Archive for the ‘Pandora Shakedown’ Category

The MTP Interview: Blake Morgan and David Lowery on the CRB Rates

December 17, 2015 1 comment

MTP had a chance to catch up to Blake Morgan and David Lowery for an interview about the CRB rates announced yesterday.  This is the first of the two posts with Blake Morgan, read David Lowery’s interview here.

MTP: How do you feel about the CRB decision in general as far as rates go?

While I’m happy the Copyright Royalty Board raised Pandora’s non-subscription royalty rate by 21%, I can’t celebrate fully. The fact that webcasting rates were cut by 25% makes this mostly a wash, and flies in the face of basic respect for music makers.

MTP:  Was this more of a victory for the Pandora/Google MIC Coalition or for artists?

Overall, Pandora is going to have to pay 15% more than they have been paying, so it’s certainly not a victory for Pandora/MIC. Artists are going to get more, so that’s a win. However, it could have been a slam-dunk victory for artists, and I feel this is more of a squeaker.

MTP: Do you feel compensated for the value lost from the last CRB when Pandora got the CRB rates cut substantially?  Do you think that the CRB had in mind restoring what was taken away the last time around?

It’s hard for me to climb inside their heads, but it does feel like the CRB decided to make a “some for them over here, and some for them over here” kind of decision. This is a significant cost increase for Pandora, but it’s still less then what we wanted––so it’s like the CRB tried to drive right down the middle. If they were trying to restore what’d been taken away last time, and that’s all, then that would be really disappointing to me.

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that essentially froze the 2016 royalty rate and just adjusted for inflation so that artists essentially would be paid 2016 value for the next five years.

Yeah, that’s a little how I feel. But, I hope it doesn’t matter because there’s such a strong possibility that Pandora won’t even be around in five years. At least if they continue to run their business the way they have been recently.

MTP:  The press seems to always refer to the fact that Pandora “hasn’t turned a profit” yet, and tries to create this impression that Pandora is an otherwise well run company with $1.1 billion in revenue, zero debt, government mandated below market vendors, SG&A over 40% that’s going on an acquisition binge for unrelated businesses with no regard for integration costs—that also can’t manage to “turn a profit”.  Does anything bother you about that press profile?

I have yet to meet a music maker who isn’t bothered by this. Far too many people have noticed that Pandora’s founder, Mr. Westergren, has bought and is building what’s being widely reported as a “massive” mansion, with 14 bathrooms. Not turning a profit? How full of shit do you have to be to need 14 bathrooms in your house, man.

MTP:  What’s the reaction in the #irespectmusic community to this latest move by the MIC Coalition?  Do the new CRB rates make getting a royalty for terrestrial more or less important?

Securing a terrestrial radio royalty for artists remains the singular issue in this fight for music makers’ rights and respect that everyone I talk to supports. They agree it’s embarrassing that we have to even talk about it, that it’s embarrassing for us as a nation to not have it, and it’s critical in winning. Simply put: it couldn’t be more important. It’s a century overdue, and it’s time to get this done for American music makers.

The MTP Interview: Canadian Artist Suzana Barbosa Who Really Did #walkmilesformusic

June 16, 2014 1 comment

Suzana Barbosa is a Canadian artist who walked from Los Angeles to the Googleplex (well…not inside the Googleplex) and used her #walkmilesformusic campaign to call attention to the absurdly low streaming royalties that are cannibalizing sales.  In a serendipitous coincidence, Suzana’s protest coincided with the release by the Copyright Board of Canada of its new statutory rates for Pandora in Canada.  Remember those really low rates that Pandora pays in the US?

The Canadians are now paying less than 10% of those rates for sound recordings thanks to Pandora’s lobbying efforts.

That’s right.  $0.000102 per play.  And of course the artist’s share is 50%–got your scientific calculators ready?–$0.000051.

So Suzana’s direct action couldn’t have come at a better time in both her home country and in the U.S. as Pandora is trying to do the same to artists in the U.S. in a rate proceeding with SoundExchange.

We were lucky enough to interview Suzana about her experience.  Find out more at Suzana’s Walk Miles for Music website and follow Luminova on Twitter @lumnov.

