SEC Told Pandora To Be More Explicit In Its IPO That Its Business Is Likely Unsustainable Due To Crazy Licensing Rates

from the licensing dept

Wed, Aug 10th 2011 1:11am — Mike Masnick

We've been questioning the business model viability of Pandora for a while now. The company had told various press outlets that it was profitable, but when it filed to go public that did not appear to be accurate. The issue isn't so much Pandora, but the ridiculous licensing fees it has to pay. Again, this fit with what we had noticed by doing some quick back of the envelope math. We couldn't figure out how the company could become profitable under its licensing deal in which the record labels get a ridiculously large cut -- especially since many in the recording industry have viewed that deal as too favorable (it was a discount from the rates set by the Copyright Board) and would like to increase the payments when the deal expires.

Now it's come out that prior to Pandora's IPO, the SEC asked the company to be more explicit about the fact that its business plan relies on a lobbied agreement, and that under the Copyright Board's rates, the company's business model is unsustainable:

You currently operate under a business plan strongly reliant on lobbied concessions and federal court and federal agency consent decrees and settlements, setting reduced royalty and licensing rates that expire in 2015 and that ordinary rates, not subject to such extraordinary measures, to which you may be subject upon the expiration of these exceptions make your current business plan unsustainable, as discussed in your risk factors on page 15 and 16;

Again, the real issue here is the ridiculously high licensing fees, set by a completely out of touch and technically clueless Copyright Board. These are the baseline for any negotiation, and while an agreement was reached to let Pandora (and many others) have lower streaming rates for the time being, it seems unlikely that the recording industry will agree to any lower rates in the future, and will only try to push for higher rates. This is unfortunate, given that Pandora is a cool service and it would be nice if it could survive. And, don't think this only impacts Pandora. Other music streaming services face similar licensing issues as well.

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Filed Under: business models, copyright, licensing, sustainability
Companies: pandora

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alex (profile), 10 Aug 2011 @ 2:08am

The article you linked to says that Pandora pays a maximum of 0.0025 cents (a 400th of 1 cent) per listener per play.

Is that it or are there other fees they have to pay? That doesn't sound like much at all to me.
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Anonymous Coward, 10 Aug 2011 @ 2:47am

Greedy bastards!
A 400th of a cent is way too much. Rather than sell more ads or find another way to make money, Pandora should keep complaining to journalists that the rates are set too high.
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Anonymous Coward, 10 Aug 2011 @ 2:57am

Re:
Let's try to put things into perspective:

If 1 million (10^6) people listen to one song, the fee runs up to $25 (10^6 * $0.000025 = $25).

If the average song runs for 3 minutes, and those million people listen for one hour of music (60/3 = 20 songs per hour), it costs pandora $500 per hour to stay in business (20 * $25 = $500).

Something like that, If I got the math right. Feel free to smack me upside the head if I got it wrong :)
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alex (profile), 10 Aug 2011 @ 3:11am

Re: Re:
Your maths looks sane to me.

The other side of the coin is that Pandora need to convince labels that they want to have their music on there, as that is the core of their product. As the fees stand at the moment, for every 1m plays of a track, the maximum a label will get is $25 (in reality, I would guess it's lower than this figure, though I don't really have a clue how the fees get split up). If the fees are lowered, they risk having a bunch of labels pull their content from the service.

This has made me think of this techdirt article which I agree with the sentiment of, but I think can also be applied to this topic.

If You're Arguing That Pandora 'Deserves' Their Business Model To Work, Your Argument Is Wrong
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mike allen (profile), 10 Aug 2011 @ 3:56am

If that was all they paid i think there is a one off $500 set up fee + other admin charges the rates are way to high surely the only way for pandora to make money is a percentage of revenue, say 10% that would be fair and the service is only available in the USA.
pandora pulled out of the UK saying the PRS wanted too much from them.
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Jay (profile), 10 Aug 2011 @ 4:20am

Re: Greedy bastards!
Yeah, just like $16 a week isn't a lot until you begin to do the math of how this is unsustainable.
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Gabriel Tane (profile), 10 Aug 2011 @ 4:28am

Re: Greedy bastards!
You notice, however, that Pandora believes this is possible... the SEC are the ones who think the costs are too high and relying on the lobby concessions and other 'favors to reduce that cost is a risky business plan.

