“The sleep of reason produces monsters”-Goya

By the end of 2015 Pandora Executives  and Investors will have sucked nearly 1/2 a billion dollars in “stock compensation” out of the company.  Yet Pandora complains very publicly to the US Congress about being unable to cover royalties to performers and Songwriters. Hence the massive lobbying effort in Washington DC and endless lawsuits against performers and songwriters.  Pandora is currently pleading for lower royalties before the Copyright Royalty Board in Washington DC.

Sen Ron Wyden the hand puppet of webcasters and broadcasters (and our vote for Manchurian Candidate) even repeated this crap when he announced the Pandora/broadcaster backed Internet Radio Fairness Act.

“Senator Wyden is introducing the Internet Radio Fairness Act (S.3609) to remove the regulatory shackles preventing Internet radio from being commercially viable” (italics added for emphasis).

But this is not true.  The interactive radio monopoly Pandora is not profitable simply because it doesn’t know how to live within it’s means.  It’s just math folks.  Look at the numbers.

If Pandora would eliminate the outrageous sums it is paying to executives in “stock compensation”  it would actually be profitable.

As The Specialist at Seeking Alpha notes Pandora’s own 2015 guidance demonstrates that it would have a $70-80 million dollar profit in 2015 without the $122 million in executive “stock compensation.”

Tom Silverman is a genius. Or Billboard is run by total idiots.

Maybe both. One does not preclude the other.

A billboard Guest Post By Tommy Silverman from Jan 2013

2 years later this article in Billboard.  Here Billboard reports with (almost) a straight face that Silverman is now predicting a much more pessimistic 5.5 billion dollar business by 2019.  While the journalist does address the earlier $100 billion prediction you got to wonder why Billboard would devote this sort of fawning coverage to a guy that was off by 94.5 billion dollars! The only explanation is  Tommy Silverman is truly a genius.

Spotify isn’t necessarily the enemy of performers and songwriters.  No I don’t like the rates I am paid (as either performer or songwriter).  My main beef with Spotify (and the deals labels cut) is that I wish I didn’t have to have all my catalog on  the service.   I’d simply like to be able to opt-out.  And if I control enough of my rights I can.  Spotify is a legally licensed service that negotiated deals with large blocks of rights holders.  It may have been bad business for performers and songwriters but it was just that: A business. A legally operating business.

However I’m not sure you can same thing about Pandora.   Pandora has conducted a scorched earth campaign against artists and songwriters.  Refused to pay on pre 1972  recordings despite recent court rulings.  Sued BMI and ASCAP for lower rates. In the ASCAP case there were tens of millions of dollars spent in legal fees to save a few million dollars a year? Pandora spent millions lobbying congress to pass a FEDERAL law that would have mandated artists take up to a 60% pay cut.  Who does that?  What kind of business goes to the US Congress to force it’s suppliers to take less? Also in what appears to be some sort of bizarre publicity stunt,they claimed to have bought a radio station in South Dakota (it’s still not clear they have all the assets that would allow them to really claim this).   The idea here may have been that they would pay  lower royalties as a terrestrial and web broadcaster? Each of these “events” was loudly proclaimed as “good news” for Pandora and it’s stock price in the financial press.    Why?   I don’t really know but maybe it has something to do with this:

By the end of 2015 executives and investors will have sucked nearly 1/2 billion dollars in “stock compensation”  out of the company. A company that has yet to make a dime in profit. 

Pandora does not seem like an actual “business” to me.  You readers are smart enough to draw your own conclusions.

While I’m not a huge fan of Spotify they have negotiated and despite the hardball stance on free tier of streaming have generally played by the rules.  Yes there may be a sort of Cold War between artists and Spotify, but there are rules.

So lets run with that analogy.   If Spotify is like the old Soviet Union what do we make of the DeadEnders over at Pandora?  Pandora has just about destroyed the music licensing system through their scorched earth policies.  The Copyright Office came as close as they could to pointing the finger at Pandora in their recommendations for music licensing reform. One could argue that  the last three years of Pandora rate court shenanigans is the very reason that the Copyright Office decided to study the music licensing process in the first place!

So if Pandora doesn’t care if they destroy the federal licensing process on which they and every  TV, radio station, restaurant and venue in the country depends what are they?   They are not a business.

In our analogy Pandora is more like ISIS?

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 involving “connected refrigerators” from the VPs of digital “strategy” at your record label or distributor.   This is what is really happening.  And can we really trust these digital executives anyway?  They have been proven objectively and demonstrably wrong.  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?

But I digress, here’s todays installment:

The Cynical Musician has demonstrated a flat rate streaming model of the music business essentially creates a cap on the size of the recorded music business.   The corollary to this is that as streaming services “scale” the rates will go down per spin. Our data shows that this is indeed the case.  Streaming rates per spin are falling.  This is contrary to what pro-streaming music business executives and the digital services have claimed.  Details here.

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.