MTP:  Tell us a little about your creative arc, who are your musical influences, what’s your background and how did you get to where you are today musically speaking?

Suzana:  I knew from the age of 4 I wanted to be a singer. Due to a tumor I had in my right ear at age 7, I had a 89% hearing loss in that ear. I told the Doctor I wanted to be a singer and he told me that it was “unlikely I would become one.” It didn’t stop me. I joined choirs and music classes as much as I could.

I started singing melodies and writing lyrics from a very young age. I always heard music in my head. I graduated recording engineering school so I could record my own music. I met my music partner Mike Dell (aka Jack Darling) to which we are now heading into a 14 year co-writing relationship.

The 3rd addition to the team was Randall Savoy, who had been in several bands before joining ours.

The 3 of us have incredible strengths and I love what we can create together. We all love different styles of music – from classical to rock, swing, elctro, folk and blues. You can hear bits and pieces of all those elements in our music.

We have a Cabaret/Jazz/Pop group called Suzana d’Amour where I sing in 3 different languages and do a full Cabaret show (nothing to do with being naked). Then there is our indie, folk, electro band called Luminova which is recently new and SO much fun to play.

I have many musical influences, but if I had to pick 4 women that vocally influenced me, I would say – Kate Bush, Annie Lennox, Edith Piaf and Kimbra..  not that I sound like them but women I absolutely adore.

MTP:  What’s the Walk Miles for Music campaign about, how did you get started with the idea?

Suzana:  Well, along with doing music I’ve always given back hence my side company called I Dare You to Care, where I would coach, or consult others to incorporate some type of daring act for a Cause they care about and follow through with fundraising and Marketing.

I started to think about that. Why have I never dared myself to care? Music! One of the most important things in my life. Something I feel I was born to share. So, the idea was born. At first, I thought I was going to walk across the Country – but I had a 60 day time limit due to a tour I have happening in June. So Coast it was.

Walk the West Coast of California for 60 days. With no money. If people don’t pay for my music, I don’t eat.

And to be honest, I was at my wits end. I had to move out of my apartment because I could no longer afford rent, we had just come back from recording our album in Berlin (which was 3 times cheaper to live then where we currently live) and my band mates had second thoughts about continuing the journey. Everything I had ever known was about to end. I was depressed and tired of the “starving artist” mentality. Then I came across the “Unsound Movie Trailer” to which gave me hope. It was either sink or swim. I chose to swim, full speed ahead. I gave up my apartment, stored boxes at my moms place and used all of my aeroplan miles to support my flight.

I also had something constantly whispering in my ear about finding solutions. I have come to learn, my instincts are always right. So, walking along the coast, interviewing and co-creating solutions was part of my mission. I knew I couldn’t do this alone. My friend Nathan Greene from Imaginology helped me along the way. I set up a webpage, had a rough plan for a route, borrowed a tent, sleeping bag + pad, bought a used baby buggy to put everything in and off I went!

So really, everything happened at the right time.

MTP:  We’re very impressed that you actually walked 400 miles!  I’m sure this is a much longer story that you’ll tell the world at some point, but give us an idea of what that was like, who you met along the way and what reaction you got from musicians and fans.

Suzana:  I actually did just over 500 miles!! It was the scariest but best thing I have ever done. The scariest part was sleeping at night, in the dark, alone in a tent. Although my feet had enough, I loved walking during the day – I was inspired every day. There was about 6 days worth of walking I had to take in rides because some spots on highway 1 were too dangerous. Cops were called on me a lot because I was pushing a baby buggy – and if you could imagine what people were thinking – “Look at that horrible mother pushing a baby on the highway!!”

Some days I just didn’t want to face to judgement, but then I would think about the impact I would have and my feet would just hustle. It also pushed me not to care what other people thought. There were magical moments everyday. The Universe seemed to have been aligned for me. The best part of the journey, were the people I met. The kindness was awesome. I have the most incredible synchronicity stories ever – here are a few.

