Pandora’s CFO Says Spotify “Isn’t Doing Well” and Its “Financials Aren’t Pretty”

potkettleblack

So, which streaming service is more completely corrupt?  Let’s see: Spotify pays outrageous ransoms to the major labels, while brutally stiffing artists in the process.  Pandora, meanwhile, is benefitting from the royalty equivalent of food stamps, and spending millions lobbying Congress for even better handouts (all while taking tens of millions home in personal compensation, and telling artists they’re trying to pay them more).

Tough call, though at least Spotify isn’t asking the government for help.  Which, according to incoming Pandora CFO Michael Herring, means they probably won’t make it.  In a recent interview with C|Net, Herring explained that without serious government handouts, Pandora probably wouldn’t be able to last in this ‘brutal’ music market.  “We have 70-plus percent internet radio market share in part because we have a great product, and in part because it is incredibly, brutally hard to compete in this market where the costs are so high,” Herring explained.

It took someone, frankly, with a lot of cash in the bank and a big income statement like Apple to finally launch a competing service.

Pandora’s financial situation remains wildly unprofitable, though Spotify is hemorrhaging dangerous levels of cash and is almost out of funding.  Which, according to Herring, is the result of being directly exposed to that ‘brutal music market’ of free market negotiation.  “What we’re trying to do in Australia and New Zealand is not just open up a market that has a lot of potential, but prove to the world that Pandora’s entrance into the market with the right rates structures is incredibly positive for the music industry in that region,” Herring noted, while pointing to a far lower rate structure Down Under.

People who have direct deals that are operating internationally are not doing well. Go pull Spotify’s financials from last year. It’s not pretty.

US-based publishers have recently been disallowed by a federal court judge from making direct deals with Pandora, thanks to an expensive legal counter-attack from the streaming radio provider.  Similarly, record labels are legally-mandated to charge specific, non-interactive rates as determine by a Copyright Tribunal in Washington, DC.

 

Written while listening to American Authors on iTunes Radio.

56 Responses

  1. comababy

    Can you elaborate more on your first sentence? Spotify pays the labels a kings ransom and stiffs the artists? Don’t the majors own the masters? Did I miss something?

    • Steve Jobs

      Apple pays around 70% of its iTunes revenue to labels/artists.

      Why shouldn’t Pandora pay 70% of its revenues to labels/artists?

      • jw

        10% more isn’t going to make any of the detractors happy. That has nothing to do with it.

        But aside from that, Pandora has to generate revenue through advertising, Apple doesn’t. There’s very different costs associated with digital downloads versus streaming radio. Not to mention that Apple makes its profits off of hardware, & doesn’t need the margins that Pandora does. It’s just not that simple.

  2. jw

    C’mon, Paul. This is complete bullshit. It’s one thing to say that Pandora’s payouts aren’t “fair,” & to argue that it’s ultimately subjective, despite it’s very, very, very favorable comparison to established terrestrial radio rates. Accusing it of being corrupt is something entirely different, & is very irresponsible journalism. Furthermore, suggesting that Spotify is corrupt for a payout structure that the labels defined is also very irresponsible. Spotify isn’t stiffing artists, that’s the labels. These are anti-technology comments that are ultimately destructive to the industry.

    You’re setting up no-win scenarios left & right that rely on antiquated ideas of ownership that, ideals aside, just aren’t going to make very much money in the future. The only way for you to be happy with Pandora’s payouts, the service would have to 1) remove the majority of artists from its database in order to concentrate payouts to a handful of elite songwriters (just like terrestrial radio) which would undermine the very point of the service & alienate listeners, 2) pay out even more to performers/songwriters, effectively bankrupting itself overnight, or 3) grow at a rate that they, again, can’t afford, bankrupting itself. What good does it do anyone to simply set up Pandora to fail? Are people all of the sudden going to start purchasing more digital downloads? I seriously doubt it. And if Spotify had continued it’s multi-year negotiations with the labels, what was their option? To continue to stay out of the U.S.? Would that have prevented the continual shrinkage of the industry?

    If the industry wants to do anything but keep shrinking, at some point it’s going to have to start concerning itself with balance. And it’s going to have to learn to see the bigger picture.

    • Paul Resnikoff

      jw
      go look up the definition of corruption.
      Then get back to me.

      • jw

        I know the definition of corruption. Each and every DMN reader knows the definition of corruption. And that’s what makes your allegations so important.

