Pandora’s Publicity Stunt: Pandora bought  South Dakota terrestrial radio station minus the broadcast license.

Back in June of 2013 Pandoras Associate Chief Counsel Chris Harrison (Songwriter Enemy #1) wrote an article for The Hill that implied that Pandora had purchased a radio station in South Dakota. The idea was that they were somehow now equivalent to Clear Channel and deserved the same percentage of revenue deal for sound recordings that Clear Channel receives.  Never mind that much of Clear Channel’s content IS NOT MUSIC and terrestrial broadcast has enormous capital costs so percentages of revenues are not comparable.  THE REAL PROBLEM and why this is misleading is that Pandora did not own the broadcast license of this station.   Transfer of this license requires FCC approval and as far as we can tell it appears Pandora had not even filed for transfer of this license at the time of this announcement (we could be wrong but we can’t find evidence, glad to correct if we are wrong).  Do you really own a radio station without a broadcast license? It’s not really clear what it is that Pandora actually purchased.

A year later this broadcast license is not in the hands of Pandora. And indeed the foxes in the henhouse over at the  FCC (much to our surprise) rejected Pandora’s license.  There is a rule that a company must demonstrate it has less than 25% foreign ownership to own a radio station broadcast license and Pandora could not demonstrate this. However silly this rule may be, it’s still a rule, and Chris Harrison as an attorney with long experience in radio surely knew this.  Right?  So shouldn’t Congress and the SEC ask Pandora and Harrison if they intentionally misled Congress and investors?

Maybe they didn’t mislead investors and they really didn’t understand the requirements for purchasing a broadcast license.  But this implies that the top legal staff of Pandora is incompetent.  What does that say to investors?

 

Informal Trichordist  poll calls Chris Harrison Songwriter Enemy #1.  Here’s  some reasons why songwriters feel this way about Pandora’s litigator in chief.

We don’t know quite why, but Pandora seems to have put Tim Westergren on ice. If we had to guess, we’d guess that this is because Westergren has served his purpose to the corporate overseers at Pandora. You know, you’ve done good job, Tim, we’ll take it from here.

Tim’s made bank on his project, we figure he’s closing in on $20 million or so. Pandora is sitting on top of about $200 million in cash. The corporate overseers gave the old management team a chance to get their numbers up the old fashioned way—screw the artists and songwriters. This artist friendly crap is over. Tim Westergren, Joe Kennedy, etc., got iced. The big dogs want the real cold blooded types now because they’re gonna get their money. And the shirts off our backs.

Enter Christopher Harrison. You may not have noticed him until recently, but he’s now firmly in charge of the artist screwing crew. Our bet is that he’ll do what the Wall Street overseers want every time like a good boy and roll over for the tummy scratch and a big green bone in his mouth—cash or stock. For whatever reason, from what we can tell he’s had a big one for creative types for a long time, especially songwriters and most particularly ASCAP.

The rumor is that this started when Harrison was at the DMX background music service. The story goes that he got the company to partner up with Music Reports (you’ve probably gotten a few thousand NOIs from them along with penny checks) to try to make an end run around the songwriter PROs. DMX—apparently led by Harrison—went out to make direct deals with publishers. The rumor is that they went to a big publisher and paid them money under an NDA to get them to give a low rate. Then they supposedly told a bunch of other songwriters and publishers what the rate was and convinced them to take most favored nations on the rates, but left out the part about the up front money. Some people might call this lying.

Then the rumor is that Harrison took the direct deals to the rate courts and showed them as evidence of a “free market rate” and the rate court Song Czars forced the PROs to take the chump MFN rate on all the songs that DMX didn’t have direct deals with, thus rat stumping all songwriters, including foreign writers.

Pretty slick!

Since the DOJ supervises pretty much anything to do with Songwriters  it’s mighty mighty curious they have never investigated this.

So if you’re a corporate overseer at Pandora and want to find someone whose really got a major big one for songwriters and artists, Harrison has to be on your short list. He’s already made his bones. If the rumors are true.

