Liar Liar Streams On Fire #1: Survey Suggests Spotify Has Peaked Among Key Demo

We’ve got data.  Lots of data.  We have two different consumption surveys of college students and one of the broader population.  We’ve also got the details of 2014 digital revenues from a moderately sized independent catalogue.

While everyone else wildly speculates we’re gonna show you our data.  All this week.

This is not pie in the sky projections from the VPs of “digital” at your record label or distributor.   This is what is really happening.  And you know you can’t trust these digital executives, right? They have been objectively and demonstrably wrong on so many things.  We suspect they are now  just making shit up to try to cover their asses (or looking for jobs at the streaming services.) See: Who will be the first executive to lose their job over the streaming fiasco?

Here’s todays installment:

An informal semi-longitudinal survey of students at a large public university shows that overall use of the Spotify is already falling among a key demo. Further revenue from paid subscriptions for the service appears to have already peaked for this important group.   This appears to be the result of students switching from the $9.99 service to the $4.99 service.  Or put another way Spotify is cannibalizing it’s own paying subscribers resulting in lower revenues even as it loses overall popularity with these students.   Genius.


Spotify subcribers and revenue down

Out there waiting

Originally posted on MUSIC • TECHNOLOGY • POLICY:

When the years have done irreparable harm
I can see us walking slowly arm in arm
Just like that couple on the corner do
Girl, I will always be in love with you

When I look in your eyes
I’ll still see that spark
Until the shadows fall
Until the room grows dark

Then when I leave this Earth
I’ll be with the angels standin’
I’ll be out there waitin’ for my true companion

From True Companion by Marc Cohn

I have always believed there is no human loss greater than the loss of a spouse.  Parents, of course, will immediately disagree, but that’s OK.  When you have struggled through tough times together and prevailed, every close call reminds you of how indescribably dear your spouse is.

It’s also a reminder of the inevitability of having to take on life alone for one of you because one of these days…

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Live From YouTubeistan Delivered Straight To Your Living Room

Originally posted on MUSIC • TECHNOLOGY • POLICY:

When moms in Middle America let Little Johnny use YouTube in his room of an evening, do you think it ever occurs to them that Little Johnny is watching radical jihadi recruiting videos?  When moms hear about jihadis using “social media” to radicalize new followers, do you think the moms think that means it’s coming into their house? Ah, but it is.  Thanks to YouTubeistan–the digital library of jihadi videos readily available on YouTube, the jihad will be monetized.  And which videos will be made available is apparently totally arbitrary, contradictory and trends toward making these videos available.  They do draw millions of views, after all. Two days ago we spotted a YouTube video courtesy of the Long War Journal which evidently was taken down within hours of the MTP blog post.  This is what I wrote:

According to Long War Journal: [T]he media wing of al Qaeda in…

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The Return of the $50 Handshake: Pandora says “no comment” about “steering” payola in direct deal with @naxosrecords

(Ed note- The $50 dollar handshake was record industry slang for the age old practice of illegal payments by record labels to radio stations for preferential airplay.  The technique was for a record promoter to palm a $50 bill to a DJ concealed in a handshake.)

Pandora announced another “direct” deal this week, this time with Naxos Records.  Remember, Pandora is in the middle of a rate setting proceeding for the webcasting royalty at the Copyright Royalty Board (CRB)  in Washington. This is no accident that Pandora is trying to get as many of these direct deals done as possible before the CRB rules on its statutory webcasting rates that Pandora will pay–sound recording owners.  Record labels like Naxos have the ability to “opt out” of the statutory rate set by the CRB if they make a direct agreement with any service including Pandora.

And you know there’s always a trick with Pandora, so here it is.  If Naxos did nothing, they would get the statutory rate.  If they make a direct deal, they presumably got “something” better than the direct rate.

But why would Pandora make a direct deal with Naxos (or Merlin for that matter)  and pay a higher rate than the one they get from the CRB? It’s unlikely they did.  They have no incentive.  It only makes sense that Pandora got a lower-than-statutory rate and in exchange Naxos (like Merlin) got “something else” in exchange for taking the lower rate.