        Your complaints about Pandora executives cashing out their stock are red herrings. That money would’ve never made its way to artists, & it’s misleading for you to write about it as if it’s money out artists’ pockets. Their cashing out is perfectly legal & fair. The truth is that roughly $10m/yr goes to executive salaries, & that’s a drop in the bucket that, spread out across all of the artists Pandora plays, wouldn’t change anyone’s opinion of the rate. Sure, they’re overpaid, just like the guys @ the RIAA are overpaid, the executives at major labels & publishing houses are overpaid… executives all over the plays are over fucking paid. But if an artist or songwriter is suffering unjustly, it’s less Westergren’s fault than it is the guys @ the labels & publishing houses. Essentially, Pandora is no more corrupt than any corporation inherently is, & the way you treat tech companies compared to “music” companies is unfair (the truth is that they’re ALL middle men, only I see Pandora acting much more fairly to both artists & consumers than any of the other middle men).

        And as for Spotify, you’re holding them accountable for the sins of the labels. The labels are committing outright atrocities against their artists, & Spotify is left in a “take it or leave it” situation. What would you do in that situation, Paul?

        As a consumer, I see Spotify & Pandora as the only companies with a real chance at dragging the industry out of the shitty state it’s in. For the life of me I can’t figure out why those with a vested interest in the health of the recorded music industry, or those purporting to represent those with vested interests (I’m looking at you, Paul) are rooting against them.

        • Twerk THIS

          cor·rupt
          kəˈrəpt

          adjective
          1.
          having or showing a willingness to act dishonestly in return for money or personal gain.

          So you see it’s really simple

          Tim Westergren writing some emotional letter to artists lying to them that they are going to be making more money if they support him.

          Telling Congress that Pandora needs lower rates or they will die – lying to members of Congress – while carrying positive EBIDTA and taking $25MM home a year in stock only.

          Daniel Ek purposely negotiating insane deals with major labels that he knows will result in indies and artists getting stiffed. Then saying, well we pay the labels!

          Want more?

          • jw

            Tim Westergren writing some emotional letter to artists lying to them that they are going to be making more money if they support him.

            Westergren is a the CEO of a publicly traded company, & so he’s only allowed to be so candid. I wish that he would clear up problems related to artists’ expectations, but he it doesn’t flatter to company to say, “Our reach is actually much shorter than you think.” I’m not sure if you’re familiar with the exchange Westergren had with Blake Morgan over the summer. Blake was upset because his songs were played nearly 30,000 times on Pandora, & yet he was paid less than $2. Reaching 30,000 listeners via terrestrial radio means one or two plays a small/medium market that will net you a few cents. Compared to the reach of terrestrial radio, Pandora is still tiny. And yet their goal is to completely replace terrestrial radio. What does that require? For one, local advertising. Internet advertising is a joke, & localization is going to help fix that, but that takes a lot of infrastructure. Pandora needs capital to make that happen. Pandora wants to scale to reach the audience that artists seem to think it already reaches, but it can’t do that without capital. Could you imagine national radio payouts multiplying by 10x or 100x?

            Furthermore, if the powers that be within the recorded music industry had their way, the market would decide what artists get, & independent artists would be facing the same problem they face with Spotify, where they have no negotiating power & they just end up with the scraps after the major labels & publishers have had their spoils (typically at the expense of their own artists). Most certainly it would be less than what they are receiving by statutory mandate.

            Additionally, most artists getting played on Pandora get no terrestrial exposure. That means Pandora has created a new revenue stream for them. Which is to say without Pandora, money is getting left on the table.

            So yeah, in general, & specifically for independent artists, there’s more money in it if you support Pandora. They shouldn’t be allowed to pillage artists or anything, but clearly that’s not happening. This is an issue of context and scale that’s not being properly explained by Pandora’s side, though it’s not as if songwriters are, by & large, actually trying to understand anything beyond “more for me now” or “less for me now”.

            Telling Congress that Pandora needs lower rates or they will die – lying to members of Congress – while carrying positive EBIDTA and taking $25MM home a year in stock only.

            The take home is a red herring.

            Daniel Ek purposely negotiating insane deals with major labels that he knows will result in indies and artists getting stiffed. Then saying, well we pay the labels!

            Really? Purposely negotiating insane deals? lol.

        • Radio and Records Vet

          I see Spotify & Pandora as the only companies with a real chance at dragging the industry out of the shitty state it’s in.

          Why does it have to look like a “shitty state” of business?

          I know I’m just a small time operator grossing <100k a yr in revenue, but from my perspective there's a lot of business being done at all levels. It just boils down to perspective.

  3. JW IS OBVIOUSLY NEW HERE

    JW, i wont even waste more than what Im about to say to you here….. You have no f***ing idea what you’re talking about.

    Please go away,
    Signed the professional songwriters being stiffed.

    • GGG

      Are you actually an established songwriter that people care about (or care about the artists you write songs for) or are you another person with 400 facebook fans that think they should be making six figures off music?