For instance, met a great couple, Steve + Flora Rodriguez who took me in like I was part of their family. When a police officer stopped me and told me I had to turn back, because it was too dangerous to be on Harris Grade, after I had walked 9 miles UP HILL (no joke) – he asked if I could call anyone. There was Steve. Flora and Steve helped me get a TV interview with KCOY and a radio interview that will be happening soon. Gary + Kyndra, who I met at El Capitan beach, drove all the way up to meet me along my journey, to bring me an abundance of food and band-aids (my poor feet).

I met another amazing couple, Brian + Rhonda Jean, while camping at Pismo beach. I walked over to introduce myself for safety reasons and I ended up staying an extra day because I fell in love with the both of them. Brian is an amazing guitar player and they absolutely adore each other. Turns out, Brian is a stats professor at Taft Community College and developed an app called TC-Stats – to which creates pictures of data in milliseconds that would take hours by hand with large data sets. Brian will be taking my “music appreciation” and “artist-musician” surveys and providing me with a summary of findings once we’ve received enough submissions.

OH! and this one. I landed at Pfieffer state park and Hip Nic (3 day music festival) was happening. It was a “coincidence” this Festival was happening. So,I thought it would be a great opportunity for me to interview musicians and ask them a few questions. I asked the organizer if I could get in, he said no. I asked if I could volunteer, he said no. Then magic happened. I met a fantastic musician Ian Moore who ‘happened’ to have an extra ticket and generously gave it to me! It turned out, he had been feeling the same way and has aspired to find sustainability for musicians too.  [MTP:  Ian Moore is from Austin and is based in Seattle.]

First 5 minutes of being in Santa Barbara, Musician Rich Stranger asks me if I have a place to stay and when I say no, he says, “you are staying with us!”

It goes on and on.. I could go on forever. It’s been awesome. I should write a book.

MTP:  What is your feeling about streaming services in general?  Any that you particularly like or dislike?

Suzana:  This is what I think. If I were being paid a salary, streaming my music or playing for venues that only want to offer the door and 10% of bar sales wouldn’t be such a big deal. We need to come together as a community and support our local musicians. I don’t think anybody realized what impact streaming would have on the average artist. I know I didn’t, and I was in it.

There needs to be some type of regulation and there are fantastic organizations like the Content Creators Coalition that are fighting for our copyright protection, but the real issue is awareness. I don’t think people understand the impact they have when they decide to stream a song. I was guilty of it too. The impact is catching up fast and technology moves much faster than the court system. So, we need to take a grass roots approach and help other people understand ‘we need their support’.

Many people I spoke to along the way, told me they had no idea artists were struggling. They assumed they were successful. The image of someone on stage seemed to equal fame. Which is absolutely untrue.

MTP:  I saw that you intended to end your walk at the Googleplex!  Is that where you ended up and if so how were you received?  Did anyone from Google talk to you?

Suzana:  My intention was to end up at googleplex but it didn’t happen. I wanted to set up a time with someone and I got the run around.  [MTP:  Walking 500 miles wasn’t enough?]

I will be having a discussion with google eventually but this is about building an alliance, not war. I need to focus on what I can change now.

Instead I got to interview Unsound Movie director – Mikael “Count” Eldridge – which was a goal of mine.

MTP:  As a Canadian artist concerned about streaming rates, I can’t help noticing that the Copyright Board of Canada just announced webcasting rates that are 10% of the already astonishingly low rates in the U.S.  These super low Canadian rates don’t just affect Canadian artists as they apply to all recordings played in Canada, so your action is no doubt greatly appreciate by artists everywhere.  What’s your reaction to these new Canadian rates?

Suzana:  I read this article by Michael Geist: The Copyright Board of Canada Music Streaming Decision: The Good, the Bad, and the Ugly which was, ironically,  posted on my birthday.

The board largely rejected the arguments of Re:Sound

“We are unconvinced that non-interactive and semi-interactive streaming cannibalizes sales of CDs or downloads. Though the Objectors’ evidence and arguments in this respect are not without contradictions, we agree with them, for the reasons set out in paragraph 157 below, that non-interactive webcasting is similar to over-the-air radio. We find that neither over-the-air radio nor non-interactive webcasting is likely to cannibalize music sales; if anything, they are likely to stimulate them.”

I am disappointed. But the only reason I know this happened was because I am inundating myself with this information. I wonder if all of the musicians knew of this, we would gather together? There isn’t enough awareness going on.

