Major Labels

The Downfall Of Pandora, Consumer Choice And Emerging Music

20081109-cbe7abtrsdqmqgbefb4dqdxp2sGuest post by Joey Flores

(@earbits) of sidewinder.fm, a music and tech think tank. Flores is co-founder
and CEO of Earbits, an online music streaming service.

If you listen to Pandora, you may have started hearing commercials asking you to support the Internet Radio Fairness Act. It’s legislation proposed to
reduce Internet radio royalties to the level of other digital formats, like satellite
radio. Over the coming months you’ll hear others “advocating for artists” by keeping the rates high. As a strong advocate for artists, let me tell you why
maintaining the current rates is the worst thing that could happen to artists, consumers, and the future of music.

The beauty of Internet radio over broadcast is its personalized nature. With each user having an individual stream, Pandora can play totally obscure music
for one person while playing Top 40 for someone else. With broadcast radio, audience sizes are static and large. This creates airtime scarcity and opens up
programming to the influence of money. That’s why commercial radio has long been dictated by the major labels and their massive budgets. With unlimited
stations and single-person audience sizes, Internet broadcasters are empowered and driven to play what each user wants. If they don't, users will find
someone who will, and finally they can.

Simply put, the Internet is democratizing music, and this is a good for artists. 

Internet Radio Royalties are Creating a Music Middle Class

In addition to providing greater variety, Internet radio is putting millions of dollars in the pockets of musicians. Under their compulsory licenses
provided by Congress and the Copyright Royalty Board, Pandora and Sirius can play whatever music they want if they agree to pay a performance royalty to
sound recording owners. This is the first time that broadcasters have been required to pay a royalty that makes its way into the pockets of the performers
themselves and it’s a huge win for artists.

Unfortunately, this revenue is in jeopardy. While Sirius pays a percentage of revenue — a manageable structure that accounts for swings in internal
performance and market conditions — Pandora pays a per-stream fee every time they play a song. This structure opens them up to significant risk, along with
all other Internet broadcasters who rely on these licenses. Despite over $180 million dollars in revenue for the first half of this year, Pandora has lost
over $25 million, and no major company has yet to be profitable under this structure. Without a change, Pandora will go out of business or be forced to negotiate terms directly with rights holders, i.e. the major labels. Forcing Internet
broadcasters to pay unsustainably high rates to the majors will reduce consumer choice, kill payments to artists, and cut many independent labels out of
the future of Internet radio.

Historically, the major labels have worked day and night to figure out contract structures and licensing arrangements that avoid paying money to artists.
The labels either designate most fees as a type of fee artists aren't entitled to share in, or they withhold the majority of them because artists aren't
entitled to payments until the label has made back the bloated costs of their recordings.

Pandora, on the other hand, pays their royalties to a government-appointed organization called SoundExchange, which then distributes half to the labels,
and half to the performers on the record. The fact that Pandora’s payments circumvent label accounting departments is a multi-million dollar-sized thorn in
the side of the majors. While major rights holders lobby against lowering the compulsory rates, behind closed doors, they would gladly accept a reduced
rate of 80%, as long as it flows through their accounting departments, instead of getting only 50% from SoundExchange.

Lobbying for Internet Radio Fairness Act is Lobbying for Artists

If companies can’t make the compulsory licenses work, most will sit down at approximately four negotiating tables, representing the bulk of popular music.
They’ll be offered better rates for playing the content provided by this group than other groups, and they’ll be given further breaks if they play the
specific artists the labels tell them to. This means less airtime for independent labels, less choice for consumers, fewer artists sharing in the royalty
pie, and so on. Once again, financial incentives will dictate what you hear on the radio, not consumer demand.

