Pandora Groupthink. (look it up)

(All links are to articles preceding this one.)

Several of my former workmates at Pandora seem to be drinking the Kool Aid. I’m seeing posts claiming that David Lowery and Pink Floyd are talking ‘trash’.  Yes, I worked at Pandora. You can read all about that here. I also play in a band with David Lowery, it’s called Camper Van Beethoven (not the band with the song in question here.) He and I don’t necessarily agree on everything, but I’m totally backing him up on this one.

Yet, some people I respect are referring to this article by Michael Degusta as if this explains where “the artists” are wrong in claiming that Pandora is not paying enough in royalties. Because we know that pie charts are data, and data is true. (The chart is “estimated”. Also note that no comments are allowed to refute his findings.)

Additionally, invoking op-ed like this, by a “former Pandora intern” named Charlie Kubal , which I find particularly damaging. It’s digital utopianism, not reality.

So let me explain. David Lowery points out that his songwriter royalty from 1000000+ plays on Pandora was $16.89. He gets 40%. He also gets performance royalties from internet radio, which totaled ~$1350, which is split to the performers, so David probably got another few hundred dollars.

So refuting a headline like “only $17 for 1,000,000 spins” is easy, but that wasn’t really his point. The point was that the songwriters’ royalties were only $17, not that there were other royalties. So the pie chart article is like saying, ok he only got $x for broadcast, but LOOK! he also got $y for performance, so he’s wrong! But of course, David’s point was that $x is extremely low.

Then the pie chart article goes on to say how, look AM/FM doesn’t even pay performance royalties! So he’s better off with internet radio!

Yes, terrestrial radio in the US does not pay performance royalties (yet) as it does in the rest of the world. That’s bad, by the way. They should. But they do pay $0.09 in Broadcast royalties to BMI/ASCAP/SESAC per spin of a song. (That is, provided that their reporting is accurate, which it never is. Not that it can’t be, it would actually be easy.)

Piechart man says “apparently in Lowery’s view a performance royalty of $1,275 is unsustainable but the AM/FM world of $0 is totally fine?” I don’t know where David would ever think that. This whole issue is not about performance royalties.

It seems to me that this entire article is obfuscation, it’s meant to confuse the reader by leading them by the nose away from the discussion of broadcast royalties into the discussion of broadcast royalties AND performance royalties. As is Pandora’s response to Pink Floyd and David Lowery. The point, again, is that broadcast royalties are extremely low on internet radio. Pandora says “to reach the exact same audience, Pandora currently pays over 4.5 times more in total royalties than broadcast radio for the same song. In fact, at only 7 percent of U.S. radio listening, Pandora pays more in performance royalties than any other form of radio.”

So what, I say. They may pay more in performance royalties, but they don’t pay more in broadcast royalties. Broadcast royalties go to songwriters. You are listening to songs.  And yes, the performance royalty is indeed unsustainable. And again, so what if they pay out more money, that’s not relevant to the fact of how much money is paid out.

Additionally Pandora likes to play with words: “A glaring example is the assertion that Pandora supports an “85 percent artist pay cut.ʺ That is simply not true.” The number 85% is simply not true? Or the term “pay cut”, which assumes pay to begin with (in taxation, royalties are not considered “pay”)? Here’s the truth: they are trying to lower the rates. Whether or not that’s an “85% pay cut” is immaterial.

Pink Floyd’s major point was that Pandora wanted artists to join in on their letter of support, while “a musician could read this “letter of support” a dozen times and hold it up to a funhouse mirror for good measure without realizing she was signing a call to cut her own royalties to pad Pandora’s bottom line.”

EDIT 28 june:  I think I may know where this number comes from. After reading yet another misinformative piece by, of course, Cory Doctorow (what a tool of digital utopia!) here, he posted (uncredited, so I don’t know who said this) a large quote about how Pandora negotiated a rate with ASCAP, who later decided against it. I bet this number “85%” is the difference between the desired rate that they attempted to negotiate and the current one, or perhaps the difference between the negotiated one and what ASCAP actually wanted. So Pandora is suing ASCAP now, as *they shook hands, man*. This quote ends with saying that “Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.” Of course it doesn’t really, they certainly weren’t trying to negotiate a higher rate!

Doctorow’s intro is wrong as well, webcasting rates do compare unfavorably to satellite radio. Again, the comparisons between multicast and singlecast radio are apples and oranges. Each needs a sustainable rate, neither has one.

As well, “Turns out (unsurprisingly), it’s RIAA lies.” Uh-huh. Sure.

_____________________________________

I think people misunderstand the performance royalty reality. If you’re in a band, usually you have some cut of publishing (hence Lowery’s 40% of “Low”), so you won’t be missing out on terrestrial radio royalties (like the digital utopianist keeps saying, “terrestrial radio pays NOTHING”… in performance royalties). The instance of performance royalties where it would benefit players is for studio musicians, and mostly for high-end pop music (like, say, Britney Spears’ bassist) but even then, the record company or publisher gets the money and is expected to disburse it! If you are a big session guy, you can register with SoundExchange also and claim songs. It’s a process, believe me.

So the argument here should be: how much is one spin out on broadcast radio worth, versus how much one spin on internet radio is worth, for the songwriter. The internet stream goes to one person. The radio broadcast goes to many.

The digital utopianist says that the value for internet radio is better, estimating that 10,000 people hear a song on terrestrial radio when it is broadcast, which his math puts at $0.007 per person, while the million legitimate listeners who each heard the song on Pandora amounted to $0.00014. I can’t check this math, because the numbers are entirely made up for terrestrial radio, we don’t know how many people hear, all we know is how much they pay in the end.