MTP:  What do you have planned in the future for #walkmilesformusic?

Suzana:  This is my vision – Start the Abundant Artist Alliance – Creating sustainable living for artist-musicians.

* Abundant Artist Alliance – pay, already, professional artist-musicians a salary.

* Build residencies around the world, where Artist-musicians can record and craft for 3 – 6 months.

* Build an alliance with people who want to contribute to the entrepreneurial success of artists

* Build an alliance with music and non-music profit companies and construct a win/win business model

* Bring awareness on the importance of supporting artist-musicians directly.

Something amazing happened one day while sitting at my desk and doubting this crazy idea. I could feel that this vision was already alive, existing, waiting for me to meet it. It was the most amazing feeling I had ever had. This may take me a lifetime but all I know, is that I must become part of the solution, not the problem.

I know that I can’t do this alone. If you want to help be part of the solution, please go to

MTP:  Thanks for your inspiring commitment to making artists’ lives better!  We’re really impressed with your extraordinary effort to bring awareness of the streaming problem to all creators.

For other coverage of Suzana’s 500 mile walk to the Googleplex, you can read SF Weekly and FYI Music Canada.





Guest Post: ASCAP and the Great Pandora Battle, by Monica Conlon

May 19, 2014 1 comment

[Editor Charlie sez: This is a guest post by Monica Conlon.  Follow her @momusing.  Used by permission, copyright held by the author, any reproductions require the author’s consent.  Monica is Senior Executive Vice President of Creative Affairs and Licensing at Next Decade Entertainment, Inc., an independent music publishing company which she has been privileged to work at since 1991. Her responsibilities include signing new writers, negotiating, drafting and licensing all works published and administered by the company as well as overseeing the distribution of royalties. Some of Next Decade’s clients include Harry Belafonte, the Pure Songs catalog (the band Boston), Gaucho/Sandbox Music (70s R&B catalog with lots of samples in rap and hip/hop), trance/dance writer Jan Johnston (hits with Paul Oakenfold, Tiesto, Paul van Dyk), Bob McGrath (from Sesame Street), Lucy and Carly Simon, Martha Redbone and Aaron Whitby (Martha Redbone Roots Project, THE GARDEN OF LOVE – SONGS OF WILLIAM BLAKE), Marcy Heisler and Zina Goldrich (lyricist/composer of the Broadway bound musical EVER AFTER and the musicals DEAR EDWINA and THE GREAT AMERICAN MOUSICAL) and Vic Mizzy (“Addams Family Theme” and “Green Acres Theme”). She has been a guest lecturer for the Copyright Society, the NMPA/HFA, the Hartt School of Music, the International Intellectual Property Conference at Fordham Law School and the Cutting Edge Music Conference.]

I spent many hours fielding questions and having conversations with songwriters about the recent win by Pandora in the ASCAP rate court. Mostly, the songwriters wondered why there was a battle in the first place and why ASCAP lost. Performance rights licensing (the right to publicly play/perform a song on the radio, television, the Internet, large venues etc.) is one of those areas that songwriters love, but often know little about. They love that the check comes in the mail on a quarterly basis like a miraculous gift and some even call it “mailbox royalties.” They rely on this money heavily even though many would not be able to describe how it is generated or what the rules are in governing the two major Performance Rights Organizations (PROs), ASCAP and BMI.

The Pandora battle revolves around this governing issue. ASCAP and BMI are membership associations which each represent over a half a million songwriters and music publishers in the field of performance rights licensing. ASCAP and BMI each function under consent decrees entered into with the U.S. Justice Department. The current consent decrees require that ASCAP and BMI must grant a license to any potential company or service that wants one. They do not have the right to say “no” to any potential licensee.

If, after they negotiate with any licensee — in this case, Pandora — and the licensee does not like the rates proposed by ASCAP or BMI, the licensee or the PRO has the right to go to federal court in New York to set the rate. This is exactly the tack that Pandora took and what has led us to this current situation. In court proceedings, it is the PRO’s burden to demonstrate that its proposed rate is “reasonable,” but the consent decrees provide no standards for determining “reasonableness.” The ASCAP Rate Court, through Judge Cote, has been consistently ruling against ASCAP since she began her tenure as the sole judge responsible for setting ASCAP license fees in 2009, rejecting the comparable licenses ASCAP has proffered as benchmarks for gauging the reasonableness of its fee proposals and accepting instead the licenses relied upon by Pandora and other ASCAP licensees.

