Posts Tagged ‘internet radio fairness act’

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

January 15, 2013 Comments off

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Please, people, this is not that hard.

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

Let the fan decide.

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

December 1, 2012 5 comments

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

So let’s help Joe refresh his recollection.

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

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

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

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

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

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

Remember–Steve Jobs took a $1 salary.

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

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

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

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

Pandora insider shares

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

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

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

Creators would like a little liquidity, too.

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

The Artists, United, Can Never Be Defeated

November 29, 2012 Comments off

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

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

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

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

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

And Tim Westergren wants to pay them less.

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

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

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

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

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

And that’s the fact.

The Inmates Are Restless: @zoecello’s excellent idea meets the fog of trolls and the Bundler’s Dilemma

November 21, 2012 Comments off

I always say that the great thing about the Internet is that it brings people together who would otherwise might never have met.  The bad news is that regardless of the Internet, the place they would likely have met is prison.  Who are these people?  You know–The Trolls.  Often corporate backed attackers leaving pre-digested bits of astroturf in the comments on well-meaning and heartfelt blog posts.

And so it is with Zoë Keating’s excellent point about data.  What has brought out the trolls this time is something more commercially debased than just copyright–it is that Ms. Keating has pulled back a little corner of the curtain that conceals the Great and Powerful Oz.

Let’s be honest–for the Great Troll Google, every aspect of their business is about collecting data.  This has held true from the Wi-Spy debacle, to the debacle of Google’s near-indictment for profiting from the sale of illegal drugs, to YouTube.  And since Google presents the Federal Trade Commission with the classic Bundler’s Dilemma (how does a Presidential appointee prosecute a company whose executives have raised millions for the appointee’s boss and who provided the data crunching for a successful campaign?), it is unlikely that anything will stop the Great Troll Google.  And Google is a good proxy for the other services, because the other services know that all they need do is let Google fight that one for them.

And if Google don’t share their data with the US Government–we assume–then does anyone think Google will share their data with an artist?  Even if that data solely concerns her fans and her music?

In a word–no.  Not voluntarily, anyway.  To paraphrase Arthur Jensen (in Network), you are meddling with the primal forces of nature, Ms. Keating, and you will atone.

And that is reason alone for The Man 2.0 to send in the gangs of Straw Men, the Categorical Imperatives and other members of the intimidation squad.  And of course no one knows this better than the Head Trollette herself, Jill  Hazelbecker–at least according to the New York Times.  (When Ms. Hazelbecker was caught trolling on New Jersey Democratic Party websites on behalf of her Republican candidate.) That would be the same Jill Hazelbecker, now the Head Trollette of Google a/k/a Google’s Director of Corporate Communications and Public Affairs.  I wonder what Google found most compelling about her qualifications?

So we should not be surprised that Ms. Keating has been slashdotted and trolled–that’s actually confirmation that she has a startlingly brilliant idea that will send a shiver down the backs of incumbents.

You know–disruptive.

A Great Question from @ZoeCello: Should Digital Retailers Own the Artist’s Fan Data?

November 19, 2012 Comments off

I want my data and in 2012 I see absolutely no reason why I shouldn’t own it. It seems like everyone has it, and exploits it…everyone but the creators providing the content that services are built on. I wish I could make this demand: stream my music, but in exchange give me my listener data. But the law doesn’t give me that power. The law only demands I be paid in money, which at this point in my career is not as valuable as information. I’d rather be paid in data.

Zoë Keating, What I Want From Internet Radio

Zoë Keating has raised a number of interesting points in a recent blog post about digital music services and one of them caught my eye–why is it that artists can’t get in the loop with the fans who buy or listen to their music?  When artists spend significant amounts of time and money trying to drive fans to purchase from iTunes or listen to their music on Pandora, Spotify or YouTube, why can’t these same artists connect with their fans who happen upon a track on a digital retailer?  (I may use “digital retailer” generically to include streaming services even though strictly speaking there’s no actual object being “retailed.”)

Or said from the point of view of property rights, why should the digital retailer own (or own exclusively) the artist’s property right in data relating to their works?  Since it is data created by the sale or transmission of the artist’s work for which the artist has spent time and effort to make valuable, why should that value accrue soley to the digital retailer?

As Zoë Keating says: “I want my data and in 2012 I see absolutely no reason why I shouldn’t own it. It seems like everyone has it, and exploits it…everyone but the creators providing the content that services are built on.”  That’s my emphasis, but I think that she sums up the problem very concisely.  (There’s a lot more to her post that you should read, but I’m going to focus on this one issue.)

The Land Grab for Fan Data

The main reason, of course, is that the digital retailer doesn’t want to share that information with anyone because it’s valuable.  I’m not talking about getting information about how many people in zip code 90210 bought your track.  I mean who bought it.

The retailer will no doubt say that simply handing over this information without the consent of the consumer would violate various privacy laws.  Yes, that’s probably true and also a very convenient dodge.  What I do not think would violate privacy laws would be if the retailer offered the fan a meaningful chance to sign up for the artist’s mailing list at the point of purchase or at the time of listening.

For example, if you are listening to Zoë Keating on Pandora, you are taken to a page that says “Frozen Angels” from “One Cello X 16: Natoma”.  You can “Share” or “Buy”.   If you click on the album page it’s similar stuff.

Same record on iTunes, you get “Artist Quick Links” which is all Apple-facing stuff:  “copy link” means the iTunes link, alerts are for iTunes, tell a friend let’s you send a link to iTunes, and so on.  And of course, you can share it on Facebook or share it on Twitter.