So I missed the part where Pandora was whining to anyone about anything. Did you read a different article then I did?
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John Doe, 10 Aug 2011 @ 4:50am

The real problem is...
The real problem is Pandora is effectively radio, something people have gotten free for decades. I am guessing most, like me, don't pay for a membership. So short of ad revenue, which online ads don't pay what OTA ads pay, their out of luck.

The music labels should see it for what it is, radio, and be paying for the promotion of their music. Yea, I know that is illegal, but the point is that licensing should be extremely cheap or free.
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Jay (profile), 10 Aug 2011 @ 4:56am

Re: The real problem is...
The reality is, with Spotify, turntable.fm, and a bunch of other places popping up, the music labels can continue to charge higher rates. But as Pandora goes down, someone will come in their place.

When have the music people ever cared about what others think of their horrid extortion practices?
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Howard the Duck, 10 Aug 2011 @ 5:06am

Music
I've bought more tunes listening to Pandora than at any other time. Pandora, Netflix - The business models that would actually work for the RIAA and the MPAA, being shot down by the lords of idiocy.
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alex (profile), 10 Aug 2011 @ 5:33am

Re: The real problem is...
the point is that licensing should be extremely cheap or free

You think Pandora should have an annual turnover of something like $200m but they shouldn't have to pay anything for the content that makes their product good?
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Nicedoggy, 10 Aug 2011 @ 5:44am

Re: Re:
How much that exposure increases sales?
What is the number of people that pandora sends to stores?

Do they have to pay for that work really?
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John Doe, 10 Aug 2011 @ 5:49am

Re: Re: The real problem is...
You did see the part where I said cheap or free? You are taking the exact same line of thinking the RIAA takes, if someone makes money off "our" content, we should get a cut. Would you also argue that Ford should get a cut every time someone rents a Ford vehicle? Or maybe, just maybe, the people providing the service should be allowed to make money too?
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Anonymous Coward, 10 Aug 2011 @ 5:56am

Re:
The same article also states:

In Q1 2011, license fees at Pandora were $29.2 million

If that figures consistant every quarter, that's $116,800,000 a year. In licensing fees. From 1 company.
Even to the mafiaa lords, thats a figure to drool over.
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Casey, 10 Aug 2011 @ 6:01am

Unless I am mistaken, Pandora agreed to the Pureplay SoundExchange rate, which is $0.00102 per song in 2011, or roughly 1/10th a cent. Not 1/400th of a cent.

http://soundexchange.com/service-provider/rate-tables/commercial/alternative-rate-structure s/pureplaysmall-pureplay-rates/
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E. Zachary Knight (profile), 10 Aug 2011 @ 6:06am

Re: Re:
Now take that $500 an hour and multiply it by the number of hours in the year 8760*500=$4,380,000 a year, if, and that's a big if, only 1 million people are listening each hour.
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alex (profile), 10 Aug 2011 @ 6:12am

Re: Re: Re: The real problem is...
Are you saying that we shouldn't have copyright in the first place and that one should only have the right to sell something (eg. music, software, books, art) once, like Ford do with cars?
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DannyB (profile), 10 Aug 2011 @ 6:15am

Re: The real problem is...
Let's use some recording industry wisdom here.

> The music labels should see [Pandora] for what it is

It's a way to increase audience enjoyment by valuing the content more. Paying more makes listeners value the content more. The more they value the content, the less they'll pirate. Ergo, the way to fight piracy is to charge unbelievably high prices -- as they are doing to Pandora. Problem solved. Everyone happy.

> The real problem is Pandora is effectively radio,
> something people have gotten free for decades.

And therein lies the problem: Freetards expecting radio for free. Letting other people overhear radio for free. The obvious (and therefore patented) way to solve these problems is to put radio behind a paywall which will greatly increase the number of listeners.

(I think I need to take a shower now. :-) )
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DannyB (profile), 10 Aug 2011 @ 6:20am

Re:
Are you suggesting it is a sound business plan to assume stable prices when dealing with people who are, how shall I say this, insane?