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.  You know you can’t trust these digital executives, right? They are objectively and demonstrably wrong.  We suspect they are now  just making shit up to try to cover their asses (or looking for jobs at the streaming services.)  Who will be the first executive to lose their job over the streaming fiasco?

Here’s todays installment:

According to our detailed examination of a moderately sized labels digital revenue, it appears that free Spotify pays less than a tenth of a penny per stream.  $0.000966 to be exact.  This is all revenue to rights holders!  The paid service pays 7.5 times as much (But as we detailed yesterday a survey of college students shows revenue from paid subscriptions appears to be falling).

See our detailed post about this from November. 

We saw the surprise announcement that Rob Wells chief of digital has stepped down from UMG.

We have no idea why he would have resigned. It seems to be a great mystery.

Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?

Let The Heads Roll…More Genius From The Record Industry Braintrust or Mark Mulligan Gets a Calculator…

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

December of last year Billboard changed the way it calculates it’s album charts.   The publication once hailed as “The Bible of the Music Business” last year announced that it would count 1500 streams as the equivalent of an album sale.  While I welcome the addition of a streaming component to the charts,  I believe that Billboard may be overweighting free streams in order to help streaming services keep artists on the free tiers of streaming services.  Let me explain.

The 1500 streams were supposedly based on the approximate rate that streaming services pay per spin. At $0.005 a spin to rights holders the $7.50 generated by 1500 spins is close to the $7.00- 9.00 rights holders net on an iTunes album sale. Ed Christman detailed and previewed these changes last fall in Billboard before they were formally implemented. This was clearly part of the logic of the change.

But since that time we have discovered that Spotify free tier does not pay anything close to that.   Our examination of the revenue generated by a moderately sized indie catalogue shows that in the US Spotify free tier generates $0.0009 per spin.   So 1500 plays on the Spotify free service really only generates $1.35.  YouTube generates a similarly low amount per 1500 spins.  By our calculation YouTube pays $0.00175 to all rights holders per spin (including video!).  That’s $2.63 for 1500 spins.   So on Spotify free platform the revenue equivalent of an album sale would require more like 8000 streams and on YouTube more like 4300 streams.

Objectively we can conclude that in terms of revenue both YouTube streams and Spotify free plays are vastly overweighted compared to sales.

Now let’s put this in context.  What happened at the end of October/ beginning of November?  Taylor Swift released an album that she tried to place only on the paid or premium tiers of the streaming services.  Or in other words she tried to withhold her full album from the free tier of the  streaming services.  Both YouTube and Spotify refused to do this.  As a result Swift’s new album did not appear on these two streaming services at all. Largely unreported was the fact that Swift wasn’t making an anti-streaming statement, indeed she left key parts of her catalogue on the premium Rdio service.

Wait! This isn’t the way the mainstream press and Billboard first reported it?  That’s right. Ever wonder why? In the case of the mainstream press they may have innocently missed this subtlety.  But Billboard?  The Bible of the Music Business? You got to wonder.

This wouldn’t be the first time that Billboard has seemingly engaged in very Hearst like reportage to prop up a streaming service in trouble.   When we broke the story that Pandora founder Tim Westergren had repeatedly contributed funds to a congressman that tried to have Washington DC’s gay marriages voided,  Billboard quickly stepped in with this piece by Andrew Flanagan to defend Westergren.  Flanagan seemed to find some sort of “balance” in Westergren’s donations that canceled out those donations to a gay baiting congressman.  Interesting. An unusual  argument for a NYC based, sometimes NPR reporter to make. I wonder if he’s ever tried this argument out on his gay neighbors?

But I digress.  The point is this: Treating Billboard as an unbiased observer in the music industry battle over streaming is becoming a sketchy proposition. It has clearly become a partisan player in the battle over streaming.    And you have to wonder if the curiously timed changes to the Billboard charts are not part of this battle.  Because now if an artist wishes to “chart” they will have to think twice about removing their songs from YouTube or Spotify.

How convenient for the streaming services!

New Math $.00666 : Billboard’s New “Consumption” Chart, Free Streams and the End Of Meaningful Metrics?

Why do we expect mobile consumers to adopt Spotify premium when they can steam any song they want on YouTube mobile already? Without a subscription to Music Key?  They can do the same on SoundCloud for that matter.  Further these services pay a pittance to artists compared to Spotify.  Why aren’t artists outraged?

A survey of music consumption habits by students at a public university indicates just how tough it is for Spotify.  When asked which services they use to listen to music, clearly YouTube dominates. The not-fully-licensed SoundCloud is a respectable 4th. (Ed Note: And what’s the deal with 8tracks.com? This was not really on our radar until now.  It was a write in but had it been included in survey it would have polled at nearly 10%.)

We can also objectively conclude that Beats Music Service is DEAD. Monty Python might phrase it this way:

“This streaming service is no more. It has ceased to be. It’s expired and gone to meet its maker. This is a late streaming service. It’s a stiff. Bereft of life, it rests in peace. If it had not been purchased by Apple it would be pushing up the daisies. It’s rung down the curtain and joined the choir invisible. This is an ex-streaming service.”