(*from Charlie Kubal: total plays != total listeners. David owns a fraction of the songwriting for Low, and his cut on Pandora is worth about $.015 per 1000 listens (1000 * $16.89/1,159,000). With terrestrial radio, it’s harder to say how many people are tuned in at a given time it’s played, but with major markets playing to 100,000+ people at once, I’d think 10,000 people is a conservative estimate. as such, his cut on terrestrial radio is half of what it is on Pandora: $.007 per 1000 listens [1000 * $1379/(18,797*10,000)].  —> entire thread on Facebook here.)

Regardless of how you “use” data, one thing we do know is that over a million listeners individually heard the song on Pandora. And that paid the songwriters about $40. We don’t know how many people heard it over terrestrial radio, but in the same period, David says he received about $1500 for terrestrial play.

The utopianist also claims that artists are “barking up the wrong tree by going after Internet radio — which is the best targeted, pays the highest per listen and provides the most secondary value in linking to artist information and sales than any other radio medium.” I think he is highly overestimating the actual value of internet radio in terms of linking sales. It’s probably impossible to see actual statistics. In fact, the very way it is stated makes me think that he are shilling for somebody: “best targeted, pays highest per listen and provides most secondary value…” etc, it sounds like it’s straight from the Pandora PR department, all speculation and intent and no real way to back it up. I bet the same concert advertised on terrestrial radio garners more attendees than any link from internet radio. As for sales, well… you could only know if you had a click through from terrestrial. And sales just aren’t good for anything. Are you one of the digital-utopians who think that bands make money from touring and t-shirt sales? That really only is true of the top small percentage of bands. Mostly it’s a break even for the greatest majority, and a loss unless you have a regular audience of more than a few hundred people. Touring is incredibly expensive.

Now as to Pandora’s intent: I worked there for 3 years. I saw the intent change massively when it went public. Yes, just because a company wants to make money doesn’t mean they’re screwing over artists, but man, those dudes are some majorly hypnotized people. Do you know the term “groupthink“?

It runs rampant there. A person must be with them and their ‘lovely intentions’ or is considered aberrant. I began to distrust Tim, more and more the longer I watched him operate. He uses a lot of buzzwords, with no desire to really explain their meaning. Then they got Deborah Roth, Simon Fleming-Wood, etc. Now they have Nancy Tarr from Qorvis? That’s just creepy.

If indeed their intention is still to be great for artists, they need to pull their heads out of their asses and assess the situation. Again, they could simply add a second minute of ads, right?
Companies are companies, they exist too make money, shareholders don’t give a shit who suffers for it. Spotify and Pandora are simply companies that use music as something to make money with, it could as easily be sausage. Notice how the stock goes up when it’s brought up that they don’t pay out enough in royalties….

A couple more points that have been bandied about in this discussion.

1)”Radio has never been seen as a direct, primary income stream for artists.”

Sorry, that’s not correct at all, broadcast royalties were established because they were meant to be an income stream for writers, who weren’t performing the music (starting with John Philip Sousa with mechanicals royalties, on through songs made famous in films, etc. Imagine being a film or TV composer, the bulk of your income is not the upfront payment.) Radio royalties have always been considered a major source of income. Other people have brought up this idea recently, as well, that radio was supposed to be considered only promotional. That’s an extremely defeatist stance, only one I’ve heard from indie artists, and only recently. Most jazz and classical artists that I know know that the US sucks for payouts, so register in Europe and actually get paid by radio. It’s pretty major, the whole idea. We’ve been beaten down into this “it’s a great time to expose yourself” mentality. As Doonesbury said, “Can I eat exposure? Can I smoke it”?

2)”I’d posit that it’s a better time than ever to be an indie artist — your distribution and promotion have gone largely digital, and you can reach fans around the world instantly. ”

That is called “leveling the playing field”. A level field has no mountains.

There is no curation with this methodology and hence just heaps of shit for people to wade through. There is no greatness to equalizing things here, it just means an unending river of new DIY. Ever been to SxSW? Most music biz people can’t even handle it now, there’s simply too many bands. The talent buyers are dropping out rapidly nowadays.

What this era is great for is keeping indie bands in their 20s. No person older than that could afford (economically) to continue doing it, so we’ll have continuous cycles of cool bands who are young and can barely play, and by the time they get good, they won’t be able to afford to continue living off their parents or miniascule sales to continue to make records, so they’ll fade away allowing the next set of 20 year olds to be cool for a few years. Think Unknown Mortal Orchestra will tour next year? How about the year after that….?

I’d like to end this piece by saying: please read Jaron Lanier‘s books “You Are Not A Gadget” and “Who Owns the Future?”. The latter is especially apropos here.

_______________________

Second EDIT 28 June:

A lot of people who are reading this think that I am entirely anti-Pandora (at the whim of being pro-Clear Channel somehow?) Clear Channel is getting a kick out of all of this, they were in bed with Pandora for IRFA in order to take the heat off of terrestrial radio NEEDING to have performance royalties attached. Pandora also claims that that’s why they have been involved in this fight, to make things fair, where terrestrial must pay performance royalties.

Let me be clear, as I was in my older pieces on Pandora. I had high hopes for their service, and I think they could still be potentially an incredible boon for culture as a whole. The problem, in my mind, is that they wish to be a money making conglomerate in THE SAME WAY as the major mass media like Clear Channel, so they choose to emulate. There has never been any need for them to be parochial to the “big boys”. They could have and maybe still could be their own thing. But they choose to cater to the lowest common denominator, which essentially breaks their original charter: music discovery. The masses don’t want to hear new music, they want to hear the hits over and over. Curation, largely the most important aspect of Pandora, in fact the most important aspect of digital radio at all, has moved from being thoughtful to servile.