Since Pandora started lobbying publicly to level their playing field, many artists, small labels, and advocates have been up in arms demanding they
continue paying “fair” rates. The Recording Academy is using politically-charged language, calling the bill a Pandora "bailout", accusing them of
deceptively naming it the "Internet Radio Fairness Act", and saying that it will increase Pandora's profits — and yet, Pandora has never had a profitable
year. The RIAA and other groups say these rates are good for artists, but I encourage artists and consumers to ask, when has the RIAA ever fought for
anything that was good for artists or consumers?

Lobbying for high rates seems like a pro-artist thing to do, but unsustainable rates force companies into making money-driven decisions about what content
they’ll play, and worst of all, will lead to an insurmountable obstacle between artists and their royalties. Consumers and artists should not buy into
politically-charged language that exaggerates the strength of an industry on its knees.

Bringing the current rates to a sustainable level creates a market where companies who pay artists can flourish, play a wider variety of artists than ever
before, and continue making their payments through a non-profit organization. There are dozens of companies waiting to get into Internet radio and add to
this massive revenue stream for artists, if only the rates are made sustainable. If you like choice and advocate for artists, if you want radio where
consumer demand dictates what we have access to, not royalty structures, support the Internet Radio Fairness Act.  Despite the fact that a reduction in
royalties only strengthens my biggest competitors, I believe it’s the right thing to do for artists and emerging music.

Editor's Note: Earbits does not rely on the compulsory licenses affected by the Internet Radio Fairness Act. Find more information about the legislation here

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62 Comments

  1. $.oo1 is too high!?!?!? If Pandora isn’t successful it’s not because they are paying the artists too much. It’s because they are incompetent at running a business.
    Furthermore, Pandora doesn’t pay ANY artist anything. Never has, never will. Pandora pays Soundexchange. And you, as an online streaming service, as in favor of this? Gee there’s a big shock, of course you want to pay us less, so you can pocket more. You think $.001 is too high. I think it’s too low. If you can’t pay, you either need to change your model or find another line of work.

  2. Noah, if you read the editors’ note, you would know that my company does not operate under those licenses. I will not benefit from a reduction in these rates, and a stronger Pandora is not in my interest. I honestly believe that finding a workable rate is the right thing for independent artists, which is all I care about.
    I would ask you to explain, with real math, why $.001 is the appropriate rate, and how come these “incompetent” businesses are so good at building massive companies with hundreds of employees and beautiful products, and yet not a single one of the internet radio companies has managed to make those rates work. Every other royalty structure for broadcasters is based on a fair percentage of revenue, while Pandora and others are beholden to a flat fee per stream that does not reflect the value of advertiser dollars online. If you have real data that suggests otherwise, I look forward to seeing it.

  3. Hahahahahahahahahahahahahahahhahahahahaha.
    help artists by slashing their pay 85%. that’s rich.
    haahahahahahahhaahhaha.
    Once again Hypebot give a platform to idiots shills and liars. Nice work Bruce. I hope your skyline agency artists know you are working hard to help pandora take money from their pockets.
    Also I’d like to know why The Sherman Act is in the bill. Why speficially it would prevent artists from speaking out collectively against direct licensing under threat of criminal prosecution under the sherman act. This bill parties like it’s 1894. If this bill is about rates someone explain to me why this is in the bill.

  4. From the Internet Radio Fucking of Artists act:
    Nothing in this paragraph shall be construed to permit any copyright owners of sound recordings acting jointly, or any common agent or collective representing such copyright owners, to take any action that would prohibit, interfere with, or impede direct licensing by copyright owners of sound recordings in competition with licensing by any common agent or collective, and any such action that affects interstate commerce shall be deemed a contract, combination or conspiracy in restraint of trade in violation of section 1 of the Sherman Act (15 U.S.C. 1).

  5. And why do we need a law for this?
    Let the “invisible hand” of the market regulate what royalties are paid, and how internet radio is financed.
    The only role government should have is enforcing contracts that two parties willing make with each other, not on dictating the terms of those contracts.