Like Netflix, like Hulu, etc, once Pandora is really successful, which direction do you think the price will go and how fast?
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alex (profile), 10 Aug 2011 @ 6:26am

Re:
ugh - i've just double-checked in the SEC paper and the guy in the other article has it wrong. He says "0.0025 cents" but it is actually a maximum of "$0.0025". The actual rates listed are:

2011 - non-subscription: $0.00102 subscription: $0.00170
2012 - non-subscription: $0.00110 subscription: $0.00200
2013 - non-subscription: $0.00120 subscription: $0.00220
2014 - non-subscription: $0.00130 subscription: $0.00230
2015 - non-subscription: $0.00140 subscription: $0.00250
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Anonymous Coward, 10 Aug 2011 @ 6:26am

Re: Re: Re:
I don't think they're saying Pandora 'Deserves' anything. I think they're saying that shutting down Pandora by setting prices too high for them to operate would be a short-sighted and ultimately self destructive move by record labels. Pandora's business is clearly value additive to the recording industry overall even if they pay no royalties at all, so why price them out of the market?
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Anonymous Coward, 10 Aug 2011 @ 6:33am

Re: Re: The real problem is...
They do 'pay.' Even with no royalties at all labels still get free promotion and purchase referrals.

Pandora's 'product' isn't the music itself either, it's the discovery engine. If I already know what song I want to listen to Pandora is not where I would go looking for it because their service doesn't work that way. It actively encourages people to find new songs to buy. That could be a win for everyone, consumers, Pandora, and labels.
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indieThing (profile), 10 Aug 2011 @ 6:37am

Re: Re: Re: Re: The real problem is...
No copyright, that would suit me just fine, I've been making a very good living off of my games sales for many years now. All without using copyright, I know I have it, but enforcing it doesn't make a blind bit of difference. Copyright doesn't give you the ability to sell more than one item. Putting together a decent business model does though. And yes, my games have been pirated many times. So what ?
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John Doe, 10 Aug 2011 @ 6:43am

Re: Re: Re: Re: The real problem is...
When it comes to buying a product and using it the way you want to, then yes, that part of copyright should go. Ford can't tell me what I can or can't do with my truck and I don't expect to be told what I can or can't do with my music, movies, books, etc.

Now should I be allowed to buy 1 movie, copy it a million times and sell it? No, but should I be able to play it over the net to other? Sure, why not?
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Gabriel Tane (profile), 10 Aug 2011 @ 6:46am

Re: Re: Re: Re: The real problem is...
Are you saying that an artist (and we're ignoring the fact that all these license fees really go back to the RIAA, and a small, laughable trickle comes down to the actual artists...) should get money every single time that song is played?

Remember, the whole copyright system was developed to promote creativity... not create a welfare system for artists so that they never have to work again. If they can coast on the residuals of a song written 50 years ago, where's the incentive to create new art?

Now I, and the person to whom you were replying, don't think that everyone should get these things for free. But if you are making MILLIONS off of a handful of songs because you are charging per person who ever hears it, how is that using the CW system to 'recoup the cost' of creating the and distributing the art? That's extortion.
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alex (profile), 10 Aug 2011 @ 6:49am

Re: Re: Re: Re: Re: The real problem is...
Why don't you release your games under creative commons?
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alex (profile), 10 Aug 2011 @ 6:54am

Re: Re: Re: Re: Re: The real problem is...
So the fundamental difference is between streaming and downloading. Providing a downloadable mp3 file should have a cost, but if that download is in a streaming format, the cost should be waived?
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alex (profile), 10 Aug 2011 @ 7:11am

Re: Re: Re: Re: Re: The real problem is...
I haven't heard any well-explained alternatives that sound better than the current system of labels being paid when their music is played, so yes, I'm going with copyright. (not that I'm closed-minded or some sort of maximalist)

Just to mention your point about a a small, laughable trickle comes down to the actual artists - I think you may be making the mistake of confusing the music industry with the major labels (something I read all the time on techdirt)

Pandora pays their licence fees to soundexchange, who don't make a profit and pass those fees directly on to the labels. In the case of the majors, that may be through the RIAA. In the case of independent labels, it is given directly to them.