I don’t really listen to streaming radio very much, but I used to while working, and I would invariably listen to Pandora, I have many great Baroque and 20th century classical stations, and some pretty goos indie rock or stoner rock ones. I don’t live in the US anymore, so I can’t listen to Pandora now, and I don’t really like Spotify.

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43 comments on “Pandora Groupthink. (look it up)
  1. Chris Castle says:

    Reblogged this on MUSIC • TECHNOLOGY • POLICY.

  2. Arne Meås says:

    Thank you for clearing up a few points. Damn hard to find the right path through Pandoras (lack of) information.

  3. David Bean says:

    Thanks. And I can attest to radio still selling more concert tickets and music than the internet http://www.beanbag1.com/AAA.html – David Bean

  4. Duncan Bray says:

    “What this era is great for is keeping indie bands in their 20s. No person older than that could afford (economically) to continue doing it, so we’ll have continuous cycles of cool bands who are young and can barely play, and by the time they get good, they won’t be able to afford to continue living off their parents or miniascule sales to continue to make records, so they’ll fade away allowing the next set of 20 year olds to be cool for a few years. Think Unknown Mortal Orchestra will tour next year? How about the year after that….? ” … this paragraph is a wonderful, succinct sumation of the shit we’re in now … Brave(?) New World … ah well …

  5. Ken Adams says:

    Jonathan, that was again, an awesome detail of the problem. Between this and what David has been writing, this should help clarify a lot to many artists… and hopefully consumers. Thanks for that analysis.

  6. LukeM says:

    So…you know this all started because Clear Channel pays a lower royalty rate for ITS Internet radio station than Pandora does, right? Pandora bought a radio station to bring this unfair situation to light. It’s surprising to find Camper Van Beethoven getting exposure for being the mouthpiece of Big Radio, but I guess you guys are no longer a cool band who is young and can barely play. You should be supporting Pandora, not trashing them — they are WAY more on your side than Clear Channel is. However, the PR people at Clear Channel have managed to get you to dance to their tune. Awesome role reversal, and very impressive on their part.

    (If anybody knows how to get in touch with Qorvis, let me know — It would be nice to get paid for this astroturf sock puppet stuff.)

    • Nobody here is touting Clear Channel at all, but yes, you are correct that they have remained in the shadow of this discussion, sadly. The fact that Pandora was in bed with them regarding IRFA was pretty funny, because they had different goals: Clear Channel wants to avoid the whole idea that terrestrial radio in the US doesn’t pay performance royalties. That’s a different battle on our parts.
      If you read about my experience with Pandora, you may know why I write about them, I actually have no direct experience with Clear Channel other than while working at Pandora to have them be the example of “Major Mass Media”, a term used to determine what was legitimate advertising (!)
      I am certainly no sock puppet here (and the very fact that you are referring to my writing of this article as “astroturf” show that you are embedded enough in the digital communications environment to know that you don’t get paid for exposure!)
      As for supporting Pandora, again, if you read other things I have written about the company, you would know that I think they had and potentially have the potential to be a great thing. They need to make their own path, not try to be parochial to “the big boys”.

      • LukeM says:

        Jonathan: Thank you for approving my comment, and I apologize for my earlier tone. I was feeling frustrated at what struck me as intentionally misleading information that David was posting, which is assembling a pitchfork-wielding mob against Pandora. Musicians across the land are frothing because they believe him when he says he can’t buy a T-shirt with the money he received from a million plays of “Low” last year, even though Pandora payed Cracker over $1000 for that, all included. I saw him referring to the people that pointed that out as “astroturf sock puppets” — implying that they were dishonest. I thought that was very unfair and disrespectful, and I took out my frustration with him on you. (I’ll bet that’s not the first time that’s happened to you! )

        I hope everybody reads your post that you referred to about your time at Pandora: https://jsegel.wordpress.com/2013/03/21/pandora-now-a-year-down-the-road-from-me/ — it’s fascinating. (It’s linked to in your post, but it’s a small, easy-to-miss link.)

        Here’s the pain I’m feeling: David’s post (and your posts are being used in support of it, with “look, even the guy in Camper who worked at Pandora feels this way” comments in articles about it) is addressing a real problem (underpaid composers) but getting people to blame the WRONG side! Pandora isn’t the source of the problem of starving musicians, it’s part of the solution. It’s a SMALL part, but that’s what solutions look like. If somebody claims they can easily solve a huge problem, they are almost always either lying or deluded.

        Here’s what’s wrong:
        – This all started because Pandora bought a radio station so they could get their royalty rates lowered to what Clear Channel pays for the same thing. Pandora would be OK if Clear Channel’s rates were raised to theirs — it’s just can’t be different. David (and your) suggestion to “get a better business model” can’t work if competitors get to pay a lower rate.
        – Radio works BECAUSE broadcasters (like Pandora) can afford to have something to broadcast. That rate HAS to be incredibly low per listener, or it all won’t work. So the numbers sound crazy low when you talk about them, but that’s true of ALL radio. It’s true of most businesses. But Pandora is LESS like this than traditional radio, it’s a step in the right direction. If David succeeds and gets Pandora put out of business, that HURTS musicians everywhere. It’s like getting mad at the music industry and taking out your frustration by burning the local vinyl-only used record store – it’s the wrong target.
        – Pandora is largely creating NEW value that didn’t exist before — it gets played mostly (I think) by people working, replacing the silence they used to work in. They listen to ads or pay the fee, and while the money comes in a thousandth of a cent at a time, it adds up. Last year Pandora paid $150 Million to rights holders. Some of that is existing value diverted from listening to radio and other sources, but most of it is new. This should be celebrated, not attacked. Pandora creates value, and that’s how you save the world.