What is particularly upsetting about all of this is the monetary facts revolving around Pandora. The license that Pandora has been functioning under since it entered into its original agreement in 2005 with ASCAP was at a rate of 1.85% of Annual Revenue, with the combined rate for all of the PROs totaling 4.3% of Annual Revenue. This is slightly more than traditional radio broadcasters pay for their ASCAP licenses, and commensurate with what other streaming services had been paying. However, services like Spotify and the new iTunes Radio pay significantly higher rates, ranging as high as a combined 10% of Annual Revenue. Further, the rate that Pandora pays the record labels for the master rights (the artists recording of a particular song) is in the range of 50% of Annual Revenue. Yes, you read that right….the songwriters have been fighting Pandora for them to pay 4.3% of Annual Revenue when Pandora pays the record labels 50% of Annual Revenue for the use of the master recordings of those same songs.

When Pandora complains that they are paying too much in royalties, which is their constant battle cry, the problem is they are paying a huge rate to the record labels. However, they have no recourse or leverage to reduce the rate they pay to the record labels because the labels function independently and their rates for services like Pandora have been determined by another governmental entity, the Copyright Royalty Board. The only royalties that Pandora has access and leverage to reduce are the songwriter royalties because of the way the consent decrees function.

The court costs that ASCAP has paid in fighting Pandora over their streaming rate come somewhere in the range of $5 to $9 million. Pandora likely has paid equivalent legal costs in their battle. Imagine if Pandora hadn’t gone to court over the combined PRO rate of 4.3% and had put that money — at the low end, say $5 million — into paying music publishers and songwriters a fair rate, the rate other streaming services are paying. Maybe then, Tim Westergren, Pandora’s CEO, who loves telling the press how much he adores musicians and songwriters, could honestly say that he is helping them with his streaming music service rather than what he has truly done, which is to almost single handedly upend the entire structure of the performance rights licensing system.

How did Westergren affect the performance rights licensing structure? The music publishers disagree with Judge Cote’s rate of 1.85% of Annual Revenue. In fact, the music publishers thought the combined PRO rate of 4.3% was also too low. The only way to get a higher rate is to pull the digital rights licensing away from the PROs’ control and make direct deals with digital services. This would allow the music publishers not to be governed by the consent decree in matters dealing with digital performance rights licensing. Some of the major music publishers and independent music publishers were in this process of pulling their digital rights with the PROs and EMI Music Publishing, Sony/ATV Music Publishing and Universal Music Publishing even negotiated direct deals with Pandora as they were the first music publishers to pull their digital rights licensing from the PROs. There had been a six month waiting period before any publisher could pull digital rights from ASCAP or BMI.

This process was moving forward for many publishers and then Pandora went to the ASCAP and BMI rate courts, asking those courts to rule that the publishers’ rights withdrawals did not apply to digital services like Pandora that had applied for licenses under the consent decrees. Both rate court judges ruled that the music publishers could not pull just one set of licensing rights (e.g., digital rights) from either ASCAP or BMI. The judges said if the music publishers wanted to license directly, they would have to pull all performance rights licensing from the PROs. No music publisher wants to do that.

Now, the PROs, the music publishers and others are asking the Department of Justice to agree to change the consent decrees so that it is clear that digital rights licensing can be pulled from the PROs. This will mean all digital companies, including Pandora when its current license is up in 2015, will have to negotiate with multiple music publishing companies either to get their services up and running, or to continue to offer their digital music services, because they won’t be able to clear digital performing rights at the PROs alone if the music publishers withdraw their digital rights. It will add a whole new level of rights clearance issues and liability to the process because the lawyers for these new digital companies will have to engage in these direct deals and ensure that they are covered for all of the music repertoire in their client’s digital services.

Before this rate battle began between ASCAP and Pandora, there was no question that all of the music publishers were being represented by the PROs for digital rights licensing.

