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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. 

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.

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