While the internet and startups play a critical role in driving innovation in content industries, the relationship between incumbent companies and their young competitors has never been harmonious. From the advent of radio to the launch of Napster, disruptive technologies have experienced legal barriers to markets. The Internet Radio Fairness Act of 2012 -- introduced by Oregon Democratic Senator Ron Wyden in the Senate and Utah Republican Representative Jason Chaffetz in the House -- will help boost web-based music services by leveling the playing field for all radio broadcasters.
Internet radio broadcasters pay higher rates to play the same songs than other music distributors using different technologies. An August Brookings Institution paper on the rate differential concluded that the policy discourages new companies from entering the market. The paper notes that internet radio companies may be compelled to pay a larger share of their revenue to acquire the rights to play music than other radio services using different technologies, such as satellite radio.
Constant innovation drives the music industry. Where iTunes and Pandora began disrupting through digital distribution, companies like Grooveshark, TuneIn, and Spotify continue to push the envelope. Young businesses often have the greatest difficulty maintaining steady revenue flow. Government shouldn’t be in the business of increasing barriers to entrepreneurship and propping up incumbent industries. We welcome Senator Wyden and Representative Chaffetz’s bills and encourage Congress to pass legislation that promotes competition in all markets.