Pandora Tries to Convince a Musician That He Isn’t Getting Screwed…

“Who you gonna believe, me or your own eyes?”

Groucho Chico Marx, Duck Soup, 1933.

Is Pandora really trying to pay musicians more?  Here are some choice snippets from an email exchange between Pandora founder Tim Westergren and musician Blake Morgan, who recently got a check for $1.62 on 27,900 plays on Pandora.  The full, rather lengthy exchange was published in its entirety by the Huffington Post, part of a growing level of scrutiny from more mainstream media outlets.

Email #1.

: Tim Westegren, founder, Pandora

To: All Musicians on Pandora

quotationmarksOver this past month we’ve had over a 1,000 conversations with independent musicians on Pandora. It’s been a very productive, and encouraging dialogue. One thing is crystal clear, there are large numbers of musicians who have not been part of the mainstream that have the talent and commitment to break through. And internet radio could be the difference.

Our goal is to make something truly useful — not just interesting or cosmetic.  Something that can materially impact the ability of artists to make a living. So stay tuned for that.

We really think there’s an opportunity here to change the course of the industry in a direction that will be far more inclusive and empowering for independent musicians.”

Response.

From: Blake Morgan

To: Tim Westergren

“I have to be blunt and honest in my reply.

I like Pandora, and have supported it.  However, this approach and idea that Pandora is intimately interested in the success of independent artists rings quite hollow –– especially from a policy standpoint –– when it’s put next to the reality of the so-called Internet Radio Fairness Act.

Representatives [Mel] Watt and [John] Conyers have gone so far as to re-name this bill humorously as the Paycheck Reduction Act. The AFL-CIO, NAACP, Americans for Tax Reform, the American Conservative Union, SoundExchange, and others all oppose this bill, and the supposition that Pandora should pay less to artists and songwriters in order to accomplish higher profitability.

So again, Tim, I support Pandora and would like to believe that you and your company have artists’ best interests at heart. Unfortunately, it’s difficult to stomach this supposition based on policy, and reality.”

Response Back.

From: Tim Westergren

To: Blake Morgan

quotationmarksUnfortunately, there’s been a lot of misinformation put out about our intentions. We have no desire to lower royalties dramatically. In fact, we’ve already expressed a willingness to consider a structure that would have our payments never go down from their existing levels.

We’re seeking a balanced structure that allows musicians to generously participate in the business, while also accelerating its growth. Every hour that moves from AM/FM to the web is good news for musicians, as AM/FM pays zero royalties to performers. There’s definitely a win-win to be had.”

Response Back.

From: Blake Morgan

To: Tim Westergren

quotationmarksWithout us, you don’t have a business.

The idea of “allowing” us to “participate” in a business that is built solely on distributing and circulating our copyrighted work is like a grocery store saying it has an idea to “allow” the manufacturers of the goods it carries to get paid. The store isn’t “allowing” Del Monte to get paid for their cans of green beans, right? Of course not.

So part of the argument Pandora has made in support of the so-called Internet Radio Fairness Act is that internet radio is a burgeoning and fragile medium that is, in fact, in danger of closing. That it’s an industry that needs a little boost right now, at its beginning, just to get going –– or it will collapse. Consequently, the Act proposes to reduce musicians’ royalties by up to 85% from the tiny amount they’re even paid now (although you say that you have “no desire to lower royalties dramatically,” it’s clearly stated in the bill).

But there’s a problem with this argument. I couldn’t help notice –– because it’s been so widely reported –– that you yourself earned a reported $13.9 million last year from cashing in stock options in your very own company, Pandora. Being wealthy and successful is certainly no crime, but I’m sure you can understand how to the objective and rational observer, it’s difficult to see you making a fortune on the one hand, while you and your company are pleading economic and industry hardship on the other.”

27 Responses

  1. Avatar
    Professor Rosse Forp

    Actually it was Chico Marx who said “Who are you going to believe, me or your own eyes?”.

      • Avatar
        Interocitor

        It is indeed Chico (disguised as Groucho/Firefly) who says “well who are going to believe, me, or your own eyes?” to Margaret Dumont/Mrs. Teasdale.

        Perhaps you should watch the film more closely.

      • Avatar
        timmmmmy

        Sorry to chime in, but it is Chico not Groucho. He is disguised as Groucho though. That might be where the confusion comes in.

  2. Avatar
    Jerry Woods

    This just pisses me off!!!!!! It’s just another example of the rich making their money off the backs of…the rest of us. You know – the other 99%

  3. Avatar
    Casey

    Again, Tim selling stocks and making a profit does not mean Pandora is making a profit. In fact it has little to do with the performance of Pandora. Pandora has been consistenly unprofitable or barely profitable. As with practically every internet radio webcaster.

    • Avatar
      Satan

      Yes and since asking congress to bail you out is really hitting bottom Tim is wisely cashing out as quick as possible.