The future seems precarious to the music publishing/songwriter community. The BMI rate court has yet to take up the Pandora royalty rate issue. If the PROs and the music publishers are successful in modifying the consent decrees, they will have a business solution for getting a higher rate, but it really isn’t a solution for the health and development of building new digital music companies and services. I firmly believe none of this would be happening if Pandora had been a good player with ASCAP. They created this situation and then Judge Cote complemented their bad moves with a totally unworkable decision.

I was at a publisher meeting recently, and the presenter gave some startling figures. He said that last year, Tim Westergren took out over $15 million dollars in stock options for Pandora (the highest amount he could extract in any given year). At the same time, Pandora paid ASCAP a little over $11 million in royalties for access to the entire ASCAP repertoire for the entire year. If this is true, or even slightly exaggerated then how does the guy who owns Pandora receive millions of dollars more in money in one year than all of the ASCAP songwriters and music publishers whose music was featured on his service in that very same year? When you look at it from this perspective, you can understand why there is such an outcry from the songwriter/music publishing community.

The music publishers and the PROs want a workable solution with Pandora and all the digital companies, but they cannot sit idly by and not receive a fair market value for their songwriter’s works in the digital arena. It’s a wild west in licensing right now, what I find so sad is…. it didn’t have to be.

Pandora CEO says “Pandora is Radio” so Pandora shouldn’t pay artists at all–and CEO Pay is Up 3,882%

April 25, 2014 6 comments

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.

Pandora Key Executive Comp Closeup

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.

Pandora Executive Comp

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.

Pandora’s New CEO Says He’ll Continue Pandora’s Old Boss Policies and Getting Richer

September 19, 2013 Comments off

The Associated Press story on new Pandora CEO Brian McAndrews starts out on a false premise:

Pandora’s new CEO Brian McAndrews is a rock star of the digital advertising world.

Actually–he’s not. He may like to think of himself that way when he plays air guitar in his bedroom, but he’s not a “rock star”.  But it points out an interesting twist–“rock stars” are hard to find these days, thanks to companies like Pandora.  But the suits–now the suits are the rock stars.  And even if he holds his breath and wishes very hard, Brian McAndrews is a suit.

The Arrogance of the New Boss

So how’s he doing in his capacity as a suit?  Here’s a clue–he has no idea what business he is in and he has no reason to worry because he’s in a protected class, the compulsory licensee, the music profiteer.  The government protects him, forces his suppliers to sell to him at a below-market price through consent decrees or compulsory licenses, and he can outlast any songwriter in court.

And–to our knowledge, Pandora has never been audited.  (And $5 says if you ask McAndrews if he’s been audited, he’ll think you mean by the IRS or maybe by public accountants.)
Are you surprised then that Brian McAndrews’ public message to songwriters and artists is:

The 54-year-old executive told The Associated Press that the royalty fight is “a ways off” and that he’ll rely on the counsel of co-founder Tim Westergren and outgoing CEO Joe Kennedy.

“I’m confident we’ll be prepared and do the right thing,” he said.

“I do share Pandora’s longstanding belief that musicians should be fairly compensated for their work,” McAndrews said, adding that the existing patchwork of laws was “created piecemeal over decades” and “doesn’t serve any one very well.”

Well, as the company’s stunts and litigation tactics this week demonstrate, Pandora’s “long standing belief” is that songwriters and artists should be jammed down as hard as humanly possible with the help of lobbyists and lawyers in ways that the “old boss” wouldn’t have dared to do.
While at the same time bringing their 2nd IPO to market and putting over $300 million in the company’s coffers.  To bonus songwriters and artists for sticking with them in the bad times?
Oh no.  For acquisitions.  And probably to cover Brian McAndrews salary, which I for one think he should disclose, don’t you?  If Pandora says they are not making enough money to pay fair royalties–but they are making enough to do a second IPO–then maybe they need some help from songwriters in how to make those precious dollars last longer.
That’s certainly something that songwriters know something about.
But as the AP reports, let’s not hear anymore poor mouthing and handwringing from “Million a Month” Tim Westergren about how Pandora is not going to make it unless artists and songwriters take less:

What’s different about the upcoming fee negotiations with SoundExchange is that Pandora’s survival is no longer in doubt. Analysts expect that in the fiscal year through January, Pandora will post its first positive earnings per share — 3 cents after excluding special items — since it became a publicly traded company in the summer of 2011.