Be sure you don’t miss the point here–Pandora is trying to show these direct deals with Naxos and Merlin as evidence of what royalty rates should apply to the rest of us.  So Pandora wants the royalty rate to be lower than the rate that SoundExchange is asking for so they can use the Naxos and Merlin deals as examples of “free market” agreements between a “willing buyer” and a “willing seller”.

As the Radio and Internet Newsletter (RAIN) explained:

[Pandora’s p]rivate licensing deals are significant for another reason. The CRB process of setting government-mandated rates has been distorted, some audio publishers believe, by a lack of real-world deal-making examples which could establish a value of licensed music that isn’t theoretical. Pandora used its Merlin deal as an anchor example in its initial argument brief. Presumably, the Naxos agreement could bolster Pandora’s case during this year-long lead-up to new rates.

So again why would Naxos and Merlin agree to a rate that helped Pandora lower the royalties paid to everyone else?  There’s probably an easy answer to that.

Very likely because they got each something else that made it worthwhile.  And if by taking that vigorish it hurts the rest of us–well, it’s a cruel world, don’t you know.

Now what might that vig be?

In the case of Merlin, they accepted a lower rate in part in exchange for Pandora “steering” listeners to Merlin artists.  If this sounds a little like payola you wouldn’t be the first to question this practice. 

Pandora Says No Comment

“Steering” payments are a different beast–these are payments that benefit Pandora by triggering a lower royalty rate if Pandora plays more of the label’s artists.  That consideration that flows to Pandora is a lower royalty rate–the benefit to Pandora being the difference between what they would pay under the presumably higher statutory rate and what they do pay under the steering arrangement.  You know, consideration for airplay.

Consideration for airplay…isn’t that payola?

Was there a steering payment in the Naxos deal?  RAIN also noted:

We reached out to Pandora to ask whether the Naxos licensing agreement includes similar “steering” as with Merlin, and received a polite “no comment.”

Now why would that be?

Let’s recap a little history.  One trick that Pandora is trying to fool us with was originated by their in-house lawyer, Christopher Harrison when he was at DMX.  David Lowery noted that Billboard called out Harrison on the issue:

 Ed Christman did his homework on this part of the story, too and called Pandora lawyer Chris Harrison on the bullshit he pulled while he was at DMX that shafted songwriters and that Harrison is trying to duplicate for Pandora to shaft artists, musicians and vocalists.  Ed got that exactly right.

Here’s how Mr. Christman described DMX’s dirty tricks on songwriters:

Back in 2007-2010, when ASCAP and BMI rate court judges were involved in litigation between DMX and performance rights societies, the judges examined the direct licensing deals DMX cut with publishers. During that process, judges did not review the advances or any of the other aspects of the deal, and only looked at the reduced per-store royalty rate Consequently, in the case of BMI, this resulted in the per-store negotiated rate falling from $36.36 to a per-location fee of $18.91, much to the chagrin of the publishers, who stayed a part of the PROs’ blanket licenses. The ASCAP rate court returned a similar finding.

(Did we mention that Pandora vp of business affairs and assistant general counsel Chris Harrison was DMX’s vp of business affairs at the time of the rate court ruling in a lower per-location blanket fee?)

Oh yes…the advances.  There is usually money involved after all.  We don’t know if Naxos or Merlin got any advances, or better yet for a label, nonrecoupable payments from Pandora–the kind they don’t share with artists.  (This is a variation on “breakage”, being payments that are so large there’s no chance that the label will ever recoup during the life of the license.)

But we do know that when Pandora filed the Merlin agreement with the CRB as evidence in their rate proceeding, there was a whole bunch of stuff blacked out so we couldn’t read it and know what the deal was.  What do you bet that had something to do with M-O-N-E-Y.

So if Naxos did a deal that is so great for their artists (including symphonies and conductors), why aren’t they singing it from the rooftops?  If Pandora only has the artist’s best interests at heart, then why isn’t Pandora singing it right along side Naxos?  Of course in a way, anyone doing a direct deal with Pandora is driven to it by the threat of having to take the statutory license if they don’t–the implication being that the statutory license that the rest of us have to live with will be worse than whatever deal Naxos made that did not rely on the statutory license.  So what could make it better?