    • jw

      I would actually love to have this conversation with you, voice of the professional songwriters being stiffed. I’m actually open to being proven wrong. I will give your arguments the benefit of the doubt, because you, as a songwriter, have more on the line than me, as an individual consumer (however, don’t get me wrong… I’m not saying that songwriters are empirically more important than consumers in the greater context, or vice versa).

      Here’s my question… on what basis are you getting stiffed?

      I contend that you aren’t. Here’s why. Pandora pays songwriters approx. 1/5000th per play of what terrestrial radio does. I’m making this comparison because 1) it’s a previously established “fair” payout, & 2) they serve up songs in a similar manner (which is to say “the radio way”, as opposed to streaming services where the user is fully in charge of what they’re listening to). Now a Pandora play, for the sake of argument, goes out to a single pair of ears. It’s connected to a single Pandora account, & is meant to be used on a “user” basis. That means that a single play is associated with a single pair of ears & a single pair of eyes being served a single ad. Now, radio, on the other hand, broadcasts to many. A single play is heard by many (potentially many, many more than 5,000, likely more than 5,000 in almost all cases), & subsequently so are the ads. This means that, per play, the value being created per advertisement for the advertisers is thousands times more for radio than it is Pandora. If a song is being broadcast to 10,000 listeners, Pandora is paying a double rate. If it’s broadcast to 100,000 people, Pandora is paying 20x. And that’s not even considering the performance royalty that Pandora pays out and terrestrial radio does not.

      Compounding the issue for songwriters is the variety of material that Pandora offers. Even if payout rates were equal (which, of course, they aren’t), a radio play is concentrated. Which is to say that a single radio play would be tantamount to 5,000 Pandora plays (again, supposing payouts were equal). Only radio is like 5,000 plays going to a single songwriter (for the sake of simplicity & clarity, let’s not bring co-writing into the debate) adding up to a few cents, whereas Pandora could potentially be sending fractions of cents to 5,000 different songwriters.

      So what you have is Pandora paying out premium payouts to both songwriters & performers, only it’s so widely distributed that songwriters & performers see the total, & see this misleading comparison of a “play” to a “play” & it seems like they’re getting gypped. Only the math says otherwise. Pandora’s PR problem, then, is that the quarterly reports present a “play” out of context, giving songwriters & performers an inflated sense of Pandora’s reach (and in turn an inflated sense of the value being created by each play), & then, due to the variety of songs played on Pandora compared to radio, the more cash it pays out in total, the more enemies it makes due to the lower total payouts belying the actual payout per play (which is to actually say per listen). In simpler terms, if you’re terrestrial radio, you can pay a lower rate to fewer songwriters & keep everyone happy because payout totals are high per songwriter, even though total payout is much lower. Pandora, on the other hand, is paying out a higher rate to more songwriters & pissing everyone off. Apparently if you aren’t getting mass (i.e. terrestrial) exposure, songwriters would rather just not get paid anything at all.

      It’s all a matter of context & scale.

      I’ll further contend that advertising on the internet is totally fucked up due to metrics & click-thru rates, & that it’s comparatively much harder to make an ad buck on the internet than on the radio, though radio is no picnic, either. This should skew the rates in radio’s favor, making Pandora’s more significant payouts even more generous.

      Now, in terms of Spotify, they negotiated with the major labels & for YEARS before officially launching in the U.S. That was money left on the table, & also put the U.S. years behind other countries in terms of streaming adoption. Had the delay not happened, premium streaming could potentially look much different than it does now (perhaps a little bit more like certain Scandinavian countries). There is no indication that Spotify set out to screw artists, but there is EVERY indication that the labels sought to look out for themselves & themselves only during the negotiations, leading to equity deals & upfront payments that do not trickle down to artists.

      Please enlighten me on any mistakes I’ve made in my argument, I look forward to hearing your response.

      • David

        The mistake you have made in your argument is to assume that the appropriate comparison is with terrestrial radio. As Pandora’s own publicity emphasises, it is NOT just an ordinary radio station – it serves up PERSONALIZED choices for each listener. It is functionally intermediate between ordinary radio and on-demand streaming. So go back to square one.

        • jw

          The mistake you have made in your argument is to assume that the appropriate comparison is with terrestrial radio. As Pandora’s own publicity emphasises, it is NOT just an ordinary radio station – it serves up PERSONALIZED choices for each listener. It is functionally intermediate between ordinary radio and on-demand streaming. So go back to square one.

          The “interactive radio” argument was formed by people who don’t know wtf they’re talking about. Here’s my take on it.

          To determine a fair payout, you have to determine what value is being created by a song being played, & where that value is derived. And when I say value, I’m talking about advertising revenue. The payout has to be relative to the revenue generated by ads. For us to be on the same page, this has to be understood to be true. Any argument that doesn’t presuppose this is cancerous, & doesn’t have the longterm health of the industry in mind. Here’s why I say that.

