Archive

Archive for the ‘Pandora Shakedown’ Category

Pandora’s Answer in Wixen v. Pandora (Lyricfind): Can you ever find what you don’t look for?

August 31, 2019 Comments off

Remember Wixen Music Publishing sued Pandora over Lyricfind’s purported license for song lyrics.  The case is being heard in Los Angeles before District Judge Stephen V. Wilson.   (If that name rings a bell, he was the trial judge in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster.)

Specifically, Wixen makes this allegation in paragraph 5 of the complaint (my emphasis):

Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which  claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.

Pandora has now answered Wixen’s complaint, which is pretty much the typical “we deny everything those guys said” type approach with one exception that caught my eye.  It could be nothing, but it is an odd phrasing to me.

In response to paragraph 5 of Wixen’s complaint, Pandora responds to Wixen’s allegations (also in paragraph 5 of the Answer, my emphasis):

The allegations of Paragraph 5 [of the Complaint] contain speculation and conclusions of law to which no responsive pleading is required. To the extent a response is required, Pandora: (i) lacks information and belief as to the allegation that LyricFind is “the self-proclaimed ‘largest lyric licensing service’ in the world, which claims that it ‘haslicensing from over 4,000 music publishers, including all majors,’” and on that basis denies such allegation, (ii) lacks information and belief as to whether LyricFind had the “authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on [Pandora’s] service”, and on that basis denies such allegation, and (iii) denies the remainder of the allegations of Paragraph 5.

Maybe this is a nothing issue and maybe I am over-thinking it.  God knows this would not be the first time that happened.  However, I do find it an odd phrasing.

Wixen’s allegation was that Pandora knew that LyricFind did not have authority to grant Pandora the rights to Wixen-represented songs.  How might Wixen think Pandora “knows and has known” LyricFind did not have the rights?  A simple explanation might be because Wixen told them so, and probably told them so more than once.  In fact, I would not be surprised if Wixen told them so repeatedly while Pandora disregarded Wixen and continued to exploit the song lyrics at issue.  (And this is the primary reason these companies get sued in my experience.)

Note that there is no qualifier on this allegation by Wixen such as “on information and belief” which usually means that the speaker is not speaking from first hand knowledge, but rather something they have been told and that they believe at the moment of utterance.  This is kind of like saying “our client informs us that….”

Pandora’s response is not “we have a contract with LyricFind in which they represent they have the rights” or better yet, “LyricFind has provided Pandora with the underlying license from Wixen demonstrating that they have the rights.”  Remember, this is arguably a core issue in the Wixen case, if not the core issue:  Did Pandora reasonably rely on their license with LyricFind that represented that LyricFind had the rights to Wixen’s catalog?  Or, did Pandora have actual knowledge that LyricFind did not have the rights to Wixen’s songs?

At this point, it is hard to know the answer to either of these questions definitively.  But–it does seem that if LyricFind did have the rights, and assuming LyricFind’s license to Pandora was otherwise solid, isn’t it kind of game over at that point?  Wouldn’t you think Pandora would be screaming it from the rooftops?

Instead, Pandora seems to be saying it lacks first hand knowledge of what authority LyricFind had to grant rights to Pandora, and on the basis of their lack of knowledge denies Wixen’s allegation (the apparent antecedent of “that basis” in the Answer).  Which I guess means that they haven’t asked LyricFind, and that’s kind of the dog that didn’t bark.  Wouldn’t you think they’d make it their business to find out?  Perhaps even long ago?  But to put a bit finer edge on it, perhaps a bit uncharitably, can you ever find what you don’t look for?

Wixen, of course, can very likely discover through a subpoena or deposition what communications exist between Pandora and LyricFind on this issue, so if they did talk about it, it’s only a matter of time until it comes out, unless they can somehow keep those communications from discovery which I doubt.

Not taking anything away from Wixen Music Publishing, but this case is quite interesting because it could have wider ranging ramifications–if LyricFind did not have the rights to license Wixen repertoire to a client the size of Pandora but did so anyway, how many others are caught up in that mess?  That’s a pickle of a whole different water, to mix a metaphor.

Status conference with Judge Wilson on September 9, stay tuned.

Wixen Music Publishing Lawsuit Against Pandora Raises Questions About Lyric Licensing

June 19, 2019 Comments off

In the “it was only a matter of time” department, Wixen Music Publishing has sued Pandora over infringing reproductions of the lyrics in songs it represents.  (For those reading along at home, Wixen is represented by badass David Steinberg, so good luck Pandora.)

All these cases against tech companies start with very similar facts–they were given a chance to fix the problem and they either entirely ignored the copyright owner (like David Lowery and Bluewater) or they obfuscated and tried to deflect blame, or did both.  Here’s the key fact from this Wixen case:

Plaintiff’s representatives put Pandora on actual notice of its infringing conduct in early 2018, yet Pandora did not even attempt to address its infringing conduct until May 2019, when it first purported to cease displaying some of the lyrics to the Musical Compositions on its service….Pandora’s infringement is therefore willful and deliberate.

In other words–Pandora apparently blew off its responsibilities for over a year and still didn’t fix the problem.  Here’s a practice point–when Wixen or someone like Wixen calls, you need to fix your problem.  Right. Now.

But this case raises an interesting side point that may indicate a likely waypoint down the trail.  There is a company called LyricFind that licenses lyrics for many publishers according to their advertising.  Wixen notes in the complaint:

Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.

How does Pandora know this?  Probably because Wixen (and possibly other publishers) told them so.  It’s entirely possible that Pandora has a license with LyricFind for the songs it represents, but if Wixen hasn’t authorized LyricFind to represent them for lyric licensing (which they evidently have not), then this is an irrelevant fact.

I have to believe until shown otherwise that LyricFind would be the first to tell their licensees that LyricFind does not purport to license all the lyrics for every song ever written or that ever may be written in any language from any songwriter or publisher in any country on the face of the Earth.

The problem seems to be the same problem that Big Tech has had with music from the beginning–the tech companies don’t want to have to confirm their rights because that involves human beings and human beings costs money.  It’s this dismally poor administration of licenses by the licensees that seems to be the stumbling block.

However, it does make for interesting viewing to see exactly what was said by whom when about what, and what assurances were given.  My bet is that the next step will be like the Music Modernization Act–a retroactive safe harbor with a blanket license and a statutory monopoly.

Read the Wixen complaint here.

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 www.walkmilesformusic.com.

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“.
%d bloggers like this: