows, adding that it’s unfair compared to other service providers – such as satellite and cable, who pay smaller royalty rates.

In a statement issued on their website, Pandora bemoaned that: “The current law penalises new media and is astonishingly unfair to internet radio.” Joining musical partners Clear Channel Channel communications in supporting the new Internet Radio Fairness Act, stating in their lawsuit against ASCAP that the royalties body had established rates that are “ill suited and not reasonable”, based on an ‘experimental’ licensing agreement originally set in 2005.

“We are asking for our listeners’ support to help end the discrimination against internet radio,” says Pandora representatives. “It’s time for Congress to stop picking winners [and] level the playing field and establish a technology-neutral standard.”

The issue however, is that the royalty fees from streaming services are already paltry, at best. Leading to some indiscriminate finger-pointing between streaming services like Pandora, who claim the record labels and royalty bodies ask too much, and vice versa. All the while the artists continuing to wonder where all the money is going if not to their pockets.“It’s time for Congress to stop picking winners [and] level the playing field and establish a technology-neutral standard.”

There’s certainly big money being made as the popularity of Pandora and its popular contemporaries (Spotify, Deezer, Rdio, et. al) continue to experience financial growth, contributing to an industry that now generates $1 billion in global revenue, but the issue of how much artists are actually earning remains a point of contention, especially considering that they are essentially the content providers that the digital services rely on.

Indie darlings Grizzly Bear (who aren’t as rich as you’d think) have criticised Spotify for underpaying artists saying that in 10,000 streams of their music they get just $10, while on the other end of the spectrum, a pop superstar like Lady Gaga only earned $167 from one million plays of ‘Poker Face’, according to a 2009 report from Swedish newspaper Expressen.

The UK’s record industry trade association, the British Phonographic Industry (BPI) have recognised the hypocrisy in another streaming music platform in Britain this week, criticising the new music service Google Play; saying that it ‘didn’t make any sense’ for the new iTunes rival to provide legal means to purchase music on one hand and “then, on the other hand, undermine artists by referring consumers to illegal sites.”

Some streaming services have made moves to recognise the contributions of the musicians supplying their content, Rdio for one, recently announcing their new ‘Artist Program’ that pays musicians and recording artists direct – not for the streaming of their music, but for how many fans they can sign up as subscribers.

Additionally, controversial music streaming service Grooveshark have also changed their model, launching a new program that allows user to create an account and like or ‘flttr’ artists with money then distributed between artists accordingly.

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