And if you look at the last Congressional hearing where Pandora appeared, guess whose bright and shiny…face…showed up at the witness table. And he you can tell he. Just. Loves. It.

He’s a serial songwriter stumper. Songwriter enemy Number 1. Can’t you just see him rolling over and barking for the corporate overseers to throw him a bone?

Other notable outrages committed by Pandora under Chris Harrison 

– This addendum compiled  by David Lowery

*Apparently colluded with Sirius and Clear Channel to stop paying royalties to legacy artists with pre-1972 recordings.  The bizarre rationale simultaneously taken by all these companies is that there is no copyright for pre 1972 recordings. ( Where is DOJ on this collusion?)  As a result Pandora will pay no royalties to civil rights icons The Freedom Singers.

The revolution will be webcast but performers won’t be paid.

Write Pandora and ask them why they are doing this:  investor@pandora.com  and pandora-press@pandora.com.  Institutions should consider the moral implications of investing pension funds in this company.

* Under Chris Harrison’s leadership Pandora has repeatedly sued songwriters. These suits have cost songwriters at least 10 million dollars in legal fees..  It likely cost the US Taxpayers and Pandora just as much.   This was all so Pandora and Chris Harrison could save $4 million dollars in 2013.. These suits are so cost ineffective you have to wonder if Pandora is simply doing this to pump up their stock price.  Fake good news for the wall street stock analysts that are pedaling this crap to little old ladies and pension funds?  You need buyers when  all the  top executives  are selling tens of millions of dollars of stock each year while the company is hemorrhaging  money.  I am not a lawyer but where is the SEC investigation of this?

* Pandora may have pretended to buy a South Dakota radio station and trumpeted this to stock analysts  and the US Congress as a way to lower payments to performers.  The problem is we have been unable to find any evidence that Pandora actually owns this station.  If you have contrary evidence please send it to us.  We are stumped.  If it turns out Pandora did not buy this station they should be investigated for all manner of fraud.

* Under Chris Harrison’s direction Pandora pushed the Orwellian named Internet Radio Fairness Act.  I say Orwellian named because it claimed to level the playing field for internet broadcasters to compete with terrestrial broadcasters like Clear Channel.  Yet Clear Channel supported the bill.  How does that work.  In truth it would have slashed digital royalties owed to performers by as much as  %85 percent for Clear Channels on their web simulcasts. False and misleading statements again. How do the feds let these guys get away with this over and over again? Especially since this was trumpeted to stock analysts.

*Pandora used the virulently anti-gay Rep  Chaffetz of Utah to co-sponsor the IRFA bill.  They also contributed money to this demagogue.  Again institutions should consider the moral implications of investing in Pandora.

*I believe Pandora (and Sirius) has engaged in false advertising by claiming to pay royalties to artists performers that they no longer pay royalties to under their bizarre interpretation of the copyright act.   I don’t understand why the feds have given them a free pass on this?

*I suspect that Pandora lobbyists or  operatives  under the direction of Chris Harrison instructed Greg Barnes (DiMA and moderator of the semi-secret hearing on Capitol  Hill monday July 21st 2014) to block me from asking questions during the public panel.  Fact: I observed a woman in the row in front of me frantically texting someone. Later I observed her smartphone displayed the following two texts. “David Lowery” and “Watch out.”  Shortly before this Greg Barnes had visually indicated that he would take my question  but after the frantic texting, he told me that he was only accepting questions from “staffers.” How did he suddenly know I wasn’t a staffer? Was that a result of the text message?   (He then took a question from a law student.)  I could be  mistaken but I’d like to remind you that Pandora could  easily clear this up by publishing the text messages of all operatives and lobbyists sent from that room at that time.

*Pandora false and highly misleading statements about me personally on national television and to national  press. These were  to counter a blog post explaining how I was paid less than $17 dollars in songwriter performance royalties for a million spins of the song Low on Pandora.    These statements  were clearly intended to damage my credibility and personal reputation. Yes a 6 billion dollar company has to resort to the dirtiest of tricks to counter a single songwriter. I believe that Chris Harrison wrote or at least approved this carefully constructed obfuscation. I could have easily launched a lawsuit against Pandora but I did not. I suggest shareholders consider the reckless nature of those at the helm of this company.