      • Avatar
        Insider

        What other service – AM/FM radio or other internet radio service provider – has ANY awareness of, promotion for, or interest in new and unknown artists? I am not saying that the Internet Fairness… Act is a perfect solution. I am saying that I want Pandora to be profitable not because I care how many stock options Westergren has cashed in (hugely irrelevant), but because they are in the very unique (and VERY tenuous) position of having the largest percentage of internet radio listeners. At the moment…
        Further, if Pandora cannot be profitable (they are not, and have never been) they will cease to exist, especially while MAJOR players like Apple and Google have already made huge gains in negotiating lower rates for themselves prior to even launching a product in internet radio. Contrast that, please, with Pandora, which started from nothing and still somehow manages to put new music out there with zero profitability. They’re not a non-profit business, and they are basically operating as such on a temporary basis while they compete with I Heart Radio, owned by Clear Channel, and eventual competitors Apple and Google.
        New artists ONLY have Pandora representing their interests. Help them stay afloat simply by leveling the playing field (if you look at the fee structure it is not some huge/unfair reduction of rates) and they MIGHT have a minimal chance of staying in the game. Please also consider that their chance of succeeding is also challenged by the impending competition about to be posed by Apple and Google, companies whose profitability is not at all in doubt.
        Capitalism requires that companies are always expanding, on some level, in order to continue to exist. Pandora is currently (and has always been) NOT profitable. This does not bode well for them. Thus, helping to (barely, incrementally, minimally) level the playing the field with AM/FM, who pays artists 0% of profits, is going to help artists in the long run.
        Someone who is upset about their monthly royalties check (the person featured in the email exchange) is probably not the most logical or unbiased source for up-to-date information about the state of the industry, especially given that they seem unaware that they are receiving zero dollars per month from AM/FM radio.

        • Avatar
          Visitor

          I had read somewhere that Apple will be paying similar rates as Pandora.

          • Avatar
            Casey

            Apple is actively trying to pay half of what Pandora pays, and with “on-demand like” capabilities. Pandora is a non-interactive service.

        • Avatar
          Satan

          “Capitalism requires..”
          Yes, capitalism requires that you must generate enough revenue to cover costs or your business dies. If a business can’t do that in the free marketplace it should cease to exist, not ask congress to sqeeze their supplier so that it can compete with other businesses that control enough marketshare to negotiate lower prices thenselves.
          If Pandora wants to complain about Clear Channel or Google and Apple’s bargaining power and how that negatively impacts Pandora’s business model, then they need to speek to an antitrust attorney not ask congress to save their business.
          Please don’t bore me with a sob story about Pandora’s humble beginnings. And I am not even going to dignify this BS “New artists ONLY have Pandora representing their interests.” with a response.

        • Avatar
          Artistic Craft

          So perhaps it’s time they die. In my opinion Pandora shouldn’t be saved at the creators and roots expense.
          It seems eventually one side HAS to fall and it’s definitely wrong if that side will be the musicians because the fatcats up top aren’t making enough money to support their ‘capitalist’ business models syphoning money from the small guys.

        • Avatar
          Manager

          Couldn’t the playing field be leveled by having AM / FM radio pay a performance royalty for sound recordings? Like in every other first world country?

          • Avatar
            Noah Peterson

            The American Federation of Musicians has been pushing a bill to pay that performance right. It stalled in committee last session. We didn’t have the votes to get it through.
            What will really be interesting is when we get a reciprocal with the rest of the free and not-so-free world about broadcast royalties. The U.S. doesn’t pay foreign artists so guess what, most foreign countries don’t pay U.S. artists. Fortunately there has been some headway in changing that. But unless the performance royalty act passes, it’s not going to get things where they ought to be. And that be having the U.S. join the rest of the world in paying it’s artists.

            A couple of other things. For those who don’t keep up. FM radio advertising revenue is up. Something like a total of $6 Billion. If you think AM/FM is anything but the granddaddy king of media, you need to take a look around the rest of the country. Internet radio is shrinking, Satellite is respectable and climbing, ever so slowly. Subscription services? Well…let’s just say they come and go. And Itunes (Apple) pays a fine rate. Pandora – they cannot die soon enough. Talk about anti-free market asshats….congressionally mandated rates of .001 per stream. FYI – they WOULD be profitable if they didn’t pay out so many “bonuses.” Or if they would sell some ads. Even wallstreet doesn’t like these guys. That stock is the equivalent of a child molestor in prision – limited life span.

  4. Avatar
    menlo

    It’s hard to sympathize with the artists and labels over the past decade- the reality is they have taken a laughable and pathetic strategic path over the past decade plus, and now they cry when what ought be obvious to everyone else actually happens. Terrestrial radio pays that artist who receives $1.62 Pandora ZERO. Why? Because of the NAB lobby. Yet this conversation is not abou them. Moreover, the number one digital music platform in the world is YouTube- wanna know how much that artist received from them versus that $1.62? Likely nothing. Why do these artists/labels willingly upload their content to YouTube then? Because there is a perceived value that occurs when someone watches/listens.
    Stop crying artists. Just stop – it’s rather pathetic. Especially the digs at how much Pandora executives make- 270,000 plays is a lot of market awareness of your music. Because another music discovery option is always to strip down to your skivvies and play in Times square- hopefully you can earn more than $1.62 in your guitar case doing so.

