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The MTP Interview: Blake Morgan of ECR Music Group on the #irespectmusic campaign

March 31, 2014 1 comment

IRM blake

 

Chris Castle interviews Blake Morgan, head of ECR Music Group and the force behind the #irespectmusic campaign on Pandora, IRFA and the campaign for artist pay for radio play.

Theme music by Guy Forsyth.

You can also subscribe to the Music Tech Policy podcast on iTunes.

 

More Corruption on the Potomac: Here comes the okie doke on Pandora’s royalty rates

May 3, 2013 Comments off

Rumor has it that the new and “improved” Internet Radio Fairness Act is about to be introduced by Rep. Chaffetz in the House IP subcommittee–which means someone is scurrying around the halls of Congress trying to line up co-sponsors.

So what will be different this time?  I would imagine that all the censorship stuff David Lowery discussed with Senator Wyden at the Future of Music Policy Summit in DC will be gone.  I would also bet that it’s going to focus more tightly on royalty rates this time.  So how might the Big Tech funders of the legislation do that?

One thing that is clear from the current noises coming from the pro-IRFA crew is that they intend to try to divide the artists.  How might they try to do that?  The same way they do everything in Washington–corruptly.  They’re going to try to buy us off.

Rep. Chaffetz (likely to be the bill’s author again) offers some guidance in his questioning of the erudite Jimmy Jam during the IRFA hearing last session (at pp. 153-54):

Mr. CHAFFETZ

Mr. Jam, as you know, currently the amount SoundExchange receives for any given recording played by an Internet radio station, generally 50 percent goes to the copyright holder, which is usually the record label [aside from the majority of tracks that are owned by the artists]; 45 percent goes to the artist; and 5 percent is set aside for background and session musicians. Do you think that the majority [50% is a majority?] of that should go to the copyright holder, essentially the record label, or should the artist get more?

Mr. JAM

Well, let me hit my button here. Sorry about that. I guess I feel that, first of all, 50 percent for the compulsory rate is fair because it——
Mr. CHAFFETZ [Didn’t like that answer…]
So you are not suggesting that artists should get the majority of the revenue. [Objection, leading…]
Mr. JAM
I don’t think I am suggesting anything yet because I had only started talking. I believe that the 50 percent is the correct—as the rate the court has set, that is the correct way to go.
Mr. CHAFFETZ
I am sorry, I only have got 5 minutes. I have to keep going. If you like the way the rates are set, I accept that, and let me move on.
You don’t suppose that Mr. Chaffetz thinks that artists–small business operators making a payroll–are stupid enough to believe that if they are given a larger piece of a smaller pie that somehow they are better off, do ya?
Do they think that they can give us the old okie doke and we’re just going to turn on each other while Tim Westergren cashes out at over $1,000,000 a month–and we’re not supposed to notice that?
Do they think we’re idiots?  Just not as smart as The Man 2.0?

The Return of the Royalty Cutter: Million a Month Tim Charges On

May 3, 2013 Comments off

Timmy

In case you were wondering, as Tim Westergren’s crew prepares to reintroduce legislation to require the Congress to reduce artist royalties paid by SoundExchange, old “million a month” Tim continues to make bank on Pandora stock sales.  Pandora’s only product?  Music.

Pandora’s Profitable Quiet: Silence is Golden

February 11, 2013 Comments off

You’re sitting there yakkin’ right in my face
I guess I’m gonna have to put you in your place
Y’know if silence was golden, you couldn’t raise a dime
Because your mind is on vacation and your mouth is working overtime…

Your Mind is on Vacation
by Mose Allison (Audre Mae Music Co. BMI)

I couldn’t help noticing that Pandora’s stock took a huge beating during the Internet Radio Fairness Act debacle–in fact, it reached its low right after the Future of Music Policy Summit:

Pandora

 

But…the stock came roaring back as soon as IRFA quieted down.  So…silence really is golden after all.  Particularly if you’re a selling stockholder…

westergrem

 

Don’t Get IRFA’d: Westergren’s Fake “Tour Support”

January 15, 2013 Comments off

Not surprisingly, Tim Westergren is rallying the troops at the Consumer Electronics Show–the locus of those just like him who want to enrich themselves from commoditizing music.   Remember, Westergren is the founder and public face of Pandora–and has been cashing in to the tune of $1,000,000 a month as he sells off his founders stock in the public markets.

So now the LA Times is reporting that Westergren is offering the Web 2.0 version of “tour support”:

[Westergren] talked about Internet radio as a means to generate income for performing artists (who don’t get paid at all by over-the-air stations) and insights. In particular, he touted Pandora’s ability to help artists figure out where to tour and promote their live shows to a receptive audience.

The key, Westergren said, is in the feedback Pandora users give on songs. The site allows listeners to give a thumbs up to songs they’d like to hear more frequently in their personalized radio feeds, and a thumbs down to those they don’t. This feedback can help identify the people most interested in going to an artist’s concert.