          Being able to skip a song or two does not directly increase ad revenue for Pandora, & therefore does not change the value being created by the song being played. That is to say that Pandora doesn’t get paid more for an ad after a song is skipped than it does for an ad after a song that has not been skipped. It does indirectly create value in that it creates a better product which creates increased listening/listenership which increases the payout to songwriters proportionally. Arguing that features that increase listening/listenership should justify a higher payout rate is essentially saying that the bigger Pandora gets, the harder it should be squeezed. There is no logic or reason behind that argument, & it in fact discourages Pandora from innovating. And, honestly, great songwriters should be behind interactivity 100%… if your songs are good, it means that the bad songs will be skipped, which means more plays for you.

          Now, where additional consumer value can be monetized (i.e. premium subscription), the payout to the artist should be relative to that value created (adjusted against the missing ad revenue), & in that case songwriters/performers should be lobbying for the best experience possible, which would demand the higher premium rates because their payout would be relative to that.

          Make sense? The argument that “interactive plays” demands a higher payout has never been substantiated. You have to identify the value being created, & where you need to, make a stand & say “I refuse to be cheated, I refuse to accept less than the value being created by my songs.” But right now songwriters & performers are making out like bandits. If you really do the math, it’s very clear that songwriters/performers have a misunderstanding of the true reach of Pandora & the value being created.

          The analog here is standard cable tv versus dvr cable tv. If I sit down at 3am to watch a show that aired at 8pm, that’s incidental so long as I’m sitting through the commercials… no extra value is being created, in terms of ad revenue. In fact, that just means I can watch a show that I otherwise would’ve missed, which means ads that I otherwise would not have seen, which creates new value which should be split proportionately between the technology company (i.e. service provider) & the content creators, NOT DISPROPORTIONATELY IN FAVOR OF THE CONTENT CREATORS. Now, if I pay a higher premium specifically for dvr service, that is value being monetized & content creators deserve a proportional cut. But interactivity does not outright mean that content creators should profit disproportionately.

          The argument that as technology allows us to create better experience for consumers, that those tech companies should be PENALIZED rather than REWARDED for improving their product, & that content owners should profit disproportionately from these technological advances is anti-technology & is made against the longterm health of the industry. That type of extortionist thinking is why the industry continues to shrink. It defies reason or logic.

          Looking forward to your response.

          • Casey

            Technically, Pandora almost certainly does get paid more for an advertisement that occurs after a skip than an advertisement that occurs after X amount of song plays. For one it proves the listener is actively there and engaged in listening. That is valuable to advertisers. Secondly they often times bring up advertisements with video content after a song is skipped instead of your usual audio ad. Video ads pay more.

            However, DMCA does not classify Pandora as an interactive service. Interactive services are not qualified to use SoundExchange licensing. Furthermore personalized means nothing. A radio station that plays Rock music is more personalized to rock fans than a Country station. We have been able to request music on the radio for decades. As long as the music can not be on-demand picked, then it is essentially the same. Therefore the argument that Pandora is interactive or personalized is irrelevant.

          • jw

            That’s interesting to know about video ads being served after a skip, I don’t use the service & didn’t consider that. However, aside from video vs banner vs audio ads, I would be very surprised if the rates that Pandora pays vary based on any proof of engagement.

            Re: interactivity, I don’t think that the argument is interactive vs webcast licensing, it’s simply justifying Pandora’s statutory rates against terrestrial radio rates. Legally Pandora’s interaction/customizability doesn’t recategorise what they’re doing, license-wise, but the argument is about fairness & getting to the bottom of what songwriters & performers are expecting & how they justify it.

          • David

            From the point of view of the artist/label, the personalised nature of the service (if it lives up to Pandora’s own claims), makes it more likely to cannibalise record sales, or for that matter on-demand streaming, which pays at least three times as much. That’s why they are entitled to complain at Pandora’s attempts to cut its royalties. I agree that Pandora has no greater value to advertisers than ordinary radio, but why should the artist/label give a flying f*** about that? Artists don’t owe Pandora a living. If Pandora can’t find a better business model – like having more ads, or, heaven forbid, actually charging its users – it should get out of the kitchen.

          • jw

            Theoretically the personalized nature of the service is likely to cannibalize sales & streaming. But theoretically the personalized nature of the service is also more likely to match consumers with a variety of artists they enjoy, increasing sales & streaming. Which is true? I haven’t seen any numbers that indicate one direction over another. But I would be surprised if Apple was putting effort into iTunes Radio that they are if they suspected it would cannibalize, rather than energize sales from their more lucrative (I’m assuming) store.

            I haven’t seen any numbers that point specifically towards Pandora cannibalizing sales, certainly not numbers that would justify increased payouts to artists. The argument that “you can’t make radio too good” just reeks of bullshit & backwards thinking to me.