Here is the statement.  It accuses me of grossly misstates Pandora’s payments to songwriters when I did not.  I have the royalty statements to prove it.

“Mr. Lowery misrepresents and grossly understates Pandora’s payments to songwriters,” a Pandora spokesperson said in a statement. The spokesperson said that Pandora must pay BMI and ASCAP, the organizations that represent songwriters and publishers, along with other parties — adding up to “many times more” in songwriter royalties than what Lowery noted in his post.

See how they did that?  To date Pandora has not retracted or apologized for this false and misleading statement despite my request to do so.

 

 

 

 

 

Diverse group of Washington DC lobbyists.

 

The major webcasters and broadcasters decided to convene a nearly secret last minute congressional panel to urge Congress and the DOJ to keep in place the 73 year old “temporary” consent decree that forces songwriters to let companies like Clear Channel, YouTube, Sirius, Pandora, Amazon and Spotify use our songs without any negotiation whatsoever.  The consent decree also empowers a single appointed-for-life federal judge to arbitrarily decide what a “reasonable” rate  is for songwriters.   In effect we have been forced by federal courts to provide  subsidy to corporations that have a combined market cap of more than a trillion dollars.

As I demonstrated in this an earlier post  as a songwriter I received less than $17 dollars from Pandora for over a million spins of my song Low. 

https://thetrichordist.com/2013/06/24/my-song-got-played-on-pandora-1-million-times-and-all-i-got-was-16-89-less-than-what-i-make-from-a-single-t-shirt-sale/

How is this a “Reasonable” rate?

The panel was hosted by Greg Barnes of DiMA.  Other panelists included David Oxenford National Association of Broadcasters and  Mathew Schruers from the  CCIA.   The companies represented by these lobbying outfits (Amazon, Clear Channel, YouTube/Google, Spotify, Pandora, Microsoft, Yahoo have a combined market cap of over a trillion dollars.  YET THERE WAS NOT A SINGLE REPRESENTATIVE OF SONGWRITERS ON THE PANEL.   This is particularly appalling considering that songwriters are the ones living and working under the consent decree.

I had prepared a short set of comments detailing my experience as a songwriter, especially the financial  effects of the consent decree on my digital royalties.    I parked myself in the second row and waited for the moderator Greg Barnes to start taking questions from the audience.  Mine was the first hand up and Barnes indicated that he would call on me but first he wanted one more comment from Oxenford.  It was during Oxenford’s comment that I noticed the lobbyist (?) seated directly in front of me pulled out her smartphone and started frantically texting something.  Curious I leaned forward and could clearly read my name and then the  phrase “watch out”.   Funny stuff.  I wanted to say “Hey dumbass, I’m sitting right behind you.” But I resisted.

Curiously it was immediately after this that Barnes suddenly announced that they would only be taking comments from “Staff” members and I would have to wait “til the vey end and time permitting only.”  He then proceeded to call upon a college student from GW.

SERIOUSLY? The Digital Media Association is in the business of selling songwriters music but their chief DC lobbyist is afraid of having a songwriter speak.  Spineless coward.  If that’s not clear, Yes, Greg Barnes, I am calling you a spineless coward. And I’m standing by it.

When the college student finished his comments I raised my hand again.  Once again Barnes told me that they were only taking questions from staffers despite the fact he had just demonstrated that they were in fact taking questions from anyone.

This went on for a while and I realize that Barnes clearly intended to not let me ask a question.  For amusement I started to stare down the not-quite-slimey representative of the National Association of Broadcasters.  He suddenly found something in his lap extremely interesting and wouldn’t look up.  If I was absolutely certain that he was not suddenly transfixed by the unexpected appearance of  a colony of miniature unicorns dancing on his lap I’d call him a spineless coward as well.  But as I actually couldn’t see his lap, I can’t rule out the possibility of miniature unicorns, and so for now I’ll give him a pass.