        Look, I think attention being directed towards helping musicians make more money is a positive thing, as I’m sure you can relate to. If David’s shots at Pandora help that, then I’m OK — as long as it doesn’t actually kill it! That would be a terrible tragedy. Maybe we could meet in the middle — just include “and Clear Channel” in the discussion, and we’ll call it even. Like this: “Pandora and Clear Channel should pay higher rates to the composers.” Clear Channel (and the mainstream Big Music industry) is the real villain in this, and so far you and David are just helping them snuff out a pesky though far smaller competitor.

      • Jag med, as we say here in Sweden. I think you’re right on the mark. My intention really was to clarify things.
        The “get a better business model” snipe has been around internet radio forever. It’s really hard to be both business and culture. I am pro-Pandora in terms of culture. The whole business to keep it that way left me sort of disgusted.
        I’m wondering if the whole “who’s gonna buy the startup” thing vis-a-vis Pandora is now turning away from the Apple/Google axis toward Clear Channel!

  7. Seems like both sides are yelling that the facts that support their side are the most important facts and the other guys facts are the least important facts.

    How bout this:

    A) You can refrain from participating in Internet Radio.

    If it doesn’t pay you what you think you’re worth – don’t do it.

    If you “can’t” refrain – or “don’t have a choice” – that was a business decision you already made and agreed to. You got paid for that deal – gotta live with it. Sorry. Which leads to point B.

    B) Pandora may need a new business model – but so do YOU.

    It’s time for you to write a NEW hit song – under YOUR control where you DON’T have to share the revenue with anyone and can make ALL the decisions about how it gets monetized and by whom.

    C) Pandora Pays 60% of revenue as royalties – and has never made a profit. But let’s go ahead and squeeze this emerging medium to death so instead of $16.00 for spins on Low, Lowery can earn $36.00 Smart.

    Meanwhile – Terrestrial Radio payments to artists/labels are capped in the single digit % of revenue and on the backs of the Artists Radio Stations have historically earned upward of 50% profit margins. 50% free and clear cash. Billions of dollars in PROFIT.

    Yet Artists have made NO concerted effort (no long blog posts) to get the people that can MOST afford to pay more (Terrestrial Radio) to actually do it.

    So instead of Radio paying any of that 50% profit margin to the Artists – do you know who got it? Wall Street M&A Guys and Radio CEO’s.

    They used that tremendous cash flow to line their own pockets in HUGE over-priced acquisitions and consolidations (Clear Channel, Cumulus etc..)

    Now those companies take fewer risks by playing fewer artists and sign new deals with labels etc… which limits FURTHER the rates they’ll have to pay and the artists they’ll promote.

    And where to the Artists direct their outrage? Pandora.

    Maybe there is groupthink around Pandora.

    And maybe it’s become destructive.

    But I saw Pandora as the first real threat to the oligopoly of shrinking choices from Terrestrial Radio.

    Artists can’t see the forest for the trees.

    And we’re reminded once against why Artists are historically – notoriously bad business people.

    • In response to A)…you can’t, actually. If you publish and sell music, it’s available for broadcast by means of a “compulsory license” granted by BMI/ASCAP etc. Pretty much anything with a bar code! I have one friend who discovered that their music compilation was on Pandora (while I was there) and wanted it off… and it was published under a strict CC license, and not published through rights holders groups. It turned out that the buyers bought the CD USED at a store without noting the publishing… it still took a long time to remove it. Beyond that, it’s unlikely to get music removed from broadcast.
      I have no response to B) except, no thanks for being in the camp that blames the victim in these situations. It’s too typical to say “if your music ain’t selling, it’s your fault.” Bullshit, I say. Artists should never have to be businessmen. If they are, what you’re going to hear most is the hucksters. You say cream rises, I say shit floats. I certainly don’t want the music I listen to made by businessmen.
      And C) So what. Why do I care if they pay out 90% of their revenue to artists, they are ostensibly based on that art, no?
      To add to this, I want terrestrial radio to pay performance royalties, making even more of their revenue payout to artists. Again, the radio we’re talking about is based entirely on playing music, right? Without music, it’s what?
      So then you’re still talking about business. I don’t really give a fuck about business. I want the artists to get paid. Maybe people should e willing to pay taxes to keep the arts alive. Maybe the radio should be state sponsored or at least financially helped. But then, of course the US would be raising the dreaded specter of socialism. Oops.

      • LukeM says:

        ” I don’t really give a fuck about business. I want the artists to get paid.”

        Jonathan: you realize that’s self-contradictory, right? Wanting artists to get paid means you DO give a fuck about business. (And there’s nothing wrong with that.)

        Pandora is BETTER for producers of music than the existing alternative. Killing it off (which is what happens if David “wins” this particular battle) hurts musicians and songwriters, and helps your current oppressors. You’re helping burn down your own house.

      • Well, it doesn’t matter to me whether the company is making money themselves, I would be just as happy if they were a non-profit. Why must artists always worry about the middleman getting paid?

      • LukeM says:

        “Why must artists always worry about the middleman getting paid?”

        I don’t know, ask David — he started it. Pandora didn’t post a message accusing HIM of ripping off THEM, did they?

        You should realize that you have real power. You can (help) destroy Pandora – your bandmate David certainly seems to be trying! He didn’t have to post anything, but he did — he got a million page views and a considerable amount of press over a headline that falsely claims that Pandora is paying him 1% of what it actually IS paying him. Because of him, many people are outraged at Pandora, and they shouldn’t be. You are helping (though you are far more reasoned and reachable than he appears to be.)

        And Pandora is NOT “the middleman” in any case. They’re the ones who delivered the music to the people and generated ALL of the revenue we’re talking about dividing up in the first place.

