The recent court ruling that web-based broadcasters like Pandora will need to shell out a $25k upfront fee and additionally 25% of their revenue to RIAA and SoundExchange to pay royalties to artists is absurd. First, it’s a ruse that the artists here will benefit. The likelihood that this money will ever trickle down to them is sophistry. This is simply a way to line the pockets of the recording industry. But the larger injustice is that the new fee structure applies just to Internet based radio. Traditional broadcast stations still get to play music essentially royalty free.

The reasoning here is that conventional radio promotes artists by playing their music. The implication being that somehow listing to the same music over the Internet does not? Balderdash! Especially in light of the fact that many services (e.g. Pandora) have a link displayed so that you can buy the music with a click while it’s playing. Try that on your car radio.

Pandora claims it’s happy with the ruling, but that’s mostly because it overturns a previous ruling that would have put it and most other web radio services out of business. In response, Pandora has already announced that they will need to start charging heavy listeners (more than 40 hrs/mo) in order to continue their service. The fee is less than $1/mo, so it’s not a huge deal to fans of the service. But lots of smaller less well established sites will undoubtedly still go under with this additional burden on their backs.

I suppose it’s possible that people like me contribute to the problem. I’ve been a huge fan of web based radio for years, although I’m admittedly a little late to the party with my Pandora addiction. Still, historically I prefer the format of radio (terrestrial or Internet) to owning tons of my own songs and albums. I’ve always leaned that way. I don’t own a lot of CDs, and am one of the three people under 50 who don’t own an iPod. So in a sense, I mooch off the system. I get my music for free by listening to radio.

But my motivation isn’t the cost so much as I like variety and I like the convenience of just pushing a button to get music. This is part of my fascination with web radio as there is lots more music and less advertising (due to the lower overhead of the stations) and I hear more old or obscure music that would never be played by the big commercial over-the-air radio stations.The reality is that in my case, I might well pony up the small f ee to continue to get my Pandora. But this still doesn’t explain why merely broadcasting over a digital network (e.g. the Internet) warrants a different set of rules than broadcasting over analog or air.

I think this is yet another example of an aging judiciary who is completely unfamiliar with digital technology and deems it something fundamentally different and maybe dangerous rather than simply a new business model. The courts should not be taking sides on business models. Let it play out in the market. if anything, the courts should be ruling to level the playing fields, not stacking the decks in favor of old established businesses. That sort of anti-innovation mentality will be the death of American businesses, not the savior of them. Suing your way to financial solvency may be American. but it is not a business model.