Posts Tagged ‘IRFA’

@IRMPodcast #2: @RadioCleveKKG Interviews @theblakemorgan about #irespectmusic — Artist Rights Watch

June 25, 2017 Comments off

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

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

May 3, 2013 Comments off

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

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

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

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


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


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

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.

In Which We Find Out What IRFA Author Jason Chaffetz Really Thinks About Artists

November 4, 2012 2 comments

Ben Sisario has an excellent article about the Internet Radio Fairness Act in the New York Times.  I have to commend Mr. Sisario–he wrote a mistake-free analysis of the rights involved.  That’s a first, at least for me.  Never seen a journalist from outside the music business write an article about IRFA who took the time to actually understand the subject they were writing on.

You should read the article yourself but here are a few choice quotes that kind of sum up the attitudes of the IRFAs.

First we have an attitude check from the author of IRFA, Representative Jason Chaffetz, he from whose intellectual loins sprang this monstrosity.  Given the inherent viciousness of the bill and the punishment it will exact from artists, musicians and background vocalists who don’t have the money to hire as many lobbyists as Google, Clear Channel, Sirius XM and Pandora–you won’t be surprised at this quote:

Representative Jason Chaffetz, a Republican of Utah who co-sponsored the bill, said in a phone interview that the bill was meant to encourage growth in the streaming business. But when Mr. Chaffetz, whose campaign committee has received $2,000 from Pandora, was asked to respond to complaints that the changes would hurt musicians, he could not resist taunting a bit.

The old-school dinosaurs are trying to help, but they’re stuck in the tar,’ he said. ‘They can go talk to the pterodactyls.’”

Really.  “A bit”?  And why should we “go talk to the pterodactyls?  Because an army of lobbyists are about to roll over us?  Or because we don’t want to hand over money to a coalition of Big Tech and Big Media?  (aka the Internet Radio Fairness Coalition)

And then there’s this very interesting quote from Clear Channel’s Robert Pittman:

“’It’s not so much about rates as about how much dollars you spend,’ Mr. Pittman said. ‘The amount of dollars to artists is rate times volume. If the rate suppresses the volume, there’s less money. If it encourages volume, there’s more money.’”

Now that’s a very interesting way to look at it–particularly if you are an FCC licensee (unlike Sirius or Pandora).  Why is that interesting from an FCC perspective?  Well, there’s this thing called payola.  And if I were Robert Pittman, I would be much more careful what I said about “volume” (i.e., number of plays) increasing based on the payment of money.

Remember that Clear Channel and Sirius XM have been interested in pursuing direct licenses with indie labels–licenses that are designed to pay artists less money.  As the Sirius CFO said of these direct deals in sworn testimony:

“Among other things, [labels] recognized that by entering into direct licenses with Sirius XM, they gained the potential for enhanced airplay and greater exposure for their recording artists.

You know, if the royalty rate encourages volume, there’s more airplay and more money.  For Clear Channel and Sirius–who control the airplay.

And then there’s this classic non-denial denial from Tim Westergren:

The music industry says that if Pandora needs to improve its bottom line, it should sell more ads. When asked to respond, Mr. Westergren makes a gesture of banging his head on a table.

“It’s an easy thing to say,” he said. “But no one has yet explained to us why Internet radio is under a different standard. No one responds to that fundamental premise.”

I’ll respond to it–because that’s the deal you made, Tim.  After you got your panties tied so tight you were screaming.  And now you don’t like the deal you made because you want to make more money off the backs of musicians.

So don’t say we don’t respond.

And if he doesn’t like the rates, why does he have to gut the Copyright Royalty Judges and all the other bad stuff in the Chaffetz bill?  He and the Honorable Mr. Neanderthal Pterodactyl Hunter can legislate profits just fine without touching the judges.

But Westergren told Ben Sisario one other very important fact: “This is not an argument about going out of business.”

Thanks, Tim.  I’ll hold you to that.

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


Tim Westergren’s Million a Month from Music: UPDATE 1

October 14, 2012 Comments off

UPDATE (11/7/12): Pandora has now filed a new lawsuit against creators in federal court in New York, familiar ground for their legal counsel who will likely pocket more in legal fees than Pandora will save in lower license fees even if they are 100% victorious.  This is not to mention the transaction cost of litigating the reduction in rates crammed down on songwriters.  But you get the point, right?  Don’t mess with Wall Street or they will sue your little tuchus off.  Or as Digital Music News puts it: Dear Pandora, You Totally Suck. Signed, Songwriters…


So check it out:

The current Pandora webcasting rates are good through 2015.  You would expect that they’d start a rate negotiation dance a year or so ahead of that, say mid 2013 at the earliest.  But mid 2012?

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

Not only is this incredibly early, but Pandora’s strategy does not seem likely to produce a quick result.  As far as we can tell from reading the press, the company hasn’t reached out to anyone on the other side of the table and instead went straight to Capitol Hill to try to use their lobbying might along with the truely fearsome National Association of Broadcasters to jam a loathesome price control bill down the throats of musicians and vocalists.

Why?  Why start the dance on new rates by introducing legislation in the waning days of one Congress that surely will need to be taken up again in the next, a full 2 years and a bit before the old rates will lapse, at least 18 months before anyone expected that Pandora would start negotiations.

As Google suggested in the SOPA hearing before the House Judiciary Committee, follow the money.

So let’s.

The insiders in an IPO (like company officers) are usually prohibited from selling their personal shares for at least 6 month after the IPO–Facebook stockholders, you know what I’m talking about, and we feel your pain.  Since January 2012 (presumably when the lockup came off from Pandora’s June 15 IPO), Tim Westergren has been selling 85,000 shares a month.  Exactly 85,000 shares per month, most recently on October 3.

This is almost always a sign of what is probably an insider selling plan (used to be called a 10b5 plan and maybe still is).  These plans are designed to allow insiders like Westergren to cash out their stock positions (especially pre-IPO stock options for which they have exercised) even if they are in possession of material nonpublic information at the time of the sale.  (No buying and selling or “trading”, just selling).  Somewhere while those shares are being sold off, the officer will probably be granted new stock options in the registered stock, i.e., freely tradable shares of P if exercised.  If that hasn’t happened already.

This means that Westergren’s insider stock sales makes him about $1 million a month just from selling stock until he liquidates his position.  That’s fine, he’s earned it.  No complaints.

What is his position? 2,042,439 shares as of October 3.  If you divide that number by 85,000 you get 24.

That means that as of this month, he will have fully liquidated his position in 24 months if he continues selling 85,000 shares a month which seems to be the plan.  So by keeping Wall Street focused on the bright and shiny object of price fixing through the IRFA legislation, is he more or less likely to keep Pandora’s stock price propped up long enough to finish his exit?  And bank roughly $30 million.  (This is in addition to the shares he sold in the 2010 “investor offer” that netted him $2.1 million according to Pandora’s S-1.)

But he wants to dictate to his “middle class musician” just how much they should make by union busting and lobbying.  Because every dollar Westergren can take away from musicians and vocalists–even in the future–is a good story for Wall Street.  Why?

Because Pandora’s future is brighter–and the value of Tim’s stock is much more likely to increase–the less Pandora pays to musicians and vocalists.

This is all fine–but don’t try to tell musicians and vocalists that they will get paid less because it’s good for them.

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