Music Business

Ex-Pandora Staffer, Musician Jonathan Segel Warns Against “Pandora Groupthink”


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Jonathan Segel 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

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.

image from d13pix9kaak6wt.cloudfront.netPink 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.”

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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.

Jonathan Segal blogs here.

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10 Comments

  1. The real problem isn’t the obfuscation of master v. performance v. publishing royalties and resulting confusion that ensues when the sophisticated parties involved tailor their message for mass effect.
    The real issue that needs addressed is all the middlemen taking a cut that are not adding value. Pandora shouldn’t have to raise rates so that middlemen can take a larger amount (based on percentage) and allow the rest to trickle down to David. It would be great if all the legacy contracts and mechanisms could be undone (or redone) and artists were freed up to take more control over their rights. Wishful thinking, I know, but for artists like David – who’s most relevant work is, let’s be honest, likely behind him – the evolving business models will be of little benefit without a massive do-over of the licensing schemes.

  2. Tell that to Zoe Keating… LOL… She has no middlemen, and actually at this point in his career neither does David Lowery… or, Blake Morgan… Hmmmm…
    You know, Blake Morgan the indie artists who traded emails with Tim Westergren.
    Try again please.

  3. I have still blown away what so few people have talked about the totiality of the bill that Pandor’s hi fultin lobbyist tried to sneak through under the banner of fairness….specifically Sec 5 of the Internet Radio Fairness Act.
    EC. 5. PROMOTION OF A COMPETITIVE MARKETPLACE. (a) Limitation Of Antitrust Exemptions.— (1) EPHEMERAL RECORDINGS.—Section 112(e)(2) of title 17, United States Code, is amended— (A) by inserting “, on a nonexclusive basis,” after “common agents”; and (B) by adding at the end the following: “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).”. (2) DIGITAL SOUND RECORDING PERFORMANCES.—Section 114(e) of title 17, United States Code, is amended by adding at the end the following: “(3) Nothing in this subsection 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).
    I know that some will also think that an artists IP is some how different that a software developers IP or even a Multi-National Corporations. And will ignore the fact that in developed nations the US stands alone in not compensating creators for their own property… However, how in the world and anyone defend Pandora for invoking the Sherman Anti Trust Act against any and all competitors is just UNAMERICAN.

  4. Every one of the collection societies is an inefficient middleman at this point. Admirable as musicians like Zoe, David and Blake are, they still produce music of little commercial value and thus the current license collection/reporting mechanisms don’t work well for them.

  5. Today’s industry ain’t much different than the one 30 years ago. Hit it out of the park, or go home and get a real job. Truth is there’s never been much money in music but for the top charters (and touring machines). Only thing different is now anyone has a shot.

  6. First off, it’s “SEGEL”, not Segal… like that young actor?
    Anyway, I don’t know what you (Todd) mean by ‘most relevant’ work, but having just made a new Camper Van Beethoven record with David this year, I think it’s our best and most relevant.
    If you mean strictly in terms of sales, then pretty much all artists have their most relevant work behind them. It’s sad to think of relevancy strictly in terms of sales, as that means that the most hyped pop dreck is the most relevant art we have for any time period. That can’t be right!

  7. This article like most on this topic is a panoply of drivel- at least the Degusta piece was factual and offered reasonable context. Segel and others act like there is some a priori amount that artists, songwriters etc are entitled to. There is not such a thing. Or at least infer that the right rate of compensation should always be anchored higher – that $17 is too low. Why? The real answer of course is that which one can negotiate and/or that which the market can bear. Well on the first of these the BMIs of the world appear to be doing a real shitty job and Pandora gets singled out because their is a high number of spins (1:1 vs the uncomparable 1:10,000 on radio / Siri etc ) in any case one doesn’t blame the buying agent of a house you are selling if the price the house sold for is low- you blame the selling agent and yourself- the buying agent acted perfectly as you’d expect. So stop complaining and negotiate better. The problem is consumers no longer pay for music – the stats are clear- the market bears increasingly less. So it’s time for this word of piss poor business people to come up with a new model; Adapt or be swallowed up. And a good first step in this regard is to stop feeling entitled to royalties on intellectual property that is 20 years old… Even the USPO limits this – music rights should be limited too.

  8. @Menlo you are totally correct, naaaa just kidding. The problem that you seem to be unaware or just not wanted to connect to is that Pandora and others went to Congress and used an act of law to compel property holders into a relationship that had not previously existed. Since Willing Buyer/ Willing Seller is the typical way someone that owns IP has negotiated the use of their property. Do you or anyone else out there think that we should let Congress set the rate of pay we all make.
    As well you’re also incorrect about people not paying for music since most fans seem to want to have music in their life and they know that supporting the artists is the only way to make that happen. Besides only an asshat is still stealing music and calling it innovation.

  9. I’m a journalist. Music—like visual art, journalism, fiction, poetry—is now a glamour industry. Your final paragraph is exactly what everyone has been saying about the journalism industry for years. To pretend that music isn’t a glamour industry—to think that most people in it can make a solid living—is simply nostalgic. Buck up. Find an alternative to the current business model.

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