      • Anonymous

        All you need to know about Pandora is that they’re at total war with the songwriters (as in suing them).

        • jw

          This type of attitude is a cancer to the industry & is the reason the industry is in it’s current condition.

          • Esol Esek

            Content creators from musicians to photographers to painters to writers to designers have been living in this Internet bullshit situation where some company paying its execs millions and its editors six figures then decides its going to pay its content contributors who drive their salaries less than the minimum wage.
            yes, the internet had promise from a production standpoint, fine. Great. Now a bunch of us have had a few years, been published, had a work out there, and seen what the result it: LESS money than any deal we ever saw in the past. NOT adjusted for inflation, but LESS period, as in dollars and cents to the point where it is both laughable and humiliating. I know more about it from the assignment photo side, but I dont want to become more familiar from the music side. Creators are going to have to get a clue, and stop getting jacked.
            THe internet can do without, and creators will have to go back to creating tangible items. This is easier in the visual arts, where a piece can still be handmade and unique. In writing and music, it’s just pathetic what Google has done to all of us. If you want to love your tech masters as your best pals, fine, but you’ll learn in good time.

            No tech millionaire billionaire is wasting his time blogging on here, so not only do artists have to deal with getting jacked by these new gatekeepers, we have to deal with the moronic trolls who create nothing, and probably steal everything, tell us that we should work for basically nothing while the fearless leaders at the top get everything.

            I’ve never seen a group of people more ignorantly stuck in an anti-labor mode. Apparently, all the right-wing elitist propoganda was very, very effective from your infancy onwards.

          • Esol Esek

            You’re probably paid to spread the real cancer – the concept that tech company execs innately deserve unlimited payouts and creators deserve nothing. I’m not that worried, because the situation is unsustainable, and while there are a million sucker newbies out there to give their stuff away for free while they’re drooling like the slope-brained morons they are, newbies cannot support an industry. Have you ever read the history of labor and capital? Do you know anything outside of your two decade world view?

            The final straw is coming with movies and tv, and that’s such a big industry with so much money, that the war should result in something productive. Then again, maybe its Orwell’s world we’re entering. Eventually, one would hope there will be public pressure to break up these tech monopolies, as they will make mistakes outside of content theft that will demand that they be broken up.

          • jw

            Photography is an entirely different situation. I’m not sure that the photography situation is as much about corporate greed as it is that the market is flooded with photographers (thanks to digital photography) & the real time nature of online publishing kind of demands that rates fall. These are legitimate market forces. I feel for you, I wouldn’t want to be a photographer these days.

            And I admire your spark, but you just don’t know the facts when it comes to Pandora. If you read the whole thread, you’ll get a better picture… Pandora is actually paying out something like 10x the rates to songwriters that radio plays, & then larger payouts to performers on top of that, which radio doesn’t even pay out. There are misunderstandings from the songwriter side about scale. See, specifically, the data I posted in response to Prof. Lowery, showing that (in our home state of Georgia, at least) even in tiny markets like Brunswick, GA, more than 5,000 users are tuned into to the avg station, making Pandora’s 1/5000th payout to songwriters favorable. And in larger networks like Atlanta where the average is 150,000 plus, the Pandora payout climbs to 30x.

            This has nothing to do with corporate greed, conservative economics, tech fetishism, or whatever. It’s purely a matter of mathematics. Purely mathematics. I don’t necessarily agree with the salary of Tim Westergren, but I’m smart enough to know the difference between salary & company ownership, & the fact that he’s selling off of his ownership means he’s giving something away in exchange for that money, & it’s fair (as much as I wish that Pandora had never gone public). That has nothing to do with artists. The total salaries of all the Pandora execs combined is ~$10m, which isn’t a great figure, but it’s much less than what everyone thinks it is. And it’s a drop in the bucket when it comes to royalties. The fact of the matter is that executives, while they’ve all got their shortcomings, & I don’t care for the corporate structure to begin with, they always become scapegoats for more complex market forces.

            I admire your spark, but you’ve misread me… I’m simply trying to see through all of the bullshit. The fact of the matter is that the recorded music industry is in decline & has been for some time, & what it needs is growth. And Pandora actually pays out very favorable rates for artists, & if it scales to replace terrestrial radio (not saying that could ever actually happen… I don’t even care for or use the service), at the current rates, the industry would be making a killing. There’s potentially a huge upside. That’s what I’m doing… I’m looking for potential upsides (based on mathematics) & trying to create an atmosphere where those products can survive because I love music & I want to see the promise of the internet as a superior distribution platform for consumers, artists, & technologists fulfilled.