This is not just the template for an indie artist–the current AC/DC catalog promotion is essentially identical.

So why is this the case?

Sharing is Caring

What is so difficult about having another button–one that said “Artist Website” or “Artist Fan List” and either put a link to the artist website (which could be part of the track metadata) or a link to a signup for the artist’s mailing list.

The point of this, by the way, is for the artist to be able to capture the benefit of some of the traffic that they drive to Pandora, YouTube or to iTunes.  Sure, these big services can look down their noses at the indie artist, but how difficult would it be to implement?  They should welcome the opportunity to support the artists whose work profits them–particularly Spotify who pays jack in royalties and YouTube who spends as much time finding ways to screw artists as they do creating impossibly screwy royalty systems also designed to screw artists in ways that no old boss ever had the brass to attempt.

So we are not talking about a link to something that would drive traffic back to the retailer, or find another way to keep the artist’s fan on the Amazon site.  If you don’t like Zoë Keating, how about a nice salami sandwich?  Would you like fries with that?

No–having these sign up buttons would not be spamming the fan and would truly be sharing at least the most important data about the fan for the artist.  How to stay in touch.

I really don’t see the harm in this and I see tremendous benefit in affording artist and fan a chance to connect.  All at the fan’s choice.  Indie artists have a hard time getting any leverage over these retailers to negotiate better terms.  If we stick together, maybe one of them will do the right thing.

Since Pandora is asking for ever greater financial concessions from artists, maybe artists could ask Pandora for a non-monetary benefit of great value to the artist.  It would be help Pandora restore their tarnished image if they took the first step down this path.

If you agree, you can Tweet them @pandora_radio.

Pandora’s Spinners Destroy Stock Price

November 16, 2012 Comments off

Check out the performance of NYSE:P this week–Pandora’s Tim Westergren’s performance at the Future of Music Coalition Policy Conference was a new approach for a top executive of a public company.  Bring the spinners from the company’s shillery and the bots from the company’s trade association to do what?  Build up the company’s future with all the good news that it was able to have a hugely successful public offering and was on a fantastic growth trajectory in the short term due to a superior product and an effective sales force?

No–these inside the beltway geniuses told the markets that anyone getting into the space would have to be crazy and that the company was barely treading water.

And did the stock price explode to the upside with all these smarter-than-thou types educating the markets?

Actually–the stock hit an all time low and is testing lower lows today.

So because Pandora is being manipulated in my view by the Gang of Four and other Big Tech oligarchs, Pandora’s stock took the hit and that creamed the net worth of all Pandora stockholders.  This inexplicable “strategy” with messaging that is right out of 1999 is slamming the company’s market cap.  And guess what?

Whatever happens to this bill, the Gang of Four will not have their fingerprints on the bill.  Pandora will, and specifically Tim Westergren will.  If the Gang of Four and Clear Channel step away from the bill and leave Pandora twisting in the wind–which could very easily happen–Wyden and Chaffetz will say they were misinformed and everyone will move on.

Except Pandora.

Wakey wakey kiddies.  Think of the employees who are watching their stock tank.

The Education of Senator Wyden: Don’t break the artists…You can’t get away with the old RIAA Booga Booga Booga or that you’ll make it up on volume

November 14, 2012 Comments off

Senator Ron Wyden revealed his well intentioned but startling lack of education about the dynamics of the opposition to the Internet Radio Fairness Act during his speech at the Future of Music Policy Summit yesterday, and it started with more of the same old whine:

You’ll hear the record labels oppose this legislation, spend lots of money saying – number one – Western civilization is going to end if we have fairness in these rates.  And they’re going to offer all sorts of arguments for why royalty rate discrimination is okay.  I personally think that if the royalty rates are lower, the internet broadcasting market becomes larger, and that’s a strategy for creating more income for artists, and more music choices for consumers, and a broader array of music.  And that sounds to me like a worthy outcome.

This is, of course not what is happening and it is definitely not what happened to Senator Wyden yesterday.  It was artists who complained about his version of “trickle down innovation”, not the record companies.   In fact, there was not one major label on the IRFA panel–his main opposition came from Patricia Polloch of the American Federation of Musicians and David Lowery of Cracker and Camper Van Beethovan.

The artists don’t want his bill.  Senator Wyden’s speech writers wrote a speech for him to give in 1999.  It does not play in 2012.

He also committed the fatal error of trying to obfuscate the really nasty parts of his bill–the censorship part and the court packing part.  David Lowery called this “newspeak” referring to George Orwell’s iconic 1984–Big Tech and Big Media want to get control over these pesky artists and put them in their place–sue them for antitrust conspiracy if they speak up and completely capture the Copyright Royalty Judges–what David Lowery called “agency capture”.

Senator Wyden said that SOPA and PIPA had the laudable goal of fighting piracy, so everyone expected–perhaps naively–that Senator Wyden would be coming with serious legislation that addressed this issue in a serious way.

Instead, we got legislation designed to break the artists.

Whether it’s just irresponsible or a calculated ploy, it still stinks just as badly and I don’t think there’s a way to “fix it” as they say in Washington.  It’s a lot harder to get language out of a bill than to put language into a bill.  That’s why the whole thing must go, and the Gang of Four and their cohorts in the so-called Internet Radio Fairness Coalition need to go back to the rate court like they did to get the rates they crowed about in 2009 but don’t like now that companies like Pandora have had a public offering.

You know, the rate court that they tried to gut.

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


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