  6. PANDORITO is The NEW MUZAK.
    Good for grocery shopping, elevators and shopping mall window shopping. Perfect for the passive, unengaged listener.
    ABSOLUTE IMPERSONAL
    Unless you consider POINTING FINGERS and BLAMING OTHERS, while you go to the bank and deposit millions. Why not personally ask artists to come by the office and help themselves to some of those millions…instead of the pennies your paying them.
    It’s not the artist’s, labels, publisher’s, performance society’s fault PANDORITO can’t execute on a SUBSTANDARD LONGTERM business plan. Your existence is based on a bunch 1’s & 0’s.
    Maybe an identity change is in order: I think PICKPOCKET would be a more appropriate HANDLE for you and your fellow
    NERDS!

  7. I’m sorry, do you care to refute any of my points or is name calling the best argument we can expect from you? I mean, if we want to go that route we can talk about how you were an Advisor to the largest ponzi scheme in history, a company that has ripped off and fucked over thousands of small businesses. Maybe you want to refrain from talking about screwing the little guy in these discussions.
    The reason that clause is in the bill is to prevent anti-competitive practices like the ones that SoundExchange and A2IM are being sued for as we speak. What they did is illegal, and this clause is simply stating that it should continue to be illegal.

  8. Hey David – there needs to be a law for this because, if there were not some standard terms under which radio companies could play music, the cost and task of going out and securing rights directly for every single track that a station wants to play would be too burdensome for both the stations and the rights holders. So, the government says there should be a universal license they can operate under, and then they have the Copyright Royalty Board set the rate for using the content. The problem is, in this case, the rate has been set in a new way that isn’t sustainable.

  9. So it sounds like there is a demand for a “music wholesaler” who makes the deals with the artists, and then resales the rights to the music retailers.
    How is this fundamentally different from any other supply chain? There are many producers of corn, and many retailers of corn, but only a few wholesalers of corn. Does the govt have to set the price of corn? No, in fact there is an entire commodity market that has grown up to fill this need.
    To me this sounds exactly like what Adam Smith warned about in his seminal work “the wealth of nations” when referring to how successful businessmen (Pandora) would use their money to buy influence with the policy makers, to get a law passed to protect their business model from competition, which led Smith to say that the successful capitalist is capitalism’s worst enemy.

  10. By the way i’m not joking about the libel thing. The ball is in your court.
    Oh so now you are admitting that this will silence soundexchange a2im, artists unions any groups of copyright holders a band, two songwriters? for speaking out against direct deals.
    This is a violation of the first amendment. admit it.
    Alls soundexchange and a2im did was TALK. so you are basically a fascist liar.

  11. I apologize for any inference that you or Groupon have acted illegally. I should have refrained from responding to your personal attacks, and I will do so now and moving forward.

  12. Okay let’s have an honest discussion about where you get your money and whether you are really just a disinterested party trying to help musicians.
    1. Pandora bill has some goodies in there for CCIA which everyone knows is google.
    2. Googles modus operandi is to spread lots of money around to people who then write about things that represent their viewpoint.
    I’m not saying you are doing this however I do note that you have the following ex googlers listed as advisor/investors . it’s right on your webpage. http://www.earbits.com/play#station/pop
    Sean Knapp
    Avichal Garg
    You also have Dina Hellerstine from Yahoo Music. which Yes is a web broadcaster. I hear Dina is smart ad sensible. Ask her what that Sherman Act shit does. she’ll tell you this: It would muzzle and censor real people. My band could not make a public statement about direct licensing deals without getting sued by sirius clear channel etc etc.
    You also apparently raised money from Y Combinator. Geoff Ralston to be exact. as in LaLa Music. Which looked a lot like a Webcaster.
    “Ding ding ding ding we have a winner!”
    I find it incredibly deceptive to argue that you are are doing this on behalf of artists, when you are surrounded by, advised by and funded by people that have been and continue to be involved in webcasting.