It's not uncommon for small indies to do 50:50 splits with their artists and it's also not uncommon for labels to pass the entire rights of recordings back to artists after a set time. The industry is not full of wankers. It's really not.
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out_of_the_blue, 10 Aug 2011 @ 7:11am

"The issue isn't so much Pandora..."
"The issue isn't so much Pandora, but the ridiculous licensing fees it has to pay."

Yot! You're slowly learning economics, Mike. The basic problem with any business IS those darn COSTS for mere PRODUCT. That's your consistent position (here in music website version): the MAIN draw must be provided by someone else FOR FREE. "John Doe" says explicitly that licensing should be FREE.

The notion seems to be that content owners should be happy that their product is being "promoted" and that they can somehow make money off selling the "real" product. -- BUT you never seem to factor in "piracy", which if unchecked, WILL lead to near zero sales. Then, having undercut all possible means of their income, you take off saying content owners are urging draconian copyright.

You seem stuck in a rut, and as I've argued before, I don't see any way that the /system/ can be made to work: ad rates are too low to pay licensing, and licensing is irrelevant in the face of rampant piracy.
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Ninja (profile), 10 Aug 2011 @ 7:27am

Re: Re: Re:
SEC must have done the math. For me, considering employees, servers and other fixed costs the model seems unsustainable. I saw ppl talking about advertising but really, do we really want ad crippled services? And even if there are less ads, the number of ppl using Ad Blockers today is huge. Take for instance the page I'm seeing now. There are only a few text ads to the left and it's actually ok for me but at some points I regret having disabled AdBlock. Banners are ugly. Banners are annoying. Banners eat my connection.

I'm not sure if they are charging monthly fees but even if they plan something like this, why would I pay for a small selection? Being hostage of MAFIAA's wills they have trouble making a decent range of content available.

I do think the service has future. But when you add MAFIAA to the mix suddenly the future looks much darker. Much like Netflix, MAFIAA won't allow those to grow and thrive. As it was well said recently, MAFIAA seems to be getting close to 1997 now. In my opinion they never left the Edison era.
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Anonymous Coward, 10 Aug 2011 @ 7:32am

Re: Re: Re: Re: Re: Re: The real problem is...
You missed the point.
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Gabriel Tane (profile), 10 Aug 2011 @ 7:33am

Re: "The issue isn't so much Pandora..."
"That's your consistent position (here in music website version): the MAIN draw must be provided by someone else FOR FREE."
Funny... I don't remember Mike ever saying that it should be free.

" "John Doe" says explicitly that licensing should be FREE."
Yet another person who didn't read the cheap part... do you stop reading as soon as you see the word "Free" so you can jump down to the Submit Comments section?

" BUT you never seem to factor in "piracy", which if unchecked, WILL lead to near zero sales"
Wrong. We have seen many studies that show where pirates make the best customers and that they DO in fact purchase music. We have heard from many self-proclaimed pirates here that say they do buy the music the previously 'pirated' so that they can indeed support the artists.
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Gabriel Tane (profile), 10 Aug 2011 @ 7:40am

Re: Re: Re: Re: Re: Re: The real problem is...
"I haven't heard any well-explained alternatives that sound better than the current system of labels being paid when their music is played, so yes, I'm going with copyright. (not that I'm closed-minded or some sort of maximalist)"
That doesn't mean they don't exist. Mike has mentioned a few alternatives to many of these business models, which while they don't work for everyone they DO work for some... contrary to what a particular AC may say about it.

And thank you for the perspective on the other facets of the industry. I know that I let my "RIAA Screwing The Artist" view cloud my perception of the rest of the labels that don't do that... I get a bit hung up on the "for the artists!" battlecry of the RIAA. Irks me.

Anyway, Even if that money does go back to the artist, how is that helping encourage the creation of new art? How is it paying back the cost of creation if they are getting ridiculous sums of money for something they did long ago? If that's the kind of business model that our society wants for artists, then fine... but I don't think it is. If it were, we'd all be in line to pay the Artist Welfare instead of here arguing about how much is being charged because there is no alternative available (unless we force a change).