For more on the second Pandora IPO see Andrew Orlowski’s great article, “Tightwad music spaffer Pandora opens box for Wall St to fill with cash“.

More on Pandora’s Bait and Switch Campaign

June 12, 2013 Comments off

MTP readers will remember the short lived legislation to lower artist royalties that Pandora backed last year.  That was called the “Internet Radio Fairness Act” and it never came to a vote.  The House IP Subcommittee  held a hearing at which, I think it is fair to say, Pandora lost and lost big.

We Will Not Be Moved

This was in no small part to two things:  Artists came together: 125 artists came together to sign an open letter to Congress that supported digital music but rejected Pandora’s lust for profits.

Songwriters also came together and a group of them performed at the House offices to demonstrate how the songwriter royalties that Pandora pays are grotesquely out of whack.  (Right after Pandora, Clear Channel and Google joined together to use their lobbying clout on that legislation, Pandora also sued songwriters to get a lower royalty for them.)

The other event was that independent artist David Lowery of Cracker and Camper van Beethoven challenged Senator Ron Wyden at the Future of Music Policy Summit about the Pandora legislation–and Wyden really didn’t have much of a response.

In short–the artists locked arms and said we will not be moved.

Pandora’s Bait and Switch Campaign:  Pandora Wants to Cut Royalty Payments But Nancy Tarr Doesn’t Tell You That

Pandora got the message–they are now trying to drive a wedge between the stars who are having what passes for hits these days, and the independent artists who aspire to have hits or to at least make a living.  How are they doing this?  By dangling the bait of “promotion” in front of artists who yearn to break in.

Here’s how it starts.  An independent artist will receive this email from Nancy Tarr at Pandora (who lists herself as a “grassroots” consultant to one of the biggest spin factories in DC):

Dear <firstname><lastname> I hope you don’t mind this unsolicited email. I’m reaching out to introduce myself and to start a conversation with you about your music on Pandora and about some broader policy issues.

Tomorrow–Baiting and Switching

How the Rate Court Cottage Industry is Leading to the Destruction of Collective Licensing

January 19, 2013 1 comment

The news that Sony/ATV made a direct deal with Pandora produced some strangely paranoid chatter in the echo chamber.  Sony/ATV can bring Pandora to their knees, getting around the rate court, etc.  I think it’s actually much simpler than that.

What appears to have happened is quite simple–Sony/ATV opted out of letting ASCAP and BMI license their catalog (which now includes EMI so is really quite massive).  This is perfectly legal, nothing shady, although a bit unusual.  They’ve announced they intend to take some digital licensing in house, so everyone should have expected this was coming.

It is perfectly legal because of the antitrust consent decrees that ASCAP and BMI operate under.  A condition of these consent decrees is that every affiliate of ASCAP and BMI retains the right to “opt out” of the blanket licenses (and rates) offered by these societies.  No reason need be given–it is a right that all enjoy.  (SESAC is a private company that does not (yet) operate under a consent decree.)

If a publisher opts out of one license or type of license, they can remain in the blanket license for all other licenses that are in place.  So for example, Sony/ATV can opt out for Pandora, but stay in for broadcast radio or venue licenses.

Why might a publisher opt out of a blanket license?  One reason is financial–they don’t have to pay the PRO collection fee on that revenue stream.  But another reason is that if they stay in the blanket license, then they are subject to rate court proceedings brought against the PRO if negotiations with a licensee (say Pandora) fail.

Rate court proceedings were relatively rare occurances prior to the arrival of Big Tech in our lives.  They have become increasingly common and almost always involve digital services.  In fact, they almost always involve the same lawyers representing the digital services.