      • Locke

        Pandora does not offer much to artists in the first place. They host your music which may or may not be played on someones channel, more likely they are making you more accessible to your own already-generated crowd. You are most likely being listened to by established fans rather than available listeners.

        Pandora has a higher payout if you just look at the checks. However Terrestrial radio generates a much higher payout through advertising your band and your name to every available listener, which ultimately can result in higher merch sales, ticket sales, and fund-raising.

        Unless your band sucks. If no one wants to hear you it doesnt matter what radio or pandora station or slot you got.

      • david lowery

        On terrestrial radio. Average listenership on your typical radio station is much lower than most imagine. But here is the thing: it can be looked up. It’s not subjective. BDS and All Access both have this data. My songs are still spun quite a bit as classic or “recurrent” tracks. They average about 3200 listeners a spin according to the rather “corrupt” way this is calculated. In actuality i’d say it’s half that. By that measure terrestrial radio pays 3x what pandora does.

        Look the world won’t end if Pandora goes out of business. Why is the government forcing songwriters to license their songs at outrageously low rates so a public company can stay in business. Suck it up pandora. Change your business model. Sell T-shirts. Or seriously, add more paid subscribers.

        There is something seriously wrong when a service like Pandora relies on the indentured servitude of the artists. That is, they have to go to court to force songwriters to stay in a government mandated scheme. If it was really valuable service to the songwriter we’d sign up.

        Further onto Paul’s use of the word “corruption” You can’t tell Congress one thing about your finances and then tell Investors the complete opposite. Should congress investigate or should the SEC?

        Finally the reason Pandora is not in many countries is because the

        • jw

          Prof. Lowery,

          I dunno where you got that statistic from, but the low listenership could have something to do with the fact that your only songs that get played were almost-hits from a couple decades ago, & the only stations who play your recent releases are college stations that are more often than not unlistenable.

          Did some math based on allaccess.com’s data on stations in the state of Georgia. Here’s what I found…

          Macon, GA, pop. 295,100
          48.9% listenership, 9 stations = 16,033 per station

          Brunswick, GA, pop. 67,500
          36.4% listenership, 4 stations = 6,142 per station

          Augusta, GA, pop. 466,000
          50.5% listenership, 9 stations = 26,147 per station

          Albany, GA pop. 136,400
          71.6% listenership, 10 stations = 9,766 per station

          Atlanta, pop. 4,487,600
          74% listenership, 21 stations = 158,134 per station

          Valdosta, pop. 118,400
          25.3% listenership, 5 stations = 5,991 per station

          Savannah, pop. 295,700
          70% listenership, 16 stations = 12,936 per station

          Columbus, pop. 209,500
          59.2% listenership, 10 stations = 12,402 per station

          Total listenership of all 8 markets
          4,183,658 listeners, 84 stations = 49,805 per station

          Feel free to fact check. But nearly 50,000 listeners per station puts Pandora @ 10x payout on average, which is what determines the fairness of Pandora’s payouts, not your own personal biases.

          • jw

            Oh, & in case it’s not clear, I’m anxiously awaiting your response, Prof. Lowery.

          • jw

            Can’t say I’m surprised not to hear from you, Prof. Lowery, considering your Pandora argument has no leg to stand on.

    • hippydog

      Quote “JW IS OBVIOUSLY NEW HERE”
      Well thats weird..
      Cause I have seen his name multiple times.. but never seen a post by you before..
      are you sure your not talking about yourself?
      Especially since his posts (though I may not agree with them) make some valid points..
      Where as yours, sounds like something from a 7 year old..
      just sayin

  4. TuneHunter

    Urgently they must drop subscription to “ZERO” to match VEEVOO on The Tube.
    Then as they apply f# formula to every tune the advertising income will brake the bank! I there is a miracle.

    I do understand that Ek and Parker are the greatest dealers of the FREE and are not have any MBAs

    … but why the owners and shareholders of Universal, Sony and Warner pay and keep on staff the executors of the DEATH WISH?

    We do have 100 billion dollar industry around us – lets implement existing resources and start Discovery Moment Monetization.

  5. Bob

    Spotify should pays more than 70%.

    Like 90% as royalties.

    If Itunes pays 70%, Spotify needs to pay more

  6. Bob

    If you want to make money in music, it’s simple. Don’t write any music, and join the C-suite of an internet radio site.

  7. Music Industry Escapee

    From what I read, JW is the only one that has an understanding of the music business and the various revenue models. The mystery to me is why Paul is such an apple fanboy. Just like Pandora and Spotify, apple pays the labels, not the artists. Why is this? Because the artists signed away their right to be paid by taking the money upfront in advances! The labels take the risk by making those advances are therefore get the revenue from Spotify, Pandora, apple, bestbuy, etc.

