I’m a Former Pandora Employee. And I’m Here to Defend David Lowery…

Not only is Jonathan Segel a former Pandora employee, but he’s also a bandmate of David Lowery in Camper Van Beethoven.  Welcome to a classic case of competing loyalties: Segel has considerable financial assets and savings tied up in Pandora, though he’s squarely siding with Lowery in this piece.

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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.’ 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 good 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.
Image by jlwelsh (@flickr), licensed under Creative Commons Attribution 2.0 Generic. Article reprinted from the author’s WordPress blog under the direct permission of the author.

28 Responses

    • Tune Hunter

      Do not call Pandora like that!

      They will be one of the saviors of the music industry.

      We are 12 months away from Pandora getting paid for playing the good staff.

  1. jw

    Degusta does an admirable job at painting in the rest of the picture with estimates. Segal suggests that estimates are irrelevant & obfuscative, & I don’t buy that.

    To really follow that line of thought to it’s obvious conclusion, you can’t say that Pandora’s broadcast royalty payouts are objective “low” without fairly comparing them to radio. The “same period of time” argument is total bullshit, & is intentionally misleading.

    The point, again, is that broadcast royalties are extremely low on internet radio.

    This is never qualified. It’s just taken for granted.

    The bottom line is that, if any of us are going to be arguing about what is & isn’t fair, we need to know what the average numbers for these terrestrial stations are so that we can make ear-to-ear comparisons. However, I’m inclined to think that Degusta’s 10,000 listener estimate is conservative. But that’s just a hunch.

    This essentially boils down to Segel says Pandora’s payouts are low based on what he believes to be the per ear broadcast rate is on terrestrial plays & Segel thinks they’re fair based on what he believes to be the per ear broadcast rate on terrestrial plays.

    • jw

      That last Segel is supposed to be Degusta. Obviously. Typo.

    • morningcoffee

      Yes, exactly.

      You, former Pandora Employee, are free to opine that overall royalties are too low.

      But Pandora pays more than radio (and has much higher costs of delivery).

      And the rates were set by law, many many years ago.

      Saying that Pandora, as a public company, wants to make money is also not a smoking gun. After all, you are insisting that artists are right to sue, withhold their music, demand a change in laws to make money.

      As someone once said, where you stand on an issue too often depends on where you sit.

      • Jonathan Segel

        A couple more things. One is, why should the artists care whether the company is actually making money or not? That’s not their problem. This is a company based on music, the price of music is the question. I’d be all for non-profit radio, or break-even radio, or state-funding… oh wait that’s socialism, help!

        Pandora does not really “pay more than radio” despite higher delivery costs. Remember, AM/FM, pays almost a cent per play, that works out to more money to the writers regardless of how many plays you get on net radio (so say my royalty statements anyway, and I’m not even in Cracker, just a cult-80s band.)

        Again, though, comparing the two means you have to have some way of comparing how many listeners per play, etc… it’s not really doable. What’s doable is trying to get better rates. These rates were set post-DMCA finally in 2007 (I think it was? and they are low. I think.

        Lastly, witholding music is not an available course of action with non-on-demand broadcasting of any kind, it’s covered by a compulsory license: if it’s published and for sale anywhere in the US, they can broadcast it.

        • jw

          Again, though, comparing the two means you have to have some way of comparing how many listeners per play, etc… it’s not really doable. What’s doable is trying to get better rates.

          This is a deflection. And you’re assuming that rates NEED to be “better,” but not qualifying that.

          You’re probably right that getting exact numbers to compare isn’t really “doable,” however, breaking it down to something like “Did Lowery’s terrestrial radio plays likely reach more or less than 5,000 listeners per play?” is totaly reasonable.

          Without making an educated judgment on that, there’s no suggesting that rates need to better. Otherwise you don’t have a leg to stand on.

    • Jonathan Segel

      Hey, Jonathan here responding (when I can).

      When I say that “broadcast royalties are extremely low on internet radio.” I mean that for a million+ plays, the whole payout was $40. That’s low. That’s a million+ plays to that many individuals. That seems low to me.

      How else can I qualify that to make it understood? Again, the Broadcast royalty rate to writers from non-on-demand webcast radio is negotiated to be a percentage of their income, (at the moment) but we don’t actually know what that percentage is, nor how it’s distributed by the PROs. Seems to me that any way you slice it, $40 is low for a million people hearing the song.

      I hear you saying that Degusta’s numbers are more than fair, but I don’t see it. For one thing (and I admit that it is maybe beside the point) think about who and how people hear these forms of radio. Pandora is webcast, people individually listen while at work or whatever. AM/FM is broadcast, played in cars (to individuals) and general public in wherever. Terrestrial stations claim a listenership of millions of people in some areas, but how many are paying attention? I would argue that those listening to webcast are actually listening, most terrestrial clients are merely hearing the radio.

      That’s my assessment of the “per ear” payout. It’s like trying to compare apples and oranges, comparing broadcast to singlecast, though.

      • jw

        Appreciate the response.

        With all due respect, the “Pandora users are actually paying attention” argument is balogna. An ear is an ear, & there are two many variables on either side to suggest that some ears only partially count. The “ears” comparison should not be a weighted comparison.

        How do you qualify it? It’s easy.

        Lowery got paid $1,373 for 18,797 plays of Low on terrestrial radio and $16.89 for 1,159,000 plays of Low on Pandora. So the per play payout is 0.07304357078 for terrestrial radio & 0.0000145729 for Pandora. Since the Pandora payout is also the per listen payout (assumedly… this isn’t exactly the case, but for argument’s sake…), an even payout would suggest that each of those terrestrial plays were heard by, on average, 5,012 listeners (i.e. 0.0000145729 * 5,012 = 0.07304357078).

