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The MTP Interview: David Lowery on the CRB Webcasting Rates

December 21, 2015 1 comment

This post is the second of a two part interview with Blake Morgan and David Lowery about the newly announced webcasting rates as determined by the Copyright Royalty Board.

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

Well it’s a mixed bag.  Leans bad.  The rates went up marginally for Pandora, and that seems to be the lead in the press.  But it looks like rates went down for other webcasters.  You saw Pandora stock popped on the CRB news?   Sometimes markets tell you what no one dares say.  The markets are saying that this is good for webcasters and bad for artists.  Of course you won’t see that in the tech or music business press.  [Billboard posted one story on the wave of negative reactions at press time after David’s interview.]

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

Definitely more of a victory for the MIC Coalition, and here is why:  The CRB allowed the Merlin-Pandora and WMG-IHeartRadio [Clear Channel] deals as evidence of free market deals.  I believe that at least the Merlin deal is illegal because it is payola.  IN CONSIDERATION OF ADDITIONAL AIRPLAY value went from Merlin labels to Pandora [now an FCC broadcaster].   Possibly the WMG deal is the same.  I’m less familiar with that deal.  How can an illegal contract be the basis for CRB rates?  What happens if the FCC gets off its ass and rules that Merlin/Pandora deal illegal?  Does the CRB go back and reset rates? Uncharted territory here. Whats next? Multinational corporations contracting to bribe executives to get a lower per stream rate?  Would that be allowed as evidence?  I really think artists need to contest this with the Copyright Office. 

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 in the last rate setting five years ago?

Well first we have to pretend that micro pennies are a form of compensation. Second the CRB has no business “taking” value from anyone.  They are supposed to be setting rates at market rates.  But, no,  they haven’t made up for the amount that they took from artists last time.  

MTP:  How about no rate increases in the out years other than indexing to the Consumer Price Index?  I saw someone online suggesting that indexing 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.

This makes me really mad. This is federally mandated wage stagnation.  Basically this says if there is any “upside” in the value of streaming music over the next 5 years performers won’t participate.  If you think of songwriters and performers as being the public, this is the classic federal scam:  socialized costs/privatized profits.  It’s stunning that people in Washington can’t see their policies create the income inequality they decry.

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?

Welcome to Web bubble 2.0!  I would say I’m looking forward to the coming crash, but I have a feeling that our pension funds will get left holding the bag.   SG &A you mean the Selling, General and Administrative costs right [in Pandora’s income statement]?   This is where they hide obscene executive salaries.  Pandora has paid out over 1/2 billion dollars in executive stock compensation since going public.   Does anyone else find this insane?  No. If you read the press, and I mean The New York Times or Wall Street Journal all you ever hear is how much Pandora is supposedly paying to artists.   I can’t wait for the New York Times to report that GROCERY STORES PAY A SIGNIFICANT AMOUNT OF THEIR GROSS REVENUES FOR GROCERIES!  Where is that headline?  When do we get to hear that sound bite on NPR? 

Seriously, we should offer a prize to MBA students.  Best plan for making Pandora a profitable company.   How many of those plans would start with that 40% SG&A.  

MTP:  How does this MIC Coalition rate from the CRB affect licensing for any streaming service that Pandora may want to launch out of the ashes of Rdio?

Well this doesn’t directly effect the on demand rates, but I’ve always maintained that the artificially low rates paid by services like Pandora, has allowed them to offer music free, which in turn allows the on-demand services to argue for free tiers.   It’s a race to the bottom. Let’s put it this way: This CRB ruling certainly doesn’t help us get better rates from on-demand services. 

Useless Streaming Artist Data: You Know Where to Put the Thumb

December 14, 2015 1 comment

Pandora and Spotify (among others) have made a big deal out of providing “data” and “analytics” about streaming uses to artists–and particularly managers–about how the artist is performing on their respective services.  The “artist data” meme is also offered up as a value add to counter complaints of low royalties.  There is a real question of how useful this “artist data” is and a recent CNBC article calls into question just how accurate it really is in the first place.