The Merlin deal had “steering” payments in it…why would Pandora say “no comment” about a component of the Merlin deal that Pandora did sing from the rooftops at the time.

Why oh why oh why?

And right there you should understand what is really rancid about these direct deals.  If nothing else, the CRB rate setting process is transparent.  Artists, musicians, vocalists and sound recording owners are represented by SoundExchange and have more or less equal voting power on the SoundExchange board.  Three judges set the rates after hearing from all sides in the process.  Unlike the ASCAP and BMI rate courts, you don’t have a situation where a single judge can decide to just ignore a vital part of the evidence the way each of the single rate court judges did in the DMX case–not doubt to the great glee of Christopher Harrison.

Not only that, but who knows if Naxos is going to apply the artist share of webcasting against unrecouped balances of their artists, or simply keep the artist share of royalties.

SoundExchange hasn’t allowed labels to collect the artist share of statutory royalties.  Artists, musicians, vocalists and labels are all paid at the same statutory rate.  No under the table shenanigans, no side deals, no payola.  Plus SoundExchange audits these services on behalf of everyone.  There’s definitely some significant benefits to artists from staying in the SoundExchange system particularly as SoundExchange pays out hundreds of millions.

Instead of the relatively transparent CRB process, Pandora is repeating the sleazy DMX charade and is trying to hide the ball.  Would we prefer that the government wasn’t involved at all?  Would we prefer if everyone made their own deal?  Probably.  But we also like the idea that all the cards are on the table and appreciate the benefit of collective licensing.  (And we know it’s a good thing because Pandora tried to stop it in the infamous Internet Radio Fairness Act.)

But You Can Give Them to the Birds and Bees

What about this steering payola?  There’s a real question of whether these steering deals are even legal, particularly if Pandora is the service.  That’s because Pandora bought a radio station, and payola laws definitely apply to FCC licensed radio station owners.  David wrote about this before (“@Billboard is Demonstrably Short on Pandora Payola: Just Read FCC Website“) so let’s read an important long quote from David’s post:

As we previously postedPandora’s own high powered Washington DC lawyer, David Oxenford, wrote an article in 2008 about Internet radio and payola that everyone should read:

As Pandora lawyer Mr. Oxenford tells us:

“The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a “radio” service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.”

So as Pandora’s lawyer tells us, if the FCC can’t get  jurisdiction over pureplay webcasters, state attorneys general may be able to under applicable state law commercial bribery statutes.  That’s potentially what’s called a 51 jurisdiction issue (50 states plus federal law)….

And if payola only applied to cash money as Pandora’s CEO would like you to believe, would the FCC have looked the other way when broadcasters received the legendary “hookers and blow”?  Vacation trips and clothes?  You know, “other valuable consideration”?  Do we really have to start quoting “Hit Men” or “Stiffed” here?  Morris Levy is laughing his ass off!

I’m just not hearing a credible argument for why getting a below market discount on something–in this case, royalties in exchange for airplay–is not “other valuable consideration.”   Therefore since Pandora is doing everything it can to buy a radio station (and is in front of the FCC right now trying to get their acquisition approved) you’d think they’d want to disclose receiving valuable consideration for playing Merlin artists. And they aren’t.

Billboard and I agree on this:  stranger things have happened in the U.S. legal system.  Far, far stranger things.  The only one who can sort this out is the FCC–and good news!  The FCC has a way to do that as part of its review of Pandora’s license for South Dakota radio station KXMZ that the FCC is reviewing right now.  And until the FCC rules on the payola issue with Pandora, it’s hard to see why Pandora’s lawyer Chris Harrison should be able to use Pandora’s end run around the law to lower everyone else’s rates in the [CRB] rate hearing in Washington….And won’t it be interesting if it turns out that Chris Harrison filed an illegal contract with the royalty hearing on everyone else’s already putridly low Pandora royalties to try to drive Pandora’s payments even lower.

Sounds like “no comment” is the safest thing that Pandora and Naxos could say at this point.

Judge Wingate to Rule on Whether Federal Government Protects Google or States Protect Consumers


The latest on Google’s lawsuit to stop states from investigating…Google. Imagine if this was Enron or Pandora!