  13. Wait a minute you ran ClassesUSA.com and LowerMyBills and you have the gall to accuse me of being involved in unethical businesses?
    How do you do that with a straight face?
    http://flaglerlive.com/8283/obama-mom-college-grant-scam/
    http://www.linkedin.com/in/joeyjflores
    Responsible for merger of LowerMyBills, ClassesUSA and Affiliate Fuel affiliate channels into a unified affiliate marketing team able to cross-sell major partners into multiple product verticals
    • Managed over $60MM in gross revenue with an average 35% gross margin
    • Responsible for web analytics, revenue reporting, monthly tri-company reconciliation and overall operations of the affiliate division
    • Performed due diligence on major affiliate partners for consideration of acquisition
    • Achieved 40+% growth year over year despite major decline in mortgage market and downsizing of affiliate related staff
    Joey has 3 recommendations (2 reports, 1 co-worker) including:
    3rd Lydia W., Sr. Account Manager, Experian Interactive Media
    3rd Joe A., Sr. Online Traffic Manager, ClassesUSA
    Director of Operations
    Affiliate Fuel/ClassesUSA.com
    March 2006 – August 2007 (1 year 6 months)
    • Direct supervisor of our Director of Business Development, Director of Sales and Director of Engineering (Management of a total 16 employees)
    • During tenure as Director of Operations, grew network from $17.2MM in FY06 to $25.8MM in FY07 (49% YOY) and was trending over $40MM in FY08
    • Launched “Host and Post” initiative ultimately responsible for over 30% of overall company revenue
    • Overhauled proprietary administration system for increased analytics, more accurate reporting and streamlined accounting process
    • Developed system to integrate reporting between ClassesUSA/AF
    Joey has 4 recommendations (2 reports, 1 co-worker, 1 client) including:
    3rd Michael P., Partner Manager, Experian Interactive Media (EIM)
    3rd Doug J., Vice President of Sales, ClassesUSA

  14. If music tracks are a commodity comparable to corn, then I’d like to trade the rights to a couple of these songs I just made with my ukelele for the licenses to some David Bowie songs plz.
    Or better yet, if we’re talking about the US government and US corn farmers, then I’ll actually go for one of those deals where I get paid to leave my fields fallow. Or where I can make high fructose corn syrup, or ethanol, and sell it in the US while benefiting from protectionist tariffs.

  15. Last comment. Bruce, It would be nice if you mentioned that sidewinder.fm is actually owned by Live Nation. You know that right Bruce? After all sidewinder is run by your former hypebot writer. A little due diligence would be good.
    This whole Pandora radio backed internet fairness bill has been portrayed as “poor little internet broadcaster against incumbent industry. This is a total lie. And you are complicit.
    This is actually the old incumbents of the business Clear Channel, NAB, Sirius, Live Nation plus Google (CCIA) going after the artists share of the pie.

  16. David,
    I will try to keep this simple. Our Advisors, hopefully as you were for Groupon, are just very smart people who have been kind enough to answer tough questions for us from time to time because they have tremendous experience at incredible companies. Some of them I have talked to fewer than 10 times, or met only once. I’m embarrassed now that any of these people, who have donated their time to help us bear the trials and tribulations of starting a company, would find their name on this site in such a juvenile discussion. They are the furthest people from having an agenda.
    If you want to have an honest discussion, here it is. I eat, sleep and breath working for artists, and I advocate for them consistently. My argument for reducing royalties is that it will create a strong internet radio market that will displace FM radio, where artists get paid nothing. That’s a good thing, and there are currently dozens of big companies that would be helping that transition along if it wasn’t impossible to turn a profit at the current rates. If royalties are manageable, these companies will be able to grow, pay billions of dollars to the industry, and play the music their customers most want. In that environment, I believe independent music will become much more prevalent, in addition to the market expanding. It will be better for consumers and will broaden the tail of the music industry.
    Pandora and Clear Channel getting bigger is not good for my business. I fight with them for listeners and the last thing I need is them having margins and marketing dollars that I don’t have. I questioned publishing this article as a result. Then I decided that if I truly believe supporting a sustainable rate is what’s best for independent musicians, sharing that idea with them was more important to me than worrying about a little competition, and I’m glad that Sidewinder and Hypebot could be an outlet for that.
    If you don’t agree with my hypothesis, and think that the rates are fair and equitable, and that keeping them is the best long term strategy, that’s your right. But just because we have different ideas about how to get to the best situation for artists doesn’t mean I have a hidden agenda, or that you need to be unprofessional or rude in communicating your thoughts. If you care to ask civilized questions, or make civilized statements, I would be interested to hear facts that you think invalidate my opinion.
    As for your rant below about ClassesUSA, that article is discussing something that happened 2 years ago. I left that company in 2008 and was in a completely different division, and building. Please stop with the paranoia.
    -Joey