    • Avatar
      steveh

      Unfortunately your comment is only applicable in the a-typical bubble that is the USA.
      In UK & Europe artists DO receive performance royalties from radio play.
      This is in addition to publishing performance royalties received by writer/composers.
      So for us across the pond it is very hard to understand why artists don’t get performance income from American radio.
      And also for us the arguments put forward by Pandora are bogus and pathetic.

      • Avatar
        Visitor

        Further to your point – Artists in the US do receive publishing royalties for AM/FM. Also, just because 1 platform cheats artists (labels have been fighing AM/FM for a long time), it doesn’t mean everyone should be able to take advantage. If anything, the fairness act should raise costs on other platforms.
        Youtube does pay for content once it’s been claimed by the master and publishing. Youtube ads pay for these royalties. And I guarentee you, if you’re constantly watching videos for an hour straight you will see much more than 1 ad per hour, which is why they’re profitable and Pandora isn’t. Pandora chooses to limit their ads, therefore choking their profitability.

    • Avatar
      davd c lowery

      Terrestrial radio does pay artists!!! Stop Lying Tim!
      Yes, because of a quirk in US history the Songwriters get paid for airplay, not the performer. Tim can say that there is no performer royalty and be technically sort of true, but it’s a total distortion. Often the songwriter and performer are the same.
      This is a distortion that westergren has pushed over and over again. Clearly Westergren does understand how royalties work, so this is actually demagoguery! But he has pushed this out there over and over again to his users to the point that people think it’s true.
      Now I agree Terrestrial Radio should pay performers as well as songwriter. Like the rest of the world does. That would be the “fair” thing to do, and Tim before he sold out used to support that position.

  5. Avatar
    Radio & Records Vet

    The reason why American radio does not pay a performance royalty is because when the original rates were passed musicians played live, or if on record were paid a contract rate to perform on that recording, with no residual royalty thereafter.
    It was the songwriters who were not getting paid, so the PROs like ASCAP and BMI were created to collect and pay the songwriter royalities … not at all unlike how theatrical plays are licensed where the owner of the copyrights is compensated in fair market value for the rights to perform that play.

    Musicians greatly abuse the copyright laws in this country… cover bands perform music they are not licensed to perform- on the expectation that the performing venue or agent will pay those performance royalty rates.

    The entire thing needs to be redone from the ground up.

    To the original protester .. please take your music offline. Please. Take your music to cable tv, movies, and tv programs… and make sure you sign up with BMI so you get your songwriter royalities.

    I own an internet radio station using an online radio broadcast provider… 50% of the cost of doing business is royalties… so if I make $10000 it costs me $5000.. on which then I need to pay all other operating costs and taxes.
    I may play a track 1000 times… you might make 1cent. But in the aggregate, I am paying $5000, regardless of how many times I play your track. I have over 500 tracks programmed on any given day … you do the math 😉
    Don’t blame Pandora. Blame Congress.

    • Avatar
      Bandit

      I am sure the original protester would say..please get the hell out of the internet radio business if it so hard to make a buck. Please. Use your site to sell t-shirts or porn.
      And how exactly does someone “abuse” a law?

    • Avatar
      Bandit

      Also it is my understanding that it was not the musicians that pushed for the digital performance royalty, it was the copyright holders i.e. major labels who recorded these musicians that wanted a piece of the new digital music distribution market.
      So you might want to focus your anger on those who pushed for these laws and not the performers

  6. Avatar
    Casey

    Pandora would have paid at least $33.48 for 27,900 plays (more if some of those plays were on Pandora One). If he only got paid $1.62, someone is screwing him but it isn’t Pandora.

  7. Avatar
    Anonymous

    Well, while grocery stores do pay their suppliers, do bear in mind that shelf space works on a payola-like model, with the suppliers of grocery items paying to get shelf space and preferential placement.
    And I can’t say I have a lot of sympathy for Morgan; lots of works-related businesses don’t pay authors. Wasn’t it Garth Brooks who was so pissed off that record stores would dare to sell used CDs? When authors go on strike and no one is making movies, or TV shows, or music, or books, or software, or fine artwork, etc. then I’ll agree that there’s a serious problem. Until then this sounds like the complaints of someone who gets shafted yet never does anything to help themselves in the future.

  8. Avatar
    Dalton Priddy

    When creatives leave their arts for others to manage they should expect to be ripped off. What has ASCAP or BMI or any of the labels done to halt the slaughter of the recording arts?
    Just look at Googles YouTube, Vimeo, Facebook, Pandora, Apple’s early launch of the iPod where most of the content came from pirated downloads. Those companies combined have a market value of over a Trillion dollars….that’s (1000)thousand billion.
    Those media devices and content hosting sites didn’t get there by creating their own..no…they used other peoples creative content. Looking the other way allowed the sharks to feast on those who where ignorant of the coming Internet monopolies.

  9. Avatar
    Devil's Advocate

    How much would a songwriter make in royalties if his song is played once on terrestrial radio for an audience of 28k people? Same reach…