The night before this event I had been warned that it was likely that I would be blocked from asking any questions or making any comments.  Considering the fact I was gonna have to get up at 5:45 am to make it to the panel I wasn’t really in the mood to go to all this effort for nothing.  I had to have a plan B.

A few days before a songwriter friend remarked that the current licensing system for songs and digital services was so fucked up that songwriters really had nothing left to lose except “the shirts off our backs.”    I remembered this.  I went across the street to the local grocery store bought some gift bags and wrapping paper and proceeded to gift wrap  three shirts that had been worn by me and my bandmates  as “gifts” for the  NAB, CCIA and DiMA.  I figured that at the very least I could present them with the shirts off our backs and eke out a photo op.

Of course it didn’t go that way.   Clearly Barnes was terrified of having an actual songwriter air a viewpoint that was contrary to the party line.   When he asked for questions again,  I asked that as the only person in the room forced against their will to live and work under the consent decree I be allowed to speak.  He refused.

So shit, I did what I had to do. I marched up to the panelists and presented each of them with a gift wrapped “shirt off of a songwriters back”.    They looked like they were gonna pee their pants.  It was priceless.

“I got less than $17 dollars for a million spins on Pandora, that’s your consent decree at work.”   I told the room and walked out.

The whole thing was so fucking stupid on the broadcasters/webcasters’ part.  If they’d just let me speak they could have spent the final 15 minutes to counter my questions and statements with measured doses of non-sensical legalese and mock concern for the plight of the independent songwriters.    But by acting like spineless cowards they totally screwed themselves.  Just goes to show that if you  put on a “Show trial?” you very well may end up with a show you didn’t expect.

Welcome to Washington gentlemen.

For those of you keeping score it’s now

Scooby Doo Gang 2

Broadcasters 0

 

 

 

 

 

 

 

 

 

 

Seems like every six months or so I have friends  forward me an article or interview with a manager or agent extolling the virtues of streaming (and sometimes even piracy.)  Usually this comes with some note that reads something like this “Agent/Manager  X thinks streaming/piracy is a good thing, Why don’t you?”  I am always  perplexed by this.   Of course some managers and agents love streaming and piracy! Less revenue from recorded music means their artists must play more and more live shows to make up the difference.  I thought everyone knew this.

You see managers and agents make virtually all their money from an artist’s live performance not from the artist’s recorded music.    However screwed up it might seem from an artist’s perspective it makes perfect financial sense (at least in the short term) for managers and agents to turn a blind eye to piracy and low payouts for streaming. Precisely because  it seems to result in more touring.  You can’t really blame them for this can you?

I teach a class on the finance and economics of the music business at the  University of Georgia.  I usually spend at least one lecture on the differing financial incentives for artists, managers and agents, and in particular how managers and agents are often incentivized to work against the artists long term interest.  Let me try to summarize that lecture here.  Especially how it relates to streaming and piracy.

First , have artists resorted to playing more shows to make up for declining revenues from their recordings?   In my case? Yes, absolutely. So have virtually all my friends.   There are plenty of  anecdotal stories of artists touring into their old age because recorded music royalties have dropped off.  Levon Helm of The Band is one tragic case and here’s Robert Hunter from The Grateful Dead spelling it out clearly.    But you don’t have to rely on anecdotal data as it is clearly reflected in the records kept by companies like Pollstar.  It depends on how you interpret the data but even the most conservative reading suggests there has been a 200%  rise in the number of shows since the advent of Napster.  Now this would all be great news except that average attendance has fallen and any gains in revenue appear to have gone to the top 1% of acts.

So why is this good news for managers and agents but not artists?   You have to consider the order in which people are compensated.   Managers and agents are paid first and off the top before expenses.  Artists are paid last and after expenses. Let me explain.

Agents.

An agent’s only source of revenue is commissions on live performance.  So if artists play more shows this is generally good for agents.  But dig a little deeper. Specifically agents usually receive 10% of gross.   Not net, but gross.  You get what that means, right?  Whether the artist makes a profit or loss on the show the agents commission comes off the top.  The agent always gets paid.