Originally posted on MUSIC • TECHNOLOGY • POLICY:

Right on cue, Jeff John Roberts gave his usual Googley spin to Mississippi’s scrappy Attorney General Jim Hood’s investigation into Google: Google and Mississippi meet in court over secret MPAA lobbying.  Roberts story first posted almost on the dot of the commencement of the hearing today in Judge Wingate’s courtroom in Jackson, Mississippi.  Like most of Roberts’ “reporting” on anything relating to the music or movie business, you can get a good idea of where Google is at just by reading the headline.  No need to suffer through the Satanic idolatry he wraps around the MPAA and the RIAA who vie for status as the Great Satan.  1999 called and wants its anti-artist rhetoric back.  As we know, Lars was right.

So sure enough, Google launched their attack on Hood largely based largely on documents stolen in North Korea’s hack of Sony Pictures.  Try as they might, Google is not…

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Searching for answers from Google about Google | The Hill | East Bay Ray

In 2001, a journalist named Bethany McLean posed a simple question in Fortune Magazine: “How exactly does Enron make its money?”

Neither company executives nor outside analysts could give her a simple answer. Her one question is now seen as the drip that opened the floodgates that drowned Enron. By 2006, the one-time Wall Street darling was closed, companies that enabled the fraud had failed, and executives were imprisoned. All this happened because Bethany McLean got the chance to ask a question.

The only way we’re going to learn about what Google is doing is through legal challenges like that of AG Hood.  I don’t see any Congressional hearings looking into Google’s practices (especially with Google spending almost $17 million on lobbying this past year). I don’t hear President Obama asking about Google (see previously mentioned $17 million). While there are European leaders and governments pushing Google to be more transparent, I don’t know why we’ve outsourced an investigation we ourselves should be doing.  I worry that if Google can block a state’s top law enforcement officer from even asking questions, then who is there to stand up and search for the answers we clearly should be seeking?


East Bay Ray is the guitarist, co-founder and one of two main songwriters for the band Dead Kennedys. He has been speaking out on issues facing independent artists—on National Public Radio, at Chico State University, and on panels for SXSW, Association of Independent Music Publishers, California Lawyers for the Arts, SF Music Tech conferences, Hastings Law School and Boalt Hall Law School. Ray has also met with members of the U.S. Congress in Washington, D.C. to advocate for artists’ rights.

What are they afraid of: Will Schmidt Take the 5th Again in @agjimhood’s Mississippi Investigation?


Exactly what is Google afraid of?

Originally posted on MUSIC • TECHNOLOGY • POLICY:

During Eric Schmidt’s Senate antitrust subcommittee hearing in 2011, a strange thing happened–Eric Schmidt refused to answer under oath on the advice of counsel when Senator John Cornyn–formerly of the Texas Supreme Court–asked questions about Google’s then-recent non-prosecution agreement with the U.S. Department of Justice.  While he didn’t give the usual catechism of “taking the 5th” around the answer, he definitely refused to answer on the advice of counsel.  And when you’re testifying before the U.S. Senate, invoking your right to refuse to answer on the advice of counsel pretty much has one meaning.

So it’s not surprising that Google is now trying to block Mississippi Attorney General Jim Hood’s investigation into the self same “plea bargain” that Google struck with the Criminal Division of the U.S. Department of Justice for which Google paid $500,000,000 of the stockholders money and for which Google is currently being sued by its stockholders.

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Smells Like Teen Enron: Pandora Sues Songwriters Again. Why?

Pandora is currently suing BMI songwriters over the rate it will pay for the next 4 or 5 years.

Pandora wants to pay 1.75%.  BMI songwriters would like them to pay 2.5%. In 2014 Pandora paid BMI $16.1 million dollars.   So basically Pandora is using the entire apparatus of the federal courts to get a reduction of less than $7 million dollars in 2015.  If it’s a 4 year deal that means Pandora saves $28 million dollars (Pandora growth has virtually stopped).  Court cases like this have typically cost the parties tens of millions of dollars.  This does not include the millions it costs taxpayers.