Rate court proceedings cost a lot of money.  Millions in legal fees.  And the twist is that if you stay in the blanket license, ASCAP and BMI pretty much have no choice but to submit to the rate court proceeding which is required by their respective consent decrees.  So in this way while the PRO licenses are voluntary–not statutory like the compulsory mechanical license–and the rates are not set by the Copyright Royalty Judges–because they are not statutory rates–the rates are set by U.S. Federal District Courts sitting as rate courts.  (For example, Judge Stanton is the BMI rate court judge in the Southern District of New York.  MTP readers will remember him as the judge in the Viacom v. Google lawsuit who handed Google a complete victory over Viacom at trial in an opinion I found meandering and bizarre, which subsequently was substantially overturned on appeal.)

Rate court proceedings are in many ways similar to the Copyright Royalty Judges and take into account a variety of economic factors, including market rate deals for the same type of license.

Blanket licenses issued by the PROs are one of the great efficiencies in music licensing.  Rate court proceedings gum up the works and undermine the benefit of lower transaction costs in collective licensing.  I wonder if at the end of the day when one takes into account the legal fees and transaction costs concerned when Big Tech fights negotiated rates whether anyone actually comes out ahead.

Meaning if you compare the position of the parties before the rate court black hole and the ultimate rate imposed by the rate court, did the Big Tech company that used its litigation budget to force songwriters into the rate court proceeding actually end up better off?  Or did they just get their jollies from dragging songwriters through costly litigation so that the next time around the PROs were more likely to acquiesce?

One thing that you often hear these Big Tech types say about their direct licenses is that songwriters are better off to not be represented by PROs because even though the direct license rate is lower, it’s more than the songwriter would get through the PRO because they don’t have to pay the PRO “commission”.

Of course, the other benefit from PRO licensing that songwriters get that isn’t discussed is that the songwriters can audit collectively under the PRO’s blanket license.  Big Tech companies hate audits.  The more direct licenses, the less likely that any one songwriter will ever exercise an audit right.  And eventually the audit right will be withdrawn (as is already happening with the YouTube indie publisher license).

So how does this effect Sony/ATV?  Recall that Pandora sued ASCAP in the rate court to try to screw songwriters right about the same time they began their campaign to screw artists in the Congress with the so-called Internet Radio Fairness Act.

If I had to bet, I would bet that Sony/ATV said enough of this BS and withdrew from ASCAP and BMI for purposes of licensing Pandora.  That takes Sony/ATV out of the rate court.  They made a deal with Pandora for a higher rate and shorter term than will ultimately come down in the ASCAP rate court.

Note:  Of course, ASCAP may be able to use the Sony/ATV deal as evidence of a significant market rate for the Pandora service in the rate court, even though Sony/ATV is not party to the case.

Pandora had the choice of excluding all Sony/ATV songs from their service or make a direct deal with the publisher.  And now that Pandora has made that deal once, they will always.

And that’s really all there is to it.

But–if Pandora had not been advised to go to the rate court, would Sony/ATV have made the same decision?

Is Pandora lucky that Sony/ATV didn’t just opt out of the ASCAP and BMI blanket licenses and not license Pandora at all?  That would probably have brought down the service.

And–given the antagonism that was heaped on Pandora by songwriters from outside the US, will the societies representing these songwriters elect to opt out of the reciprocal agreements they have with ASCAP and BMI regarding Pandora and just not license Pandora?

Will other publishers follow Sony/ATV and avoid the rate court?  Won’t that mean that the cost of the rate court will be shared by an ever smaller group of songwriters forced to litigate by Big Tech?

One thing we don’t need is less efficiency and higher transaction costs in music licensing.  Most Big Tech companies and their shills whine about fragmented music licensing, yet the same people drive up those transaction costs while enriching a small group of lawyers who undermine the benefits of blanket licensing.

Do these Big Tech companies have the right to do this?  Sure.  Does it benefit them in the long run to jack songwriters around?  Not really.  If there’s anyone who has an existential threat from Big Tech it is the professional songwriter, often overlooked yet the most important part of the equation.

Continually trying to jack these people around accomplishes one thing:  It hastens the day of full commoditization of culture by Big Tech.  This is what they may think they want, but I would suggest to you that they really don’t.

So they may have the right to do it, but that doesn’t make it smart.  But then I’m just a country lawyer and I’m not as smart as these city fellers.

You can’t blame Sony/ATV given their options.  I’d have done the same.

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