Example: a baby band gets a $500 club show but it costs them $465 dollars, in hotels, gas, rental vehicle, meals etc.   The agent still get’s his/her 50 bucks.   Off the top. Before expenses.  So the band would actually lose $15 dollars on that show.

A more subtle example is to examine what happens when a  band that normally plays 75 shows a year  suddenly starts playing 150 shows a year to make up for lost recording revenue. My wife is a concert promoter and books hundreds of shows every  year.  We see this situation all the time.  We are very familiar with what happens.    In order to accomplish this an artist may needs to play smaller rooms;  go into smaller markets and overplay and hence saturate some major markets.  The artists annual gross for live shows will not double as the result of playing twice as many shows. If the band is lucky they will see a rise in revenue of around 50%.   But unfortunately for the band, expenses may come close to doubling! As a result the artist usually only sees a small increase in their income since they get paid after expenses.  In some cases I’ve seen artists actually earn less by doing more shows!  I think this was the case for my band  in 2007! Regardless the 50% rise in gross revenues never turns into 50% rise in income to the artist.  But the agent DOES see a 50% increase in income.   As a result the agent has a much bigger financial incentive to see an artist play more shows even if the artists doesn’t see a substantial increase in income.

Managers.

Unlike agents, a manager typically does make money from recorded music revenue.  So you would think a manager might be more concerned about piracy and low payouts from streaming services.   But as it turns out managers make such a small percentage from recorded music revenues when compared to live revenues their financial incentives are no different than agents.   Also it turns out that certain managers are investors in Spotify. Again let me lay it out for you.

Like agents, managers are paid a gross percentage on their artists live revenues.  Typically a manager will get between 15%-20% of gross from concerts.  But it is customary that a manager take their cut of all other income after all expenses have been deducted,  i.e. they get paid when the artist (finally) gets paid.

So for instance if a band receives a recording advance of $70,000 and the band spends $50,000 recording the album, the manager only gets 20% of $20,000 not $70,000!

Similarly an artist is typically compensated for recorded music with an “Artist Royalty” of 10-20% of the wholesale price of a download, “stream”  or CD.  So a manager’s 15-20% of that means a manager only  nets 1.5%-4% of recorded music revenue.  And these royalties are only payable  after the artist has recouped it’s recording and promotion costs.  So in practice a manager receives very little money from these sources.

Finally a time-tested way for a manager to generate additional revenue is to get the label to pay for “tour support” and send the artist out on an otherwise unprofitable tour.  Stick with me  on this one cause this is brilliant scam.

Let’s say band X is planning a  tour and they have gross guarantees of $50,000 dollars but they have $60,000 in expenses.   The band would normally cancel this tour and the manager would get nothing.  Instead the manager requests 10k in tour support from the record label.   The record label hoping to generate sales agrees. The band then goes out on a break even tour but the manager still  pockets 20% of $50,000 which is $10,000.   Now where does that $10,000 in tour support really come from?  Does it really come from the label?  No.   It’s almost always configured as an advance against the artist’s royalties.   So in effect the manager has traded  20% cut of $10,000 in future artist royalties for 20% cut of $50,000 in live revenues.   The manager turned $2,000 potential commission into $10,000 actual bird-in-the-hand commission.

There are a zillion of these clever tricks that managers have dreamed up over the years, but that’s not really the point of this post.  The point is that managers and agents don’t really make anything off of recorded music revenues at least when you compare it to the amount they make off of live concerts.  Managers and agents have never really cared about revenue from recorded music and they have even less incentive to care about it now that streaming has obliterated what little revenue there was.

So managers and agents are free to say whatever they want about streaming and piracy.  But just remember  what’s good for managers and agents is not necessarily what is good for artists.  Keep that in mind next time you see an agent or manager extoll the “virtues” of streaming or piracy.   Heck some managers even own pieces of these low paying streaming services or worse unlicensed services that pay nothing to artists. No wonder they love  streaming and piracy.