Of course the most valuable piece of “artist data” that services could at least help the artist acquire–the fan’s email address–they won’t touch.  Obviously, I’m not suggesting that the service hand over the fan’s email address to the artist without the fan’s consent, so let’s not go down that rabbit hole, a favorite of the services trying to avoid this issue.

What I am suggesting is that the service provide the fan with an opportunity to sign up for the artist’s own email list.  This could be as simple as a link that would take the fan outside of the service momentarily to the artist’s email list sign up page.  That way I don’t believe there are any privacy law issues for the service as there would be if the service just handed over the email address.

I have raised this with senior executives at Apple and Spotify and it went nowhere.  The Spotify person rejected the idea outright because it would take the Spotify user (aka the artist’s fan) outside of Spotify.  Strange, because the fan would be offered a choice.  You know–the fan of the artist who most likely was driven to the service by the artist they are streaming.  (This would produce another interesting metric based on the number of email list sign ups by service, but I digress.)

Aside from whether the type of information being provided is even useful to artists, there’s another question of whether the “artist data” is even accurate in the first place.  And how would you even know.

CNBC did a little fact checking on streaming data provided by iHeart Radio analyzing the recent Grammy nominees.  This isn’t exactly the same as the “artist data” being hawked by streaming services, but it is perhaps a good proxy (since it’s hard for artists to see each others artist data results).

iHeartRadio (owned by Clear Channel) gave CNBC the “artist data” for the most popular tracks on Clear Channel’s massive streaming operations.  But CNBC discovered by using simple logic–aka sequential thought–that Clear Channel’s “artist data” was wrong.  Because CNBC concerned itself only with massive hits, data checking was relatively simple (which of course makes the Clear Channel screw ups look even more idiotic).

Keep in mind as you read this that if you’re an artist using the “artist data” for its recommended purpose–discovering nuances about the service’s listening audience–it will almost certainly be more difficult if you’re not Ed Sheeran or Taylor Swift.

 

In a blog post based on the original (aka wrong) data, iHeartRadio said Ed Sheeran took home the honor of “most-thumbed up” track of 2015 with “Thinking Out Loud.” Taylor Swift’s three big songs relegated her to second, third, and eighth place. (Update: the original iHeartRadio blog post was taken down. The link above is a cached version.)

More impressive in the original data was that Drake’s “Hotline Bling” was the most-thumbed up track in 26 states in 2015. That would be amazing because the song only came out in July and didn’t really catch on until the colorful video was released in October. Here is exactly what the blog post said about Drake:

Although the track didn’t premiere until mid-2015, with the unforgettable music video coming out just weeks ago, the last-minute addition of Drake’s “Hotline Bling” surprised and delighted the ears of listeners across the country, leading it to become the No. 1 most thumbed song of 2015 across more than 20 states!

But this didn’t make sense to us. Sure Drake’s song was popular, but how could it be the top song in half of all states even though it was only hot at the very end of the year?

More weirdly: how could Drake’s song be No. 1 in half of the states but not appear anywhere in the top 10 songs nationally.

CNBC pointed this out to Clear Channel, who admitted their mistake and “corrected” their bad data.  Yet that “corrected” data was FUBAR also according to CNBC:

The new data included the actual number of “thumbs up” and “thumbs down” by state. Of note is that Ed Sheeran’s “Thinking Out Loud” is the “most thumbed up” track in only one state — Hawaii. We find it is extremely unlikely that his track was actually the top track in the nation overall. IHeartRadio has not yet responded with further clarifications about the rest of its data set. We can’t check that against its original report, but we’re hoping to find out soon.

Of course, the new data set only included raw “thumbed” numbers for the top track in each state, so it’s possible that “Thinking Out Loud” had enough second-ranked “thumbs” to overcome Taylor Swift’s “Style,” but that seems unlikely.