Westergren said he could see [someday] allowing artists to log into Pandora to see a heat map of the thumbs up ratings, showing the areas where they had the largest number of potential fans (but not their identities). Artists could also enter their tour information into the site, and Pandora could send alerts to listeners who’d given those bands’ songs a thumbs up — along with the option to buy tickets with one click.

This is, of course, a watered down and Web 2.0 version of the idea that Zoë Keating came up with for online services to share data with artists.  Except that it keeps Pandora in the middle instead of empowering the artist by putting the artist in direct communication with the artist’s fans–the people who make Pandora valuable, remember them?

So when did this epiphany strike Westergren like Paul on the road to Damascus?  Pandora has had this information locked up from the time that the thumbs were a great fiery ball, right?  Why is he bringing it up now, and bringing it up to a room full of people who don’t know a trap case from a full rachet?

Does Pandora plan on charging for this “service”?  Whether they do or don’t, why don’t they offer the fan the ability to sign up for the artist’s own email list?  Take Pandora out of the middle?  Because while these Big Tech companies will wave their arms about user privacy, notice what happens?  Pandora attracts the fan to Pandora because they play the artist’s music, but Pandora controls the communication with the fan and “owns the consumer.”  Where do privacy concerns stop and commercial concerns start?  No right thinking artist wants to spam fans, but shouldn’t the fan be given the choice of whether they want to sign up?  And make it easy for the fan to do so?  You know, give the fan the opportunity when and where they want it?

And by the way–whatever you call this Pandora “service”, don’t call it “tour support”.  Tour support has a very specific meaning–writing a check to finance a tour deficit.  A tour deficit means the shortfall in a tour’s costs in excess of the tour guarantees.

And who makes the tour guarantees?  A promoter or club owner.  And why does a promoter or club owner promise a guarantee?  Because a bunch of people that have IP addresses that come up in the promoter’s zip code show up on a heat map?  Because the artist got a thumbs up on Pandora?

Ahhh…no.  The market produces this information already–it’s called a price.  The price in this case is a reflection of the risk capital that a talent buyer is willing to bet on a show.  And whether the artist takes the price is a reflection of whether the economics of the tour make sense.  Such as routing.

If an artist has fans in markets with a bunch of Pandora users, then judging from who likes what is perhaps an interesting fact, but ultimately is not as meaningful as who will pay for what and in what sequence.  Because if there are promoters willing to pay for a show in LA, Peoria, Ft. Lauderdale and Nome, that’s a very expensive tour.  It’s even less of a tour if those are just fans showing up on a heat map.

There have been Internet dudes hawking these heat maps for 10 years.  They really don’t mean much.  And they mean even less if the artist can’t communicate with the fans directly.

And it’s nice that Pandora will be willing to sell fans a ticket to a show–but there’s no show to sell tickets to if there’s no promoter willing to get the band to the gig.

This is why you have deficit tour financing–so the artist can hop on a headliner’s tour as an opener and go to places where they have a hope of reaching an audience they can come back to on their own.  To fill in the gaps where a promoter is willing to have the artist play but not to pay for the privilege with the promoter’s risk capital.  If you don’t have a record company to pay that tour support, then the artist just has to suck it up out of their own pockets.  Which is why artists need to sell CDs to pay for touring and why most tours lose money.

Please, people, this is not that hard.

I’m glad for Tim that he’s getting rich, and I’m glad for Joe Kennedy he can pay himself a $700k salary.  But why don’t they actually listen to artists like Zoë Keating and cut out the mickey mouse.

Let the fan decide.

Pandora CEO Joe Kennedy Tells Paul Resnikoff He Doesn’t Know How Much Money He Makes from Pandora

December 1, 2012 5 comments

Must be nice to be able to forget your salary–Paul Resnikoff of Digital Music News gets the scoop:

So let’s help Joe refresh his recollection.

According to the Securities and Exchange Commission, Joseph J. Kennedy, Pandora’s CEO, President and Board Chair Director) was recently granted Pandora stock options totaling 1.35 million shares at $10.63, or $14,350,500.  Kennedy’s salary is $732,000 according to Yahoo! Finance.

As far as I can tell, Tim Westergren’s current salary is undisclosed (although his 2004 employment agreement is available), but we know he’s been selling some stock.  $9,932,587 of stock so far to be precise.

Typically, we got a heap of sanctimony about struggling startups from former eMusic CEO and current Venrock VC David Pakman at the House IP Subcommittee hearing on Wednesday.  I have to believe that David probably didn’t know about the salary disparity at Pandora.  Some might praise Kennedy for holding off exercising his recent stock option grant, but with that eyepopping salary, it’s not like he’s bootstrapping.  And we don’t know what shares Kennedy sold either in the IPO or pre-IPO.  I can’t believe that the stock options Kennedy is sitting on is the only Pandora stock he’s ever had.

