Pandora: A Change in Priorities

by Mark Doyon on Interwebs, Music business 15 Nov, 2012

pandoraSo you’re an independent recording artist, casting about everywhere you can for airplay and exposure. Pandora, the internet-radio service with the taste-smart music library, has just accepted one of your original recordings for rotation. Great, right? Pandora provides access to your music on one of the most talked-about music platforms out there. It’s a step in the right direction, a win.

Except it isn’t anymore.

Like a lot of music services, Pandora began as an artist-friendly start-up, armed with ideas about rewriting the dirty rulebook of commercial radio. Spawned by the Music Genome Project in 2000, it sought to broaden listening options, and to promote musical discovery by linking similar musical traits. In 2007, it accepted guidance on artist royalty payments from SoundExchange. And it remained, at that time, privately held.

A privately held company tends to focus on its mission, as mission is the foundation of its strategic plan and business objectives. When a company goes public, as Pandora did with a $100-million IPO in 2011, its priorities change.

pandora publicly tradedA publicly traded company can’t always afford a start-up’s idealism. Investors are focused on market performance, not artistic utopia. Every expense on a profit-and-loss statement — staff, facilities, research and development, artist and label royalties — is subject to review and reduction. When evaluating performance, investors value and protect a company’s mission most when it feeds financial success.

Enter the proposed Internet Radio Fairness Act (IRFA, H.R. 6480/S. 3609), enthusiastically supported by Pandora co-founder Tim Westergren. Despite the IRFA’s nod to “fairness,” the Act will, if enacted, reduce royalty payments to artists by more than 80 percent. Pandora supports the IRFA not because it sees the existing royalty structure as unfair, but because it sees the structure as insufficiently profitable for its particular business.

This is hardly complicated or surprising, but Pandora is no longer promoting economic opportunity for artists. Instead it is preying on them. It recently sued the American Society of Composers, Authors and Publishers (ASCAP) to reduce the royalties the performing rights organization collects for artists. Why? Because Pandora doesn’t like artists having a say in the rates at which they’re paid.

There can be little doubt now that artist royalties have been targeted as revenue by music-streaming services. Just as the major labels have traditionally left crumbs to artists, technology companies, many of whom are not even involved in the work of creating music, are now trying to bleed artists by undercutting royalties. Pandora is casting the artist not as its partner in distribution, but as its adversary.

As Westergren wrote recently, “Making performance fees fair for internet radio will drive massive investment in the space, accelerating the growth of the overall sector, and just as importantly accelerating the development of new technology that leverages the incredible power of the internet to build and activate new audiences. That’s where the great opportunity lies in the long run.”

What part of that is about music and artists?

Don’t be fooled by Pandora’s calls to support IRFA – unless, of course, you think the growth of music-streaming services is more important than music.

Which side are you on? Leave it in the comments below.

 

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11 Responses to “Pandora: A Change in Priorities”

  1. ugo capeto says:

    Well, at the end of the day, it seems that it’s a lot about money. Who can blame them, really?

    • Wampus says:

      Without music, Pandora has no business model. Yet they talk the “love artists” talk while walking the “screw artists” walk. They need to work on selling the value of their service to the public. Instead they are attempting to cannibalize an existing revenue stream (royalties) through legislation at the expense of a group (indie artists) that has no lobbying power in D.C.

    • Micah says:

      I know this is a very old thread, but the remark from ‘ugo capeto’ enraged me to the point of having to comment. ‘Its all about money so who can blame them???”

      This remark is the kind of narcissistic, self serving and near sighted attitude that has created the current worldwide economic crisis, the overwhelming disparity between the have’s and have-nots, the poisoning of our food supply chains, drinking water and the very air we breathe….just to name a few.

      I urge you to take a broader look at the world we live in. An all encompassing reverence toward money is not a solution, and it certainly isn’t an excuse to do anything we please at the expense of everyone else.

  2. I’m saddened to hear about this although in the end, I guess not surprised. Independent artists screwed out of a fair living wage once again. I was never picked up by Pandora but at least now I’ll forget future attempts. When it all comes down, we have our music and the ability to distribute it as we see fit, even if that means playing it live on a street corner for pennies. If broader success means a corporation making money off of my art while my fair wage is diminished, then I’m just as happy to go my own road. I appreciate the heads-up on Pandora’s stance and will spread the word.

    • Wampus says:

      The good news is IRFA is only proposed legislation at this point, and artists — like they did earlier this year with SOPA — can mobilize and make their voices heard. Thanks for spreading the word. Pandora will find this is a long way from over.

      • Mike Malsed says:

        Unfortunately, I find this article to be very biased.

        Yes, Pandora is trying to get a lower royalty fee for themselves (and other Internet streaming services) – one might ask why? When the MINIMUM they are required to pay is 25% of their INCOME and up to 50%. . .

        I think the best argument is that of equality and fairness. Why is it that Internet streaming services have to pay 25-50% of their income in royalties while Satellite are required to pay 8-10% and terrestrial radio (like Clear Channel) pay next to nothing. Especially to artists as terrestrial radio pays to ASCAP, BMI – publishers who then pay writers, not artists (unless they are the same. . . principle is the same though).

        Truth is, though, that broadcasters have never compensated artists. The Recording Industry considers radio their promotions arm – radio plays the music, which sells the records, so no real money is due.

        Why does this model not work with Internet? Pandora has a “buy this now” link which directly drives sales. . . isn’t that even better than an indirect promotion?

        Why not renegotiate this (since 2009 was “forever ago” in Internet terms – heck Myspace was still around back then!!! ) so that everyone pays, say, 10% with a flat fee. . . or what about:

        (1) grant performers of sound recordings equal rights to compensation from terrestrial broadcasters;
        (2) establish a flat annual fee in lieu of payment of royalties for individual terrestrial broadcast stations with gross revenues of less than $1.25 million and for non-commercial, public broadcast stations;
        (3) grant an exemption from royalty payments for broadcasts of religious services and for incidental uses of musical sound recordings; and
        (4) grant terrestrial broadcast stations that make limited feature uses of sound recordings a per program license option.
        (5) provides that nothing in this Act shall adversely affect the public performance rights or royalties payable to songwriters or copyright owners of musical works.

        Hmmm – performers get equal rights to compensation. . . easy flat fee for small stations. . . sounds pretty good to me. . .

        • Wampus says:

          “Biased,” I don’t think so — but it does have a point of view.

          Royalties should be equitably spread in some way among internet, satellite, and terrestrial radio — I think we can all agree on that. But if Pandora has an untenable business model — and they do, if their protests are to be believed — it’s not the concern of artists. Pandora needs to lobby for “fairness” vis-a-vis the share of royalties paid by terrestrial and satellite radio. Either that or they need to build a better business model.

          Pandora could not exist without music and the artists who make it. This is not just about technology.

        • Music Fan says:

          Thank you Mike Malsed for adding some facts to help offset this biased article. It’s nice to see the actuall numbers rather than just hearing an opinion.

  3. B Catron says:

    It’s criminal the stranglehold big business still has on music even now in the modern information age.

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