Sometimes it pays to read the transcripts from earnings calls, especially for company’s like Pandora, our latest set of fake “friends” in the tech community. Always striving to keep their executive salaries high, Pandora’s CEO let their true strategy slip out in yesterday’s earnings call (see the full transcript on Seeking Alpha):
For the landscape around content licensing remains a complex topic. We reached the important milestone related to content cost during Q1, with a decision in the ASCAP trial. In her ruling, Judge Cote, confirmed our longstanding belief that “Pandora is Radio”. An important finding was wide ranging legal implications for our company.
Additionally the court set a rate of 1.85% of Pandora’s revenue for the five years ending December 31, 2015, which was the upper end of our proposed range of rates. And this decision followed the court’s issuance of summary judgment in September 2013 which upheld Pandora’s right to perform more compositions in the ASCAP repertory.
As you may have seen just last week, multiple record companies filed suit against Pandora in the New York State Court, regarding our use of sound recordings prior to 1972.
To be clear, we paid publish [sic] royalties on these spins. But like other similarly situated companies including Terrestrial Radio, we do not pay sound recording royalties. Pre 1972 sound recordings represent approximately 5% of total spins on Pandora.
So note the emphasis here: First, Pandora is Radio. How do we know that? Because Judge Cote, the unelected, lifetime appointment judge in the ASCAP rate court says so. The same judge who is using Pandora as a vehicle to systematically destroy ASCAP through the tool of a 1941 antitrust consent decree with the Department of Justice (that would be the same Department of Justice that allows Google to perfect its monopoly but keeps a tight rein on those dangerous songwriters.) ASCAP is one of the only examples of a system that is working in the online music licensing world but Pandora is only too happy to do all it can to destroy it–because it thinks that music should be free or near free now that it’s had both an IPO and a follow on public offering–all the while selling one product. Music. And of course its insiders are making millions after artists gave them a break to get up and running.
Pandora’s CEO says that Pandora should be compared to terrestrial radio (and of course the whole point of the compulsory license that Pandora enjoys is that it is not like terrestrial radio). And terrestrial radio doesn’t pay artists for any sound recording performances (pre-72 or otherwise…see the I Respect Music campaign).
So riddle me this: Why is Judge Cote’s ruling for Pandora in the ASCAP case “[a]n important finding” with “wide ranging legal implications for [Pandora]”? Why does Pandora latch on to the “Pandora is Radio” phrase? Perhaps it’s as simple as this: Because they want to believe–as McAndrews clearly does–that “Pandora is Radio” and tried buying a radio station so they could get the ASCAP court to treat them like a terrestrial radio station for song licensing purposes–then double back to get the Congress to treat them like a terrestrial radio station for sound recording licensing purposes? What would the other “wide ranging legal implications” beyond the ASCAP case be exactly if the plan wasn’t to try to get out of the sound recording royalty altogether? I’m all ears.
So when Pandora goes back to the well in Congress and introduces Son of IRFA, expect to see the company deliver the coup de gras: ZERO. Run to the Nanny State to have it decree that Pandora is Radio and the “wide ranging legal implications” are therefore Pandora should pay artists far less than they do currently, and preferably shouldn’t pay artists anything. (The rhetorical strategy that Pandora lobbyists and the National Association of Broadcasters tried to run at the IRFA hearing that completely backfired.)
And if that’s not what he meant, then why did he say it to his investors?
UPDATE: According to Morningstar, Pandora’s CEO compensation (i.e., pay in both salary and stock) is up 3,882.3%…. Now if that sounds high, you’ll need to ask the blue-chip stock watching service Morningstar how they got that number–because as Pandora’s trolls will tell you, Pandora CEO Brian McAndrews “only” makes $500,000 in salary.
In the world of Wall Street, that’s considered a “bargain.” Wow…that’s inspiring, eh? Makes you want to stand up and salute followed closely by voluntarily taking a cut in royalties. Maybe you’ll run into him shopping at the thrift store and he’ll buy you some socks. Because in the world of artists and songwriters, $500,000 a year sounds like an awful lot of money for a guy who doesn’t want to pay for his one product–music. Not to mention $29,167,388.
So it seems like there is one clear answer to why Pandora is doing everything they can to alienate those who create their only product–Pandora’s executive team is doing it for the money.
Or more precisely–they’re doing it for your money.