  17. Interesting revelation. Definitely a bad look for Joey Flores.
    You know you could be so much more valuable to the music industry if you didn’t waste your time picking petty fights. You could have a much broader reach. As it is you make it way too easy for people to write you off.
    You might also want to clarify your involvement with Groupon somewhere. The incredible range of complaints by small business people regarding interactions with Groupon sales people says a lot about that company. I think the current stock price pretty much sums up how they’re now viewed.
    They were innovative but now they’re just an embarrassment. And that was pretty clear even before they went public.
    On the issue of posts about copyright on Hypebot, if you really want to see more coverage to your liking you might want to encourage competent writers to suggest guest posts.
    Bruce Warila has done some nice pieces but he certainly can’t do it all. I personally take a stance that’s a little different than most and some of which you’d agree with but I generally avoid those topics because the comments section becomes a hate pit and most commenters on the topic end up sounding like extremists of one sort or another. It ends up feeling like a waste of time so I now actually avoid sharing my perspective.
    But encouraging people to write interesting guest posts would be much more productive than being so rude about what Hypebot does get from guests especially when Bruce Houghton has treated you, at least in the comments, with a level of respect that I don’t think your behavior deserves.

  18. Didn’t see Joey Flores’ statements about when he worked with Experian Interactive Media.
    I guess he’s in a similar situation as David Lowery being associated with Groupon given how that’s played out.

  19. Now that’s interesting. It’s certainly the sort of thing that should be disclosed, especially on the sidewinder blog itself.
    Here’s the registration:
    http://who.godaddy.com/whois.aspx?domain=sidewinder.fm&prog_id=GoDaddy
    Interesting stuff. I used to do this kind of thing in terms of revealing such connections back when I was in hip hop media. But it just became fodder for gossip for the most part.
    Humans’ desire for justice is a lot weaker than their desire to talk shit and party.

  20. Despite the ignorance and name-calling displayed in the comments to this article, Mr Flores has composed the most thoughtful and accurate coverage to date on this sensitive and important subject.
    From the Hot-Seat, Tom McAlevey
    CEO, Radical.FM

  21. What angers me is changing the rules mid-stream to accommodate a private corporation’s need for profit.
    Pandora knew the royalty rates going in (and certainly before they dumped all their stock on the public).
    They built a huge audience using a business model that doesn’t work (much easier than building a huge audience off a model that does work). And the founder has somehow even reaped millions of dollars for achieving this so-called accomplishment.
    And now they want to be rewarded for building this terrible business by having the laws changed to make their business profitable.
    How would this be fair to every other small business in America that built their business within the existing rules/laws? Why would congress think that internet music streaming is on such a ‘critical path’ for our country’s national security to give a crap about stepping in and making an exception for Pandora? I mean seriously, I think that congress has much bigger fish to fry right now.
    The free market will take care of this issue and should be allowed to do so.

  22. I just bought a new car but turns out I can’t afford my payments. I’ve lobbied congress to change the income tax laws for me so that I can be ‘profitable’ and afford my car. Does this sound reasonable?