So the thumbs didn’t have it after all?  Clear Channel miscounted?  Hard to say because we are entirely dependent on Clear Channel to provide the data backing up their work product.  But we know there was some kind of screw up because CNBC had to provide a link to a cached copy of the original Clear Channel blog post with the bad data.  If there’s no agenda here, why would Clear Channel try to hide their mistake from artists?

But good work by CNBC–except for one thing.  They continued the streaming service meme that somehow talent buyers and concert promoters care about how many thumbs you get when deciding to book a gig.

[C]oncert planners and promoters depend on data like this to create touring routes.

No, no, a thousand times no.  Clearly CNBC have never met a talent buyer. This is just simply not true.

Nonetheless, this CNBC post is a great example of how unreliable this “artist data” can be and just how hard it is to verify.  So hard that it may well be simply misleading to ask artists to take a lower royalty rate for what is most likely some species of snake oil.

They can keep their thumbs.  I’ll just settle for asking the fan to sign up on the artist’s site, thank you very much.

 

The Tide Has Risen: Five Simple Facts About the “Internet Radio Fairness Act”

October 28, 2012 1 comment

Big Tech and Big Media have joined forces in the “Internet Radio Fairness Coalition” which includes Clear Channel Media and Entertainment, Computer and Communications Industry Association (Google), Consumer Electronics Association (Google), Digital Media Association (Google) and…Pandora.

So you see, the way this works is the group put Tim Westergren out with the long face and the sad eyes to talk about how Pandora was having such a hard time and that artists and fans just had to support Internet radio and his $1 million a month or so in stock sales from his company with (what was then) a $2 billion valuation.  Oh,no sorry–just support Internet radio because Tim used to be in a band.  Once Tim began to realize that just like his days in a band, objects in the rear view mirror were smaller than they appear, guess who jumps out from behind the curtain?

The Great Oz–Google and Clear Channel.

And so much for Pandora’s commitment to independent artists–Did Clear Channel ever make good on their indie radio promise out of the last payola investigation?  And what’s the threat if you disagree with them?  Same one it always is with Big Media–if you get in the way, you won’t get played.

So let’s be clear–it’s not about “Internet Radio”, the Internet or Fairness.  It’s about money, power and lobbying, although I guess you could say it’s an act.  But it’s not just about the rates paid to artists–if that’s all it were about, then there would be no need for the court packing and chilling effects in the bill.  What court packing and chilling effects, you say?  You’d never know that stuff was in the bill if you just listened to Tim Westergren or read the pro-IRFA press releases.

The Tide Has Risen and Pandora is Throwing You Overboard

Here’s five reasons why artists should be very concerned about the “Internet Radio Fairness Act”:

1.  Reverse Payola to Monopolies for “Music Discovery”: The Internet Radio Fairness Coalition is backed by some of the biggest monopolies in the world: Google and Clear Channel–it’s Big Tech and Big Media combined.  Is it reverse payola?  If you make us pay you more money, we won’t play your records?

Remember all the good things Clear Channel was supposed to do after they got slammed for payola in 2007?  What did they actually do?  Clear Channel tried to get artists to waive both their songwriter’s performance royalties and their artist royalty collected by SoundExchange–in other words, the same direct licensing that artists now oppose.

[Following Clear Channel’s recent settlement of a payola investigation with the FCC, Clear Channel (and other broadcasters) agreed to air 4,200 hours of indie music.  The Future of Music Coalition commented at the time:]

Clear Channel is giving indie artists a raw deal by forcing them to give up performance royalties as a condition of getting airplay on its hundreds of stations. Remember, as a condition of its settlement with the FCC over payola allegations, Clear Channel and other broadcasters were required to play 4,200 hours of local and indie music. It’s replacing one form of a payola with another.

Sneaky. Greedy. Egregious. Any number of pejoratives could be used to describe the move, but it is especially troubling because digital performance royalties are becoming an ever more important source of revenue for artists as technological changes drive the way music is delivered….This is a company that is not — and has never been — on the side of artists.