  8. […] Jonathan Segal joins the Pandora royalty debate with a unique perspective. In addtion to being in David Lowery‘s band Camper Van Beethoven, he also worked at Pandora for three years […]

  9. mreggmusic says:

    @LukeM

    LukeM, I remember David Lowery specifically saying that it was the writers share he was talking about and that the performance royalties he would post and talk about subsequently.

    “Musicians across the land are frothing because they believe him when he says he can’t buy a T-shirt with the money he received from a million plays of “Low” last year, even though Pandora payed Cracker over $1000 for that, all included.?”

    It seems to me that whether it’s $16, $36 or even $1,000 (which you seem to imply split between Cracker’s 4 or so members, management, etc.) is supposed to be something that an artist or group can actually call a significant part of their “living?” Especially when all the revenue sources seem to point to a race to the bottom or “hey it’s good promo!” – (streaming is becoming the new delivery standard for so many, physical CDs basically dead, touring and t-shirts not viable unless you’re at the top, etc.)

    And what about the example of the “Man in the Mirror” smash hit that the writers got such a puny amount for? It just doesn’t smell right. Somebody’s making some serious $$ from this. Seems to me the IPO transition and the quarterly profit deadlines to shareholders is what drives this corporate behavior. But what do I know, I’m just a musician… 😉

    • LukeM says:

      I could certainly use $1000! Or $400, for work I did 20 years ago. Sounds pretty good to me, but then I’m just a computer guy, not a rich and famous rock star 🙂

      Look, David *did* say he would talk about the performance royalty later but…so far he hasn’t. It feels a lot to me like he’s just ducking the question. He said they were also “lame” — even though they’re a HUNDRED TIMES the headline “less than the profit from a t-shirt” number! (btw: do you guys really make more than $16 for the sale of a single t-shirt? That seems like a huge margin to me.)

      I appreciate you taking the time to engage with me like this. And I’m thoroughly enjoying “Jonathan Segel Radio” on Pandora! (Currently playing “Doc Hammer’s Weep” — I like ’em)

      • LukeM says:

        (Oops – I posted my last comment thinking thought Jonathan had written that. Most of it is still relevant, but that last bit was thanking Jonathan, not mreggmusic, and my “you guys” comment is even LESS relevant than it was already! Sorry.)

      • mreggmusic says:

        LukeM,

        Whether it was 20 yrs ago doesn’t matter. As it applies to me and any current/future songwriter it’s not anywhere near approaching something even hardly a part of what one could call a living. And as far as “rich and famous rock stars” are concerned. I would bet that Mr. Lowery is more in the middle class range of folks. From what I know of royalties from all sources as a composer/performer, it’s never been easy to have the “rich” part happen. “Low” was probably Cracker’s (and Lowery’s) biggest “hit” and he probably used it for a good example of a song that got a lot of play. If you’ve been to or followed any of Cracker/CVB’s tour dates in the last several years, they aren’t exactly headlining “sheds” and such. Even Grizzly Bear ain’t got it so good in this new Wild West, further illustrating Jonathan’s example of how anyone out of their 20s can’t hardly afford to be a musician unless they’re a “trustafarian…”

        http://www.slate.com/blogs/browbeat/2012/10/02/grizzly_bear_aren_t_rich_new_york_magazine_story_reveals_how_even_indie_darlings_can_t_afford_to_live_like_rock_stars_.html

        And, LukeM, David said that the “t-shirt” he could make that much off of was really only the special long sleeve pricey-est edition. (My paraphrase). He also said he would talk about the other performance royalties later this week. It’s just Friday here in California. He might miss it, or he might have to play a gig or something. I don’t think he’s getting paid to make these blog entries or do the advocacy work he and others have been doing lately. I know I’m not. I’m just tired of the same old “feed off the artists” mentality that didn’t start with this issue but sure got super amplified…

        And just look at this link at the Trichordist (admittedly one of Lowery’s main outlets) at all the other artists who have a problem with this. http://thetrichordist.com/2013/06/28/artists-speak-out-on-pandoras-proposed-royalty-rate-cuts/

        I think that so many like me and like Jonathan Segel and probably Lowery are disappointed that such a cool technology and idea like Pandora has succumbed to the pressures of IPO based business models. They IMO tend to carry a pressure to profit at all costs no matter what that is not conducive to a symbiotic relationship with artists whether they be writers, performers what have you.

      • Yeah, it’s true, royalties are cool. We sort of count on them, as one would, say, a pension plan. Or health insurance. Because musicians don’t really ever get either.

        I just downloaded my BMI statement for 4th quarter 2012 as well, to look at it. It’s interesting. I made $298 in that quarter as a writer. I also got $12 in performance royalties from SoundExchange for the same period. (so I’m not on the Cracker “Low” level.)
        But as a writer example, this may clarify some things. Or not. This is the breakdown of the payments for internet performances of “Take the Skinheads Bowling”, adjusted to 100% (I only get part of that):

        Internet (dunno what that means): 1498 plays = $0.28
        Live 365: 733 plays = $0.78
        Pandora : 6800 plays = $0.25
        Rhapsody Inter : 1014 = $0.50
        Rhapsody Radio : 1039 = $0.08
        Spotify : 10,860 = $2.83
        YouTube : 13,800 = $0.45

        Now, I’m a writer or co-writer on about 400 songs so this sort of thing can add up to a couple hundred dollars per quarter. Nothing to pay my kid’s college fund with, obviously.

        From this same song, there are a couple of $5 payments from use in “Bowling for Columbine” and then somehow mysteriously there is $35 at the end of the statement attributed to “radio”. So I don’t know if this helps in the AM/FM versus Internet writers’ royalty rate discussion, but it does tell you something about how puny the numbers are, when you consider that each one represents an individual listening to the song.