But let’s look at these numbers  in context to see just how ridiculous this case is.

(source for all of these charts are SEC filings and court testimony)

Pandora revenues in 2014 vs amount paid to BMI songwriter revenues  

Screen Shot 2015-02-12 at 1.02.27 PM

BMI represents about 48% of all songwriters


Pandora executive “stock compensation”  vs royalties to BMI songwriters 2014

Screen Shot 2015-02-12 at 1.18.52 PM

In 2014 Pandora paid $87.1 million dollars to executives in “stock compensation.”  In 2015 they plan to pay executives another $122 million.  By the end of the year will they have paid out over 1/2 a billion dollars to executives and investors in stock compensation.

Pandora 2014 net loss compared to executive stock compensation and royalties paid to BMI Songwriters.

Screen Shot 2015-02-12 at 1.28.14 PM

So if you were running a company that lost 30.41 million last year and you were seeking savings what would you do?

1) spend tens of millions of dollars suing BMI songwriters to “save” $7 million


2) would you maybe cut some of the $122 million in 2015 executive stock compensation?

Smells Like Teen Enron

This is totally batshit crazy right?  I mean this is more like something a petulant teenager would do ( I have a couple).   “I’m so mad at those songwriters I’m gonna sue them even though it doesn’t save me any money.”

So is Pandora behaving like a petulant teenager or is there something more sinister afoot?

When something doesn’t make sense one should always entertain alternative hypotheses to try to figure out what’s going on, right?  So why might Pandora management being pursuing and publicizing this high profile scorched earth strategy with songwriters and the music business?

One possibility is that they don’t want anyone noticing that the company would be profitable without the wildly excessive executive stock compensation.   By my rough reckoning Pandora would have made a profit of $56.7 million dollars last year without the executive stock compensation.   The BMI and  ASCAP songwriter lawsuits provide a false narrative as to why the company is unprofitable:  “Those damn greedy songwriters”.  And it has worked! With most of the financial press and even the major music industry press uncritically regurgitating this false narrative.

It also distracts from the fact that the executives and investors are sucking the life out of the company. By the end of 2015  they will have extracted over 1/2 a billion dollars from the company!

So let’s have a little fun here.  if you were forced to bet on this:



Pandora Execs Will Have Received Nearly 1/2 Billion Dollar in “Stock Compensation” By End of 2015

While Pandora is busy in court suing BMI songwriters for lower rates we thought you’d like to read this guest comment from George Johnson.

“The past 3 years, according to the SEC, Pandora executives and investors extracted over $360 million dollars in “stock compensation”. This new $122 million dollar gravy train for 2015 will put Pandora executives at almost $500 million dollars for themselves in 4 short years while they plead poverty to Congress, Judge Stanton, Judge Cote, and the Copyright Royalty Board. (Ed note: New information suggests it’s closer to $550 million.)

Not bad for a guy who thought of the entire idea for Pandora while “tripping on psychedelic mushrooms”. — see Washington Post in 2013.

It’s time for the SEC, DOJ, or Congress to shut down Pandora with a temporary injunction and have these executives PAYBACK these hundreds of millions of stolen royalty money to songwriters, music publishers, recording artists and independent labels and all their investors.”

Coincidence, or Did Mississippians Just Tell @agjimhood to Go For It in His Investigation of Google?


Strange goings on in Mississippi…

Originally posted on MUSIC • TECHNOLOGY • POLICY:

Mississippi Attorney General at February 5 Main Justice News Conference Announcing Standard & Poors Multi-state and Federal Settlement

As noted in my post about the history of Mississippi House Bill 1201, a Mississippi lawmaker in Mississippi’s House of Representatives decided to put to a vote whether Mississippi’s attorney general should have the ability to bring actions all by himself (and by extension, conduct investigations in order to determine whether an action is appropriate).  In other words, to do what the people elect attorneys general to do in large part.

There is one particular investigation that is in the news in Mississippi right now–Attorney General Jim Hood’s investigation into Google’s business practices.  I don’t know the history here, but I have to say that it is pretty dang coincidental that Hood is investigating Google and then up pops a bill in the Mississippi legislature that could stop Hood from bringing his case…

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