  23. I understand your sentiment, but you have to remember that the major labels have a monopoly on the content necessary to building a mainstream broadcasting company. My argument is that, if you leave it to the “free market”, which is pretty much at the mercy of four companies, they always find a way to work artists and independents out of the royalty pie. I, for one, would like to see there be a manageable compulsory rate so that Internet broadcasters don’t have to seek direct licensing arrangements with companies who have historically been bad partners for artists. The government is already involved in this process, and the situation as is will not just destroy Pandora, but has made it impossible for ANY Internet radio company to keep the lights on. Other than “keep the rates as high as possible”, there really isn’t much of an argument for the rates being what they are. They’re not this high for any other type of broadcaster, and what good are they as compulsory rates if you can’t build a reasonable broadcasting company under their terms? Fix the rates, let Internet radio become the many billion dollar market it should be, distribute those royalties more effectively, and you have an unprecedented opportunity for independent artists. Again, I understand if others think there is a different path to getting there.

  24. Yeah, Clyde, despite David’s efforts to paint me as an evil person, this is not a bad look for me. I ran business development for a startup that helped 3rd party advertisers connect with 3rd party publishers. We empowered hundreds of small businesses and individuals. We were purchased by Experian and merged with two other companies. While they used cheesy dancing alien ads to promote in-house properties and took a massive hit during the mortgage crisis, I took the 3rd party portion of their business into mine to manage. We never made our own ads or came up with ad copy, nor did they do anything like that article implies while I was there. I grew my division from $19M to $48M in two years, while taking over another $12M from the two sister companies. I didn’t particularly care for the culture there, so I left. Just months later, they shut down my division because they didn’t know how to operate this completely different business. I couldn’t be more proud of what my team and I accomplished in building a company from nothing, to being acquired, to growing in a recession. I aim to use this experience in building another marketplace that helps artists this time. It’s a shame that David can’t just accept that someone might have artists’ best interests in mind, and still hold a different opinion than him on how best to achieve it.

  25. If the majors have a monopoly, shouldn’t we be lobbying our government to break it up and expecting them to do so? Seems to me that this is the crux of the issue, no?
    Without major label monopoly, would we be having this discussion? I assume we would not. The market would then dictate the terms of all deals.

  26. A question from a fan that doesn’t understand the music business at all. If Pandora were forced to negotiate with the major record labels to come up with different rates – but for everyone NOT under a major label contract – wouldn’t that be better for those artists aka Indie artists? I mean if an artist isn’t on a major record label – Pandora would still have to pay them the performance rates wouldn’t they? Or is the thinking that Pandora would just stop playing anyone that wasn’t on a major record label? If that’s the case then I guess everyone wins ….. Pandora pays less ……… Indie artists get nothing – zero revenue – zero exposure ….. not sure that is really a win. If you are a smaller artist isn’t the goal to try to get as many people listening to you as possible so that they will go and spend money on your stuff?
    What about an artist subscription service? If an artist sees value in being on the streaming service for the exposure – great pay $1 a month to be there. If you don’t think it’s valuable then don’t do it and just focus on the other methods to get your music out there. Then the streaming services can focus on negotiating with the major labels to get the content from their artists.
    As it stands now – an artist doesn’t “have” to have their music on a streaming service do they? Can’t they “opt out” for lack of a better phrase? Isn’t that what Taylor Swift just did? So if it is optional and you don’t like the system – can’t you just choose not to participate? I would think with all of the other means of getting your music out there you could pick something else that is better for you.
    I am probably mis understanding a chunk of the issue.

  27. Technically, they won’t be seen as a monopoly. In fact, the merger of two of them is already being approved.
    The best way to displace this monopoly is to keep empowering the independent and unsigned markets, and keep building services that make the major labels unnecessary even for superstars. There really is no need for them in the future of music, unless they start contributing something better.