  10. zerobs says:

    Jonathan, you really lose credibility with statements like this:

    “the numbers are entirely made up for terrestrial radio, we don’t know how many people hear”

    Radio has a fairly accurate count of listeners at any one time, even more so than 10 years ago with Arbitron’s PPM. The ability of radio to set advertising rates in the top 150 markets is dependent on having a verifiable number to present to clients.

    A top 20 station in LA generally has 200K listeners at any one time, probably more. So 10 spins on an LA radio station is equivalent to 2 million spins on Pandora.

    Part of the reason artists are so tight-lipped about radio is that they still look at it as exposure. But the fact is 99% of the radio programmers look at spinning a CVB record as commercial suicide – they rather play an Eagles record for the umpteenth time because it’s proven not to be a turn-off. This kind of data is what PPM tells them.

    The sad reality is that artists are now and always will be in a caste system. A songwriter like Don Henley has factual data asserting his position, but the factual data for David Lowery’s song show the exact opposite. In short, Don Henley should be getting paid by radio and Pandora and David Lowery should be paying for play.

    I hate to sound harsh, but that is the commercial reality. And it’s actually the reason why I’ve bought most of CVB’s and Cracker’s records and have never bought an Eagles record: if I want to hear the Eagles I can turn on the radio or Pandora and will hear them in ten minutes or less; my chances of hearing CVB are slim to none.

    Now, if you want to make a point about radio-style steaming versus “tailored” streaming versus “on-demand” streaming, you can. But Spotify and Rhapsody already tier their payouts so the only thing left is haggling over the prices – which to me is a private contracting matter between the services and the artists. As soon as you try to bring the coercive arm of government into the mix to set prices, you are in the realm of taxation no matter how direct or indirect it is. (There is a reason it’s called a ROYALTY.) If the gripe is specifically about Pandora trying use their market power to pay less than what Rhapsody pays, well it isn’t much different than Don Henley getting the radio spins and CVB getting hardly any.

    • Hi,
      Thanks, great comments on this problem.
      I hope I don’t entirely lose credibility by saying that. I wrote that because he simply estimated the numbers, but also because I don’t actually trust Arbitron (after seeing how it was used to calculate Pandora listeners, while Pandora’s servers knew exact listening hours, for example.) But also I stand by my statement that web radio is going to an individual who is more likely actually listening, while terrestrial radio is going to a wide swath of people who may hear it, but only the ones trapped in cars may be actually listening! At least with your big numbers. I think (again I admit this is all conjecture, based on my personal experience) that college radio and its audience may be entirely different.
      Yeah, the caste system is responsible for the wide disparities in touring income as well. That said, I think that terrestrial radio is better at getting its listener into the concert seats, frankly, even college radio. Maybe it’s because the big broadcast to many people is more similar to the social experience that the concert is. Web radio, in its private play world, can never be replicated in concert!
      As far as the “tailored” stream, that is curation, and that is where Pandora excels. People always put down the company for “only” having a million tracks available or whatever, but that’s the point: they were chosen. Curation is, to me, the biggest problem with digital radio.
      As for the idea of individual negotiations for royalty, that’s exactly where the little guys got screwed by Spotify, the big labels accept something and then you have to accept it as well or else.
      I don’t understand your summation about Pandora using their market power to pay less being the same as the terrestrial caste system, can you explain that?

  11. […] Jonathan Segal joins the Pandora royalty debate with a unique perspective. In addtion to being in David Lowery‘s band Camper Van Beethoven, he also worked at Pandora for three years […]

  12. DavidH says:

    Arguing over specific paycheck amounts here is pointless. All that does is introduce a huge and confusing stumbling block smack dab in the path to a fair & equitable solution. It spurs and encourages endless agenda driven rhetoric and red herring squawking from both sides.

    The real crux of the issue here is baseless rate discrimination against Internet radio. And until that indisputable fact is addressed and resolved we are all just wallowing around and throwing punches in very a very slippery mud hole.

    The method used to transmit and/or receive a radio signal (whether it originates from a tower, coax cable, network server, or a satellite 22,000 miles above the earth) should have no bearing whatsoever on the standard used to determine royalty rates. A signal is a signal and an ear is an ear!

    • I’m not sure what you’re saying. If it doesn’t matter where it comes from, then why does internet radio pay so much less to writers, and terrestrial radio pay nothing to performers. The “rate discrimination” you’re talking about isn’t baseless at all. I think I listed all the numbers, and they don’t turn up to be against internet radio, really.

      • DavidH says:

        “If it doesn’t matter where it comes from, then why does internet radio pay so much less to writers, and terrestrial radio pay nothing to performers.”

        Good question Jonathan. First, I did not day it “doesn’t” matter where it comes from–it clearly does. And that’s my point. I stated that it “shouldn’t” matter. So why indeed?

        No argument from me that Pandora, terrestrial, sat, and cable should pay based upon the same rate standard–across the board. Yet they do not. That’s cocked.

        I realize that you and Lowery are focusing primarily on the songwriter’s piece–but it’s really a package deal from a vendor’s pocket book. Any intelligent discussion and solution to radio’s royalty compensation and expense should and must include all revenues and costs.

        That said, please clarify for me a little further about “internet radio paying so much less to writers”. Less than who? Are you referring to Lowery’s article?

