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Jeff Price: Pandora Is Trying To Get Uncle Sam To Lower Artists Wages

Jeff-priceBy former TuneCore CEO Jeff Price (@TuneCoreJeff) who blogs at ArtistCore.

For the streaming digital radio service Pandora, music is a commodity used to make money through advertising. In June 2012, it went public on the New York Stock Exchange, making its investors, founders and shareholders a lot of money. Despite the success of the IPO, Pandora execs have a problem: they need their company to become more profitable. Assuming they don’t change their business model of selling ads around other people’s music, they have two real choices:

First, Pandora could ask advertisers to pay it more money. Unfortunately, it has not been able to convince them to do this. After all, why should a company pay more for something if it doesn’t think it’s worth it?

This leaves option number two: pay less money to music creators and copyright holders to use their music. Understandably, music creators and copyright holders do not want to be paid less.

Pandora also has the option of writing and recording its own music thereby not having to pay anyone for its use. It has chosen not to.

If Pandora can’t get more money from advertisers, won’t create and record its own songs and can’t pay less to use music it does not own, it has a bit of a problem. One solution could be to try to convince music creators and copyright holders why they should be paid less to be part of their service, and then create a VOLUNTARY way for them to opt in. I suspect with a compelling reason, 99% of them would. However, it does not seem to want to do this either.

image from www.hypebot.comA Horrifying Solution

Rather than innovate to substantiate higher ad rates or create a more compelling model to convince artists to participate in its service, it came up with a horrifying solution: hire lobbyists and file lawsuits to get the US government to drive down the cost of the commodity they want to use at the expense of the person who created it. In other words, get the government to lower music creators’ wages. This “solution” allows Pandora’s expenses to go down and its profits to go up making its shareholders very very happy. Unfortunately, the same cannot be said for the music creators and copyright holders who will be earning less.

The irony of the situation can be found when listening to Pandora’s CEO Joe Kennedy and/or its Founder Tim Westergren talk publicly about how they care about the musician, so much so that they have over one hundred as employees. However, I suspect they would never single out only these Pandora employees and lower their salaries so Pandora’s profits go up… and yet, in a way, this is exactly what they are doing.

Music creators were not put on this earth for Pandora to exploit to make a profit. If Pandora wants to use someone else’s music and pay very little for it, it needs to convince the music creator and copyright holders as to why – a symbiotic relationship must exist that makes sense to both sides. It’s not the artist’s problem if Pandora can’t sell ads at a higher rate just as it’s not Pandora’s problem if music listeners don’t like an artist’s music. If artists don’t want to let Pandora use their music at a price Pandora wants and Pandora goes out of business, then Pandora goes out of business. It’s not the end of the world.

However, Pandora seems not to understand this. Case in point can be seen by its recent lawsuit against ASCAP. Pandora’s justification for the suit against ASCAP appears to be that it’s just not fair for Pandora to pay music creators and copyright holders more than other companies to use their music. Further, Pandora seems to believe the cost associated with using other people’s music slows down its innovation and lowers its profits (http://www.billboard.biz/bbbiz/industry/legal-and-management/pandora-sues-ascap-for-lower-rates-1008003232.story). Funny (sad) that what’s fair to the artist never comes into the conversation.

It’s important to note that ASCAP was hired by hundreds of thousands of individual songwriters to negotiate licenses and fair wages for the use of their songs. By suing ASCAP, Pandora is collectively suing these hundreds of thousands of individual artists and copyright holders in an attempt to ensure they will be paid less for the use of their music. If Pandora wins, the US Copyright Royalty Board – a governmental body - will coerce ASCAP to license the music of its members to Pandora at a lower rate.

It is not a valid argument for the government or a company to take rights and revenue from the artist under the guise that the cost of music stifles innovation or profits or that “they are paying less so we should too”. How can artists innovate, create and thrive if they are not being paid a fee that they agree is fair compensation for their work? (How wonderful life would be if things worked like this: You see something you want but think the owner is selling it at too high a price, so you ask the government to force the other person to sell it a lower price.)

image from www.google.comWithout the music creator, there is no industry, no fans, no gigs, no Spotify, no iTunes, no labels and no Pandora. And yet, somehow, the artist usually seems to be the one getting unfairly exploited. In this case, let’s just hope the artist’s voice gets heard before the Pandoras of the world can ram through legislation that may financially handicap music creators for years to come.

In the meantime, if artists would like to have a more direct say and involvement in the Pandora battle, there are some actions they can take. If you have written a song, and that song was recorded either by you or someone else, and that song is on Pandora, Pandora MUST get a license to the right of Public Performance to stream the song. If it streams your song without this license, it is violating copyright law.

In the US, there are two main organizations that represent this right of Public Performance: ASCAP and BMI. As a songwriter – or representative of the songwriter called a Publisher – you can become a member of either organization. Once a member, call them up, tell them you want to give them negotiating power to get you a fair wage for your work by temporarily withdrawing your rights from their organization in regards to Pandora. This will then require Pandora to remove your song from its service unless it gets the license from you directly. By withdrawing that one small right from ASCAP and/or BMI, it will give them leverage to fight on your behalf.

And let them fight it out for you; this is what they are best at.

If you are not a member of a PRO, and Pandora is streaming your song it is most likely doing so without the legally required license. You can contact them and tell them to remove it or pay you a license fee that you deem appropriate.

It’s vital that artists, songwriters, composers and copyright holders stand their ground during this transitional phase of the music industry to set a precedent by demanding fair wages on which to build a sustainable future.

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