    • jw

      I can’t speak for Paul, but from my perspective the main difference between Spotify & Apple in terms of payout structure is that the equity & upfront payments Spotify paid/pays(?) to major labels are in exchange for the rights to the respective label’s catalog as a whole, & therefore do not count towards any artists recouping their advances or trickle down to recouped artists.

      This is legal according to contracts between artists & labels, but I personally think that it’s unethical for labels to profit disproportionately to it’s artists in any situation. But demanding equity & lump sums in exchange for the rights to stream their artists’ songs & totally stiffing the artists is just plain fucked up & that clause (that the labels have no responsibility to distribute income based on their entire catalog to individual artists) is one that all artists should be aware of & on the lookout for going forward.

      I assume that Spotify assumed that adoption would be closer to what they were seeing in Sweden, & thought the lump sums would have less total effect on per-song payouts than they actually did. The impact on per-song payouts was, of course, lessened by the equity transfer, which was the labels trying to get in on any future IPO or buyout. It’s all pretty fucked.

      But even in spite of all that, I’m not sure Apple’s payouts are going to be substantially better, though it must be considered that they are radio payouts versus self-directed stream payouts (which is to say that they’re plays less likely to cannibalize sales).

      P.S. Paul, just got a “you’re posting too many comments, slow down” message. That bullshit should be adjusted.

      • Paul Resnikoff

        “P.S. Paul, just got a “you’re posting too many comments, slow down” message. That bullshit should be adjusted.”

        Contact me directly if this message keeps popping up for you.

    • Paul Resnikoff

      “The mystery to me is why Paul is such an apple fanboy.”

      Have you been reading Digital Music News in the month of October? Just asking.

  8. JW IS OBVIOUSLY NEW HERE

    As I stated before JW has no idea what he/she is talking about and thanks for joining the party “music industry escapee”. It goes well beyond what you just laid out JW. This issue deals with SONGWRITERS not ARTIST. Once you folks stop making them one in the same we can begin to have a real conversation.

    GGG you are absolutely HILARIOUS.

    I’ll state it again,
    the PROFESSIONAL songwriters being stiffed.

    • jw

      Everything I said was related to songwriters, hombre. I never made them one in the same, I only included that Pandora pays performers, where U.S. terrestrial radio does not (though it sounds like you just don’t give a shit about performers, which is your prerogative). If it goes well beyond what I laid out, please elaborate. If you make valid points, it will change how I argue this point in the future. I’ve got wide open ears.

      Again… on what basis are you getting stiffed?

      Look forward to hearing more.

  9. jon

    not sure the background of the person who said ‘it is not Spotify stiffing the artists but the labels’, but is not quite correct. The majors may have made equity deals which allowed them to report a quarterly or annual profit but the indie labels and their artists get screwed by Spotify and Pandora. Those tiny payments, even when they do aggregate to significant amounts, don’t even cover the cost of accounting in many cases. The comparison should not be to terrestial radio but to the foreground music business (which existed before most small retail locations switched to Pandora or Spotify and wiped out that revenue stream as well.)

    • jw

      No one is getting screwed by Pandora. That is a myth.

      But I do agree that independent labels & artists are getting unfair payouts from Spotify. I’m simply saying they’re splitting what’s left after major label demands are met. The payout structure is fucked, but that’s not because of Spotify. I mean… do you see Wal-Mart giving equity to Tyson Farms in order to sell their chicken? Or Target giving equity to Martha Stewart in order to be able to sell her curtains? Nevermind the chunks of upfront payments.

      I don’t think the comparison to the foreground music business is fair because the foreground music business never operated on ads, they are subscription services & are subsidized by retail sales (or what have you). I see what you’re saying, but that revenue stream is a casualty of technology. That’s an issue to be dealt with, but I don’t think it’s a part of this discussion.

  10. Eric the Red

    See the herring’s CNet quote. The CFO doesn’t know he has positive EBITDA (without non-cash expenses which is how Satellite & terrestrial radio measure operating profit and how the Goldman Sachs analyst that covers Pandora properly analyzes the Company)? Pandora has ~$11M more cash today on his balance sheet ($54M) than the year they went IPO (a $90M haul) and they have been investing heavily in building out local sales offices in 29 cities – a good idea for Pandora to pursue to bolster their revenue. Is this a smokescreen? Did he really say that DMCA rates are a “handout” or is Pandora looking for some sort of handout prospectively? How can one characterize the DMCA rates to be a handout and lament that “costs are so high?” He can’t – therefore he is looking for a government handout to survive – what? Isn’t someone going to call “bullsh*t!” He has no shame in lobbying for a handout while the facts represent that P is doing well and is expected to get better financially – at least that is what the Goldman Sachs analyst forecasts in his August report on Pandora. It is thievery to claim one is poor and needs government assistance meanwhile complaining that what they do pay artists is too high – it isn’t too high – it is the current market rate imposed by an arbitration panel set up by the government at the request of copyright owners in the ’90’s (i.e. Record Labels). Stop whining Pandora, grow a pair of capitalist balls and adjust your model if the cash isn’t coming in quick enough for you! This CFO sounds like a petulant child greedy to get his hands on a bag of candy behind the counter without paying for it. This guy has forgotten about the six figure salaries and options worth millions that he and his executive cadre share because the business is doing well enough to allow the rich spoils that they do have (all legal and fair).