[According to FOMC’s former executive director,] “’The fact that Clear Channel would require artists to waive royalties to get consideration for airplay clearly shows they’ve learned little from the payola scandal of the last couple years,’ said Jenny Toomey, executive director of the Future of Music Coalition. ‘Clear Channel is playing the same old tune.’”

2.  Pandora Wants to Legislate Profits on the Backs of Artists:  Now that Pandora has a $2 billion valuation, the simple truth is that Pandora is trying to legislate its profits on the backs of artists and so does Google and Sirius XM–a company that has $1.5 billion in cash on their balance sheet.   This is just about money, it’s not about music.

But for musicians, the salary remains the same.

3.  Look Musicians in the Eye and Explain Trickle Down Innovation:  Musicians gave Pandora and Sirius a discount on royalties in 2009–and helped save their businesses.  Pandora and Sirius have billions dollar valuations today and their executives–including Tim Westergren–are millionaires.  Obviously, Google and Clear Channel also have multibillion dollar valuations.

So now these companies have joined together to tell artists, musicians and vocalists that a rising tide carries all boats and that the benefits from making Big Tech and Big Media richer still will trickle down to creators.

The tide has already risen.  Not only has it not carried all the boats, the Internet Radio Fairness Coalition want to throw creators overboard.

4.  IRFA is Censorship Hiding Behind Fairness:  IRFA allows monopolists like Clear Channel, Google and Sirius to threaten any artist organization with an antitrust law lawsuit if the artists “impede” Big Media’s lust for direct licensing.

Yes–you read that right.  Monopolists threatening an antitrust lawsuit against artists who organize.  Go straight to jail, do not pass go, do not collect your $200.  Using this government mandated gag rule, Clear Channel could have tried to silence that statement about them from the Future of Music Coalition’s Jenny Toomey.  Coalition, get it?  Or the Recording Artist Coalition, or any one of a number of artist advocacy groups.

What Clear Channel and Sirius really want is artist-by-artist direct deals to pick off artists one-by-one.   Google has already demonstrated a desire for the same treatment with the Authors Guild.

Google attorney Daralyn Durie told Judge Denny Chin [the presiding judge in the Google Books case] in federal court in Manhattan that [millions of] authors and photographers would be better off fending for themselves because their circumstances varied widely, especially since the copyright issue for authors involves the display of small snippets of text. (emphasis mine)

Did Tim Westergren tell you about this part?   Does the “Internet Radio Fairness Coalition”?

Nope.  Read the bill, it’s right there under Section 5(a): “Limitation of antitrust exemptions”.

And if there’s no intent to chill artists, then why doesn’t Tim Westergren say so since he so identifies with being in a band?

5.  Payback is a Bear:  IFRA Guts the Copyright Royalty Judges:   Big Tech and Big Media want the Congress to get rid of the Copyright Royalty Judges who set the rates for Internet radio.  That’s right–they want the Congress to fire the current judges and replace them with political appointees.  Read the bill–Section 6 “Proceedings of the Copyright Royalty Judges and judicial review”.

This is simply payback for the current judges having the temerity to refuse to bow to the money.  It’s called “court packing”.  Get rid of judges you don’t like and replace them with judges you can control.

Not only that–notice the other part of that titles: “and judicial review”.  Big Tech even wants to control what previous rulings the new judges can take into account as precedent in later rulings.  That means their judges start with a clean slate and can do whatever they like.  He who doesn’t like history drools over erasing it.

Tim Westergren isn’t talking about this either.

And by the way–don’t let them tell you that somehow the judges are in the pocket of “Hollywood” (whoever that is)–all the current rates were highly negotiated by some of the very people who are complaining of them now.

Remember, Westergren declared “the royalty crisis is over!” in July of 2009.  Barely 3 years later they’re back?

And now they want scorched earth.

The tide has risen and artists need to keep their heads above water.   If Google, Clear Channel and Pandora haven’t made that an antitrust violation.

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