      • Hey, the writer’s royalties are those that are paid to BMI/ASCAP/SESAC, as I outlined in the article. It’s a very difficult thing to make them “across the board”, because the number of people listening “per spin” of the song (i.e. terrestrial plays one song, thousands hear it, satellite plays one song, hundreds hear it, internet plays one song and one person hears it.) The result of trying to accommodate for that discrepancy of listenership per play of a song is what led to the deals made with satellite and internet radio, where they made deals with BMI, ASCAP etc, individually, and settled on “a percentage of income” not necessarily disclosed to the public. This is why, for example, David Lowery had one song played on Pandora over a million times and received only $16.89 as his 40% owner of the writers’ rights. Who knows what percentage of Pandora’s income that meant? Satellite, like Sirius/XM, pays more per play than that, still nothing approaching terrestrial AM/FM radio, of course, because they are mandated to pay $0.09 every time they play a song.
        The argument Pandora makes is that they (and satellite) pay performance royalties, as mandated by the Digital Millennium Copyright Act (DMCA), which was set in 2007 in escalating rates, which are currently $0.0019 per play of a song. These are paid to SoundExchange, a non-profit in Washington DC. So that, in Lowery’s case amounted to about another $400 for that one song. So, that’s good, but we’re still talking about a million plays to a million individuals. (totals, given his 40% would be what, $45 writer’s royalties and $1300 in performance royalties.)
        So AM/FM doesn’t pay performance royalties. IN THE US! (and China, South Korea and Afghanistan. Everywhere else, they do.) Hence Clear Channel is laughing as they perceive the entire conversation here is attacking Pandora. That’s only part of it…

      • DavidH says:

        Hey back Jonathan. I think we may be talking past one another a bit here. :cheers: lol

        So let me make clear what I meant by “across the board”. In my context, “the board” refers to the USERS of the work i.e. sat., cable, terrestrial, and internet radio. No exceptions or exemptions should be made or grand-fathered in based upon a user’s means of distribution or length of time they’ve been in existence.

        Furthermore, I was not suggesting that BMI use the same calculation standard as SoundExchange or visa versa. But that ALL users be subject to ALL license types. And that rate standards should be consistent WITHIN a rights collection society’s realm…not across them.

        In other words, if the standard for writers & publishers is a percent of revenue, then that method should be granted and applied to all users. The percent of revenue model pretty much is and has been the standard for writer’s & publisher’s royalty compensation for many years. And yes, even Internet radio is assessed with this method presently.

        Yet when it comes to performance royalties, a different standard and calculation method is applied to RADIO use of a song– simply because it’s transmitted over the Internet. They were singled out. There’s a long and tangled story as to why that came to be—but I’ll save that for another time.

        Fair is as fair does, I say that if someone broadcasts your sound recording by whatever means (terrestrial tower, cable, or network server) they owe you a royalty. And the method by which this royalty rate is calculated should be consistent for ALL users. So, if one user is granted a percentage of revenue standard then all users should be afforded that same option with a similar if not identical percentage applied.

        As for the “huge” dollar discrepancy between what AM/FM paid vs. what Pandora paid on Lowery’s BMI statement, this is primarily attributable to the humongous difference in revenue between Pandora and terrestrial radio. In 2012 Pandora’s annual revenue was $427 million vs. $1.6 billion for US terrestrial radio.

        Equating spins to listens at their respective face values is at best a specious argument. Neither one is the principal means used to determining the dollar amount of songwriter royalties. That would be percentage of revenues. Terrestrial makes more money…they pay more money.

        One could however (for purposes of illustration only) extrapolate terrestrial radio spins into total listens. A reasonable estimate would be 18,797 spins = 73,000,000 individual listens. So now we have Pandora only hitting/using 1.16 million ears while AM/FM is hitting/using 73 million ears. How’s that sound for a headline?

        Lastly, I appreciate your lesson on performance royalties. But I can assure you that I’m fairly well schooled (13+ years) when it comes to the when, why, & how these compulsory rates were established, presently enforced, collected, and distributed.

        In the interest of keeping the overall gist of our discussion on track and out of a rat hole, I’m inclined to forgo pointing out a few significant inaccuracies in your figures and understanding of the statutory performance license(s) for Webcasting here.

        I genuinely want to thank you for your even-tempered comments and responses in this discussion Jonathan. I also hope that you do not take or perceive any part of my comments so far as pompous or condescending toward you personally. I know you’re a good dude—so am I.

        Please feel free to shoot me an email and we can avoid cluttering this comment thread with mind numbing and confusing legalese. Not to mention there are some critical facts and history to which I feel you should be made aware.

      • Please do email me: jsegel at magneticmotorworks dot com is best. I’d love to know things that I’m missing in looking at the issue.
        Sorry about laying out the royalties thing, yet again, I didn’t understand what you were asking I guess.
        One thing I would say about the AM/FM numbers, though, is that the number of plays could be on college radio at the same rate, which is certainly not the millions of listeners. And I would still argue that the huge numbers of “listeners” for AM/FM may be more like “hearers”, that is, much of the audience are much more passive listeners and maybe even not choosing to listen, while the bulk of internet streamers are one-on-one, that is, each is an individual who is listening to that particular stream.

      • DavidH says:

        Good deal….I’ll be in touch soon.

        No worries on “laying out the royalties thing, yet again”. Most people don’t have any clue whatsoever about how the whole SoundExchange deal works. Why would you naturally assume I was not just one more of the clueless masses? So I totally get where you were coming from. Hence, I felt I’d should let you know that I wasn’t “most people”—at least as far as performance royalties are concerned. heh.

        Not real certain what you’re getting at with
        “number of plays on college radio at the same rate”. Please expand on that one for me.

        Yeah, I’ll give ya that AM/FM (by virtue of the metrics used by Arbitron or Mediabase to determine the audience size of a particular market) is bound to have a good share of “hearers” or passive listeners.

        One of the most popular and common non-commercial uses for Pandora, et.al. is background/filler music during a party or backyard cookouts with the friends & family. So by the same token, an Internet radio station that is playing from a single computer can have a considerable number of hearers/passive listeners as well. Is it a relative percentage to that of AM/FM? Maybe? Probably not? I don’t know.

        In either case, since a precise number of “actual performances” is immeasurable on both platforms– it makes much more sense to use a percentage of gross revenues model instead of some cooked-up per song/per listener model.