  28. Really? here’s my coverage of the actual language of the bill. http://thetrichordist.com/2012/11/08/irfa-section-5
    muzzles any group of artists.
    Where is his “thoughtful and accurate” coverage.
    did he cover why this bill will fire the copyright judges? no. Did he cover why the sherman act is in the bill? no. Did he disclose his financial ties? no.
    the freedom of speech issue is gonna kill this bill.
    Have you web broadcaster really thought this through? this could be your sopa. that is you get your asses handed to you and then you have to come back and negotiate with artists and songwriters groups who now have a lot of ill will towards you.

  29. Okay Earbits. Have you disclosed to these people here that you are a Pay to Play service? You are helping artists by asking them to pay legal payola to your service. How is that helping artists?
    Does irving azoff know what you guys are up to over there at http://www.sidewinder.fm? the think tank part that he is apparently funding?

  30. I never worked for LowerMyBills. I worked for Experian marketing 3rd party advertisers only. I don’t know a thing about the mortgage business and there is no sordid past. I’m done humoring you.

  31. We are a direct-to-fan platform with the same bells and whistles as other artist marketing platforms, except that we provide a compelling consumer experience that brings the audience to our artists instead of asking them to run around tweeting about themselves. This format rewards artists with great music, instead of the ones who make the most noise online. You want to know how it helps our artists, ask them. You have no idea how many emails we get from artists thanking us for building something that works, that does not take up their time, and that gets their music heard. 80% of our artists have never spent a dime on Earbits, and we’ve generated tens of thousands of contactable fans for them. I see no reason why a artist marketing platform suddenly becomes worse because it actually attracts its own consumers. I’m sorry that you prefer the models of old and don’t understand that the Internet has opened up new possibilities for serving unsigned and independent artist better.

  32. Like it or not clyde I have a much broader reach than you think. Calling out shills and actually standing up for artists goes a lot farther than you think. And it’s certainly a more rewarding activity than being apologists for corporations that rip off artists. Why do I get asked to testify before congress?
    Did you see our little campaign against http://www.filestube.com? when we started there was advertising for major brands all over that site. we publicized and shamed brands and ad networks off that site. including google. now filestube is mostly russian brides and mackeeper software. If we could push major networks and brands off all the illegal sites it would help everyone. artists and webcasters alike.
    How? streaming because the sites are ad supported and they are having to compete with illegal competitors for advertising. It also helps artists cause streaming revenue is based overall income. This pushes up revenue for streaming which in turn pushes up revenue for artists.
    You guys don’t see the big picture. You’ve run so many articles critical of what I do why the fuck am I supposed to be polite to you? It’s a two way street.
    And this grudge you have against me goes all the way back to when CVB crowdfunded our SXSW appearances? Remember that? you were critical of that back then. Now all we hear from you guys is how crowdfunding will save the music business.
    You want respect? You’ve never shown it to me.

  33. Hey Allie,
    These are all very valid questions.
    Taylor Swift can opt out of Spotify because it is an on-demand service where people can play the specific song they want to hear anytime. There are no blanket licenses that let companies run a service like Spotify, so Spotify has to get permission from the owners of the music. Some artists have the power to hold a recording back from being used on these services.
    Pandora, on the other hand, operates under licenses that say they can play any song they want as long as they mix it with other music, do not play it too frequently, do not let users access it on-demand, and so on. There are restrictions for how they may use it, and pre-determined rates they must pay. If they play by those rules then they can play whatever they want and artists can not opt out of that, to the best of my knowledge.
    The rates that Pandora and other Internet radio companies pay are higher than any other broadcaster, such as FM radio or satellite. These rates are so high that no company, Pandora, Last.fm, Clear Channel, and so on, has been able to build a profitable business around them. Some people believe that these companies aren’t doing a good enough job to earn revenue and that it is not fair to penalize artists by reducing the rates so that these companies can make money. I and others believe the rates are simply too high, and that if you give these companies more affordable rates, they’ll grow far larger than they are and contribute way more money to the industry.
    The point of my article is that if we do not make the rates more affordable, Pandora will have no choice but to try and get cheaper rates from the major labels, and nearly anytime a company is in direct license with the labels, other artists get played less, and get paid less. Even the artists on the major labels will most likely see far less revenue if Pandora is forced to work with the major labels directly, since the label often holds up their payments.
    It’s all quite complicated, but the result is that it’s just not a healthy industry, and nobody is winning right now. It’s unfortunate but the entire industry is made up of groups trying to squeeze as much out of everybody as possible, instead of looking for ways to create mutual value for each other as partners.
    I hope that helps. Thanks for the question.
    -Joey