    Look at Pandora’s Statement of Cash Flows published on their website – they generate positive cash in the millions from Operations. They invest it in expansion – they should. And they get more cash in door from executives exercising stock options – that’s right, the Company gets cash and the executives get cash from exercising stock options at the expense of the public float of stock (this is normal, legal and fair ask any accountant). But their claims of “high costs” and “needing a handout to survive” is a 100% bullsh*t.

    If the grandmothers of the Pandora’s executives had full knowledge of their shenanigans – they would all be in for a scolding and the finger of shame…

    • Yves Villeneuve

      Without personally looking into Pandora’s financial statements, this is the best explanation so far as to what is actually going on. The fact Pandora wants more breaks on songwriting and performance royalties has nothing to do with positive goodwill toward artists. It’s about maximizing shareholder profits and executive bonuses.

  11. Manager

    The way that Pandora got lower rates in Australia was backhanded. They would not negotiate with the PPCA (our equivalent of Sound Exchange). Instead they found a loophole and did a deal with PPNZ, the New Zealand equivalent, that covered Australia as well. They get all the music they want to stream for a 5 figure number. That is how to stiff Artists.

    • Patriq

      There is nothing beautiful in how Pandora is playing out parties against each other. It’s a long time since Pandora were on the side of artists and songwriters, but they still feed this myth to the public. Pandora is a personalized service and should not be compared to terrestrial radio. My understanding is also that terrestrial radio in the US pay by far worse to rights owners than terrestrial radio in Europe, so from Europeans’ POV Pandora’s claims, demands and campaigns seem pretty ridiculous.

  12. p2b

    Why are people who aren’t musicians for a living arguing for Pandora or Spotify? Clearly they are getting something otherwise why would you care? The only people against these services are musicians looking for fair compensation. Our work is devalued and basically given away so CEOs can become rich and consumers can get their music for cheaper, meanwhile artists lose again. “Meet the new boss same as the old boss!”

    • jw

      These services were born out of consumer behavior, not corporate greed. So consumers have every incentive to defend them from misconceptions. I spend $120/year & depend on Spotify for a lot (oftentimes most) of my music listening, it’s got nothing whatsoever to do with tech fetishism or CEO cheerleading.

      Pandora isn’t devaluing your music. Just because consumers get it for free doesn’t mean it’s devaluing your music. Just like terrestrial radio isn’t devaluing music, or having a song in a commercial or film doesn’t devalue the music. Pandora is actually, by my calculations (see above) paying out ~50x what terrestrial radio is to songwriters, & then larger performance royalties on top of that, which terrestrial doesn’t pay out at all. I don’t care for the service, & I don’t use it, but I see it’s value in the marketplace & I’ve done the math. Artists’ problems with Pandora are related to misunderstandings of scale & payout distribution. Do the math.

      And while Spotify’s payout rates are low because premium subscription fees are helping to subsidize free listening in order to spur adoption of the new format, that won’t always be the case (it’s simply not feasible in the longterm). And while the nearterm payout rates are low, particularly for indie artists, this is more of a perceived loss than an actual loss. There hasn’t been any evidence that streaming is cannibalizing sales, & in fact many of the biggest spending music fans are streamers. Personally, I spend a lot more money on music because of Spotify. Were Spotify to go away, that revenue (advertising + premium subscriptions) would just be taken off the table, it wouldn’t likely return in the form of sales.

      The truth of the matter is that Spotify & Pandora are scapegoats for bigger problems. The real losses have been alluded to elsewhere in recent comment threads on DMN… a la carte downloads reducing sales by 90% in cases where a consumer is only interested in the single, the ability to preview eliminating curiosity sales, & piracy by casual fans reducing their purchases all together. These are compounded by a fractured media landscape making it more difficult to promote and break bands (due to the waning influence of traditional cultural gatekeepers), increased competition for entertainment dollars by movies, apps, video games, etc., an onset of noise resulting from increased ability for independent artists to record and promote themselves, fewer, but more label-friendly record deals that siphon off revenue that traditionally belonged to artists, etc. Spotify & Pandora disappearing wouldn’t solve any of those problems, but their success could solve many of them, or at least plug some holes in a sinking ship.

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