        Now I don’t have a lot of insight into what stations were playing the song, but that seems more than reasonable to me. The term “broadcast” implies one-to-many… a broadcast royalty for a one-to-one play, therefore, should be a fraction of what it is for a one-to-many play. And, in all honesty, I think 1/5,000 is generous.

        All of that said, I don’t really understand how you can call the Pandora payout low. In doing so, you seem to be, in my estimation (and this is mostly just a hunch, mind you), dramatically underestimating radio’s reach, & what artists really deserve for those plays.

        • jw

          Clarification: and overestimating what artists deserve for those plays.

          Also, bologna.

        • jw

          A few additional thoughts…

          People who are arguing that Pandora’s payouts are unfair seem to be having trouble understanding how Pandora & terrestrial payouts compare at scale. In simplest terms, whether you think that Pandora’s payment to Lowery is generous, fair, or unfair is defined by where which side you fall on the 1/5,000 number. Can anyone we get someone in radio to give us some averages for this type of thing? Major markets, aaa, college, etc.

          Of course I’m really just restating Degusta’s point, which you seem to have clearly missed when you read the article…

          For example, AM/FM paid him $1,373.78 for 18,797 spins. That’s 7.3 cents per spin. If only 10,000 listeners heard each spin, terrestrial radio is in fact paying just half the songwriter fee Pandora paid him per listener. And of course it’s likely to have been far more than 10,000 – even the intentionally miniscule South Dakota radio station Pandora just bought manages to average 18,000 listeners.

          This is, after all, referring to what’s being paid to Lowery as a songwriter, & not a performer, the way that your response spins it.

          • steveh

            When will Americans wake up to the fact that in all the major music markets apart from the USA terrestrial radio pays healthy performance fees to performers as well as to composer/songwriters?

            If we are talking about the future then the future has to be global.

            American terrestrial radio must eventually pay the same performance fees as radio in the rest of the world, and operations like Pandora have to raise artist payments and not cut them.

            From a global point of view if Pandora cannot give a fair shake to the creators of the music on which they base their busioness then they should be forced to shut down.

          • jw

            How is Pandora not giving artists a fair shake? Please explain that to me.

  2. hippydog

    one of the more interesting articles and almost nary a response..

    • smg77

      It’s an interesting article but I think certain artists (like Lowry) are shooting themselves in the foot. I know they would love to go back to the days where people payed $12-$15 dollars for a CD to get the one or two songs that they wanted but it just isn’t going to happen.

      Consumers *like* streaming services and I wish that instead of demonizing them and trying to kill them outright artists could find some way to work with them to improve the situation for everybody. Throwing hissy fits on the internet (while not as bad as suing grandmas for thousands of dollars) isn’t going to help.

      If streaming services end up shutting down people will just go back to pirating what they want.

    • Erin O'Keefe

      “Consumers *like* streaming services and I wish that instead of demonizing them and trying to kill them outright artists could find some way to work with them to improve the situation for everybody.”

      Arguing for fairer rates is trying to improve the situation for everybody. Pandora is getting a tongue-lashing because of the legislation they keep trying to pass through congress. Pandora is not playing fair in an already rigged game. There is a time-sensitive urgency to make the reality of the structure in place widely understood. Perhaps the only way to accomplish that is through sensational headlines and risking being called a few names. Starving dogs are much more likely to bite…

    • Isaac Waveski

      This is a rediculous statement about CDs. I never bought CDs to get ‘one or two songs’. I bought full albums by artists I liked. It is possible the music you bought only had one or two good songs on the whole album – maybe you just listened to the wrong album/artists?

      This stupid idea that people only want one or two songs rather than albums is right up there with the ‘digital utopia’ mantras like ‘artists need to concentrate on making money from merch and touring’ and ‘an album is just a business card’ etc. All of which are irrelevant for many artists.

      I know this is a sideline (in this thread) talking about the worth of an album rather than just releasing single songs but the above original statement is highly contentious.

  3. Jonathan Segel

    BTW: “Segel has considerable financial assets and savings tied up in Pandora”

    I wish! Really when I got fired I pretty much lost everything.

  4. david@indigoboom

    Look, guys and gals

    When Pink Floyd raises their voice you need to listen. Have some respect for your elders. These guys have no real skin in this. They are already safely home. That is why their voice bears weight. Take a minute and listen to ” Have a cigar”

    Cheers

    David

  5. Visitor

    This piece would have been better without the whole “herp derp there is too much people willing to make music out there” bullshit. That’s exactly the justification anti-artist people make to say that music doesn’t need to be a paid industry.

    • danwriter

      This point of view needs to be properly elucidated and this article ain’t doing it. I know what Segal is saying but his prose is so cluttered.

  6. BenT.

    Doesn’t Pandora realize that it’s destroying its brand with this crusade?

    • Casey

      Destroying it? They will already be destroyed if they stand still and do nothing. They can’t continue to lose money every quarter and expect to survive.

      • Visitor

        Casey, you’re smarter than this. Pandora is beholden to stockholders. THAT IS IT. Nobody else! Not even their own desires. After going public, it’s delusional for you to imply that there are any morals, ethics, or values at play. Every single thing they do post-IPO is for stockholders.

  7. KT

    With all this debate over royalty rates and what is fair…does any agree that it’s time for a new payment model?

    Why not keep it simple and have radio, webcasters etc cough up a % of their profits?!? Why ‘guess’ as to how many actual people are listening/hearing?

    – Radio pays artists a % of their advertising revenue divided by the amount of their songs played…

    – Internet based platforms pay artists on % of revenue divided by the amount of their songs streamed!

    Many may disagree but to me this seems a simple model that will benefit both artist and broadcaster.

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