Paul Resnikoff’s reporting in Digital Music News turned up another nugget:

[Pandora] CTO Tom Conrad has taken a cool $13 million off the table, and the broader group of executives and investors have removed more than $70 million in cash in just over a year.  By comparison, there’s almost no stock purchasing by this group: since going public, records show buys of just over $1 million.

So this points out one of the problems for Pandora–executive compensation.  How is it that a company that makes no profit can afford to pay these astronomical salaries?  If the company capped all the executive salaries at $150,000 a year, they’d probably be profitable.  And frankly, given the large stock awards for this crew, you would think that their board would demand it.

Remember–Steve Jobs took a $1 salary.

But then Joe Kennedy’s stock is worth about $3 million less than it was when he started these IRFA shenanegans.  All Pandora employees must be really grateful for how he’s handling the stock price.

UPDATE: Research has turned up an “investor offer” to purchase shares of Pandora stock from insiders pre-IPO.  What this means in English is that when Pandora was still a private company (before their IPO) the venture capital firms that had already invested in Pandora increased their holdings of Pandora stock by purchasing vested shares of common stock from the top executives of the company.  This is a little perk that is frequently extended by venture firms to the top executives in a company that the VCs have already invested in that is likely to go public.  It let’s the executives “get a little liquidity”.  Doesn’t that just sound groovy?

So in the case of Pandora, this happened in August of 2010–you know, when the “royalty crisis was over.”

Here’s the page (p. 113-114) from Amendment Number 6 to Pandora’s S-1 (the form you have to file with the SEC when a company “goes public” or registers it shares in an underwritten public offering of the company’s stock).

Pandora insider shares

So what this means is that even though Joe Kennedy hasn’t exercised any of his newly minted stock options, he did “get a little liquid” to the tune of $2,515,979 back in the pre-IPO days of Pandora.

Oh, and so did Tim Westergren, he got $2,157,375.

Now–I don’t begrudge these guys their millions, I really don’t.  But don’t come crying to the artists and songwriters and tell them how you just can’t survive when you’re playing Silicon Valley money games under the table.

Creators would like a little liquidity, too.

PS If you want to voice your opinion on IRFA, Senator Ron Wyden has a comment page on his Senate website click here.

The Artists, United, Can Never Be Defeated

November 29, 2012 Comments off

Yesterday on Capitol Hill did not quite go the way that the Internet Radio Fairness Coalition had in mind.  At all.  More about that will be written.  Mr. Chaffetz–more about him later, too–had asked Mr. Goodlatte for a hearing on the so-called Internet Radio Fairness Act, and a hearing he got.  I would say mostly a “listening” but that’s good, too.  The hearing was scheduled for 11:30 am and in a brilliant move, David Israelite of the NMPA scheduled a performance by five of our community’s top songwriters in an adjacent meeting room just prior to the IRFA hearing.

The writers were Lee Miller performing his song “You’re Gonna Miss This” (as recorded by Trace Adkins), Kara DioGuardi performing “Sober” (as recorded by Pink), BC Jean performing “If I Were a Boy” (as recorded by Beyoncé), Desmond Child performing his song “Livin’ on a Prayer” (as recorded by Bon Jovi), and Linda Perry performing her song “Beautiful” (as recorded by Christina Aguilera).

Of course there was a masterful political element to the timing and messaging of these songwriters, but first think about this–these writers performed their songs with a single instrument accompanying them.  Just one instrument and the voice, about the simplest instrumentation you can have.

And of course–the song.  These songwriters reminded the audience comprised of Members and staffers of the importance of the songwriter, and they did it by letting the songs speak for themselves.  By performing these songs–not with the vast instrumentation and production values of the recordings that interpreted the songs, they really and truly demonstrated conclusively that which every record company executive knows that is not a hype, not a self interested spin–it really and truly does all start with the song.

The combined Pandora earnings for these songwriters in the first quarter of this year was $587.39.  For over 33 million spins.

And Tim Westergren wants to pay them less.

It’s too bad that Tim wasn’t there for the sing along that Desmond Child led on the chorus of Living on a Prayer.  Since he used to play in a band and all, you would have thought that Tim would naturally gravitate to hanging out with his own kind.

I guess Tim was too busy to show up for a reminder of the investment that these writers are making in his company by giving him a break on royalty rates that all songwriters richly deserve.

When Pandora, and the NAB, and David Pakman and Google complain about royalty rates, remember that’s just about greed.  By handling themselves the way they have, all these people have demonstrated once and for all that they just don’t get it.

That’s OK, they are not our friends.  We don’t have to be friends with everyone we do business with.

But here’s the real deal: Without great songs there are no great records and without great records there is no Pandora.

And that’s the fact.

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