And maybe that's part of the problem too... we don't have a choice (outside of piracy)... it's either play their way and fund the welfare... or don't listen to music.
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Anonymous Coward, 10 Aug 2011 @ 7:50am

What does radio pay?
How does Pandora's license fees compare to what radio pays per listener? I would think they would be the same number, but what do I know.
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Gabriel Tane (profile), 10 Aug 2011 @ 8:01am

Re: "The issue isn't so much Pandora..."
And I want to point out that Mike isn't saying the fees are too high... the SEC is saying that the fees have created an environment that is so risky that proper disclosure to investors needs to be given.

If even the SEC is saying the environment is untenable for business to run safely...
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CommonSense (profile), 10 Aug 2011 @ 8:04am

Re: Greedy bastards!
For starters, no one would use it if they sold more ads...
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zegota (profile), 10 Aug 2011 @ 8:17am

Re: "The issue isn't so much Pandora..."
"BUT you never seem to factor in "piracy", which if unchecked, WILL lead to near zero sales."

Piracy is essentially unchecked, and media (music, movies, games) are selling better than they ever have.
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alex (profile), 10 Aug 2011 @ 8:20am

Re: Re: Re: Re: Re: Re: Re: The real problem is...
I agree with you about there being different viable models around that suit different people, and that's a great and exciting thing.

In my opinion, an artist being paid more if their music is popular is a nice (and somehow fair) concept. I would agree wholeheartedly that the 50 year term is ridiculous and should be shortened and sampling should be sorted out and all sorts of other issues, but I don't think the fundamental idea of paying for a piece of music, or paying a licence to broadcast a piece of music is flawed (and certainly not to the point of calling it "welfare"!)

I also don't agree that there are many artists getting "ridiculous sums of money for something they did long ago". Nobody's making great money from sales, and even fewer are making any significant amounts from streaming (but it's getting better).
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Anonymous Coward, 10 Aug 2011 @ 8:21am

Re: Re: "The issue isn't so much Pandora..."
Gabriel, you have it very backwards, you are sort of falling for failed line of logic Mike is trying to push.

What the SEC is saying is something they might say to any subsidized business: When the subsidies or price breaks on your raw material expire, and you have to start paying the true costs, it will adversely effect your business. You need to disclose it.

The SEC is not in any way commenting on the validity of licensing fees, or drawing any conclusion about them. They are only asking Pandora to be more clear in explaining to potential investors what their current situation is, and that a material change is forecast in the future, when the special pricing expires.

Basic business models 101: If the cost of your raw material is too high, you go broke. If you don't like the cost of the material, then source it somewhere else. If there is nowhere else, or the source isn't as good, you can either choose to put out an inferior product, charge more for your product, or close the doors. The SEC is just assuing that Pandora discloses this clearly important "restriction" on their business so that investors aren't tricked into buying something that likely won't be profitable when the major discounts come off.

The SEC is not saying "the environment is untenable for business". That is BS and you know it.
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Anonymous Coward, 10 Aug 2011 @ 8:23am

Re: Re:
It's still not enough. Shouldn't it be $116,800,000,000?
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jupiterkansas (profile), 10 Aug 2011 @ 8:29am

My daughter uses Pandora for the sole purpose of figuring out what music to buy next. She hears something she likes and it's off to iTunes.

It's all promotion - just like radio is all promotion - and it's appalling that Pandora has to pay the labels to promote the labels. The RIAA has no business complaining about piracy when they're charging people to promote their music, and pricing streaming services out of business - services which will reduce piracy greatly.

I guess the big labels don't like it because it might lead someone to buy music from an indie label. In my opinion, they can't file bankruptcy fast enough so the world can move on to something better.
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lucidrenegade (profile), 10 Aug 2011 @ 8:29am

Re: Re: Re: Re:
You do realize this is the recording industry we're talking about, right? Logic isn't something they're good at.
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Anonymous Coward, 10 Aug 2011 @ 8:39am

Re:
But remember, radio/Pandora/et al is