      • for “number of plays on college radio at the same rate” I mean that the writers’ royalties are the same for any AM/FM station’s broadcast of a song, regardless of the number of listeners. BMI, through College Radio plays pays $0.09 per spin the same as if it were played on mega-106 or whatever, where you assume a million listeners. In the actual case, the college radio play has listeners numbering in the tens or hundreds.
        As to Pandora’s use a background music, it is in fact licensed only for individual listeners when you sign up as. It’s illegal to use it as background for your cafe or whatever. I assume private events are exempt. There is a different commercial license for using it available via Muzak or some service like that….

      • DavidH says:

        Yep. I’m aware of Pandora’s commercial product for pubs, etc. —that’s why I said non-commercial use. And yeah…technically it’s illegal to sing Happy Birthday without permission. But we’re just spit-balling realities vs. fantasies here right? 😉

        For what it’s worth, my extrapolated estimate of AM/FM listeners was based on U.S. Commercial Broadcasters preened through Mediabase. So I’m thinking my number excluded colleges.

        In any event, I wasn’t aware that college radio paid BMI a fixed per spin fee—let alone it being the same as mega-watt commercial station. Hmmm… I thought colleges paid a flat compulsory fee based upon the number of students and commercial paid 1.7% of gross revenue—less all sorts of deductions. Then they would use a station’s airplay logs to divvy up the pot accordingly. At least that’s been my understanding with other writer PROs under their blanket licenses for radio.

  13. New shit has come to light, as Lebowski said. Check this new article out:
    http://www.billboard.com/biz/articles/news/digital-and-mobile/1568819/pandora-cuts-direct-pub-deal-with-universal-music
    Very interesting, with some actual numbers! For example it says that the “percentage of income” that I’ve been wondering about this whole time is “4.3% of revenue rate that ASCAP, BMI and SESAC combined were paid by Pandora, for the year ended Jan. 31, 2013.”
    Very interesting. Combined. That’s part of the problem, at the very least.

  14. UnSubject says:

    An interesting article. The internet keeps pushing down the cost of entertainment items and making it harder for a lot of artists to survive; sadly most reporting on the issue has a survivor’s bias going on, so you hear about the latest big success and not the numerous artists who have quietly quit the business and moved on.

  15. minimalist says:

    Jonathan,

    Huge CVB fan here. Thanks for having the courage to speak up for what’s right when it comes to artists rights and music in the digital age. I realize its especially hard to do so when you know you will be jumped on by a mob of open-culture trolls that try to discredit and humiliate anyone who dares question the fundamental tenants of their religion.

    I have to admit I was seduced by the digital dream during the days of Napster. I too used to be right there with the apologists arguing the usual talking points (artists make all their money from touring now anyway, greedy record labels are finally getting what’s coming to them, everyone just needs to find a new business model, piracy is really just a market adjustment, musicians and labels need to innovate more, cheap music is inevitable so you better get used to it, etc). But thankfully, in addition to being a technologist I am also a hardcore music geek. And I value the people who make the music that means so much to me in my life and I want them to not only survive but to prosper. And my conscience started to make me ask questions.

    It slowly dawned on me how silent many artists were on the realities of the music business in the age of dirt cheap streaming services and file sharing. I mean, if they don’t say anything then surely everything must be OK, right? It wasn’t until I took a step back and looked at the intensity and the nastiness of the vitriol that is spewed daily by many of the you-just-need-to-find-a-new-business-model True Believers against any dissenting voice that I realized that artists were likely keeping their mouths shut out of fear of being tarred and feathered as the next Metallica.

    David Lowrey’s posts at The Trichordist and Chris Ruen’s eye opening book “Freeloading” help verify my suspicions that all was not well in the music industry. Further digging around reveled that some prominent bands like Galaxy 500 and The Black Keys were hesitantly admitting as much. And as the interviews in “Freeloading” showed, if celebrated indie bands like TV on the Radio and Yeasayer were not prospering in this new digital economy than maybe some of the talking points that that get passed around the web were wrong? Ruen shows just how wrong many of them are (most bands do not in fact make enough selling T-shirts and concert tickets to survive, all record labels are not filled with money grubbing executives [although ironically it looks like some streaming service executives are], the new business model of streaming is not working out as well for artists as we would all like to believe). If its legal then surely its ethical, right? If you think so then I’ve got some 2 dollar t-shirts made in an Asian sweat shop to sell you too.

    I feel it’s the responsibility of music lovers to stay informed and to stand up for what’s right. I’m not sure most of the True Believers really are music lovers. Music seems like just an excuse for them to argue about their true love – technology. I suspect the moderate success of paid downloads in the face of piracy is proof that most people would rather do the right thing if we make it simple and easy for them to do so. The challenge as we move into the streaming era will be to help people understand that who they give their money to matters.

    Keep up the good fight.

    • Thanks for the moral support. I agree, Chris Ruen’s book is pretty eye-opening. For my part, I’m just trying to dispel the clouds of disinformation as much as I can, and I admit I have no solution to offer. I’m reading Jaron lanier’s second book on the subject, which claims some possibilities…

  16. Top post. I look forward to reading more. Cheers

  17. Asking questions are in fact good thing if you are not understanding something completely, except this post offers
    good understanding yet.

  18. Very nice blog post. I absolutely love this site.
    Keep writing!

  19. URL says:

    … [Trackback]

    […] Informations on that Topic: jsegel.wordpress.com/2013/06/27/pandora-groupthink-look-it-up/ […]

  20. […] that I have to add to the perspective on last year’s entry was made later in an article about Pandora and the internet-versus-”content creators” problems, and which is inherent to our current cultural climate, which is that the music scene is skewed […]

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