  34. Some of this is about me and some of this doesn’t have anything to do with me.
    I didn’t know you appeared before Congress. That’s great. Your reach is broader than I realized.
    But you’re still going to be just a footnote in music history.
    And that’s the last thing I’m ever going to say to you.

  35. I’ve known Joey Flores personally for over 3 years now, and I’d like to go on record as saying that this man is salt of the earth. It was precisely because of his desire to make a positive difference in the music biz that he left what would have been a promising, lucrative, and frankly easier career in the performance/affiliate marketing space.
    Also I’m happy to put a succinct end to this conversation, with science: it is physically impossible for anyone with dreadlocks longer than 3 feet to ever do anything that could hurt the music industry. Q.E.D.

  36. libel ?
    lol, you do realize the defamatory nature of implying someone is an idiot, shill or liar, right genius ?

  37. hahah, Clyde thanks for the chuckle.
    David, you sure like to throw libel threats around a lot. can you explain how calling people shill liars is not libelous and defamatory ?

  38. Are you aware this if from a compulsory license, where the labels and artists are mandated by Congress to give away their work at the rate set by a board. There is no monopoly control, it is the highest form of regulation you can imagine, much more so than anything in antitrust law. It is price setting by the government. Thats a compulsory license. So what are you talking about?
    Are you also aware that this license MANDATES that all such payments are limited to 50% to the copyright owner which might be, but isn’t always, the label. The rest goes to performers (50%!!).

  39. “To me this sounds exactly like what Adam Smith warned about in his seminal work “the wealth of nations” when referring to how successful businessmen (Pandora) would use their money to buy influence with the policy makers, to get a law passed to protect their business model from competition, which led Smith to say that the successful capitalist is capitalism’s worst enemy.”
    had to be repeated

  40. Thanks, man! I’m an entertainer at heart.
    I just regret not having mentioned “lack of reading comprehension.” No wonder he’s just a lecturer!

  41. I find it disingenuous when you say they are mandated to “give away their work”, when the net broadcaster licenses have so many restrictions about how the music can be used that make it almost impossible to hear the song you want when you want to. I also don’t know any artists who don’t want to be on the radio.
    And, yes, I am aware that half the payment goes to artists, which is great. That’s why I’m advocating that the compulsory licenses need to be usable, so that the 50% continues to flow to artists instead of going through the major labels, who are notorious for keeping all of it.

  42. It’s not defamation in this case. Cause it’s true. And I’m not being a smart ass. Lying and shilling was duly exposed. Evidence was presented. The idiocy part is a given cause its the blogosphere.

  43. The monopoly issue is a massive, widespread problem and the government officials mostly don’t mind at all. (Yes, these mergers get approval, as required.)
    That is not the only kind of monopoly the 4 big (only, IMHO, in terms of anything worthy to me that I can’t do myself, shortly) labels have. No matter how many majors there are, there will be that dominance over “car” radio, TV, Grammy’s (well hopefully not in light of recent events) etc.

  44. No. Without it, artists would usually (these days, yes, not just sometimes) get paid nothing. Big and small.
    Do you truly believe in a model with more money going to labels than artists?????! Your apparent outrage at the ARTIST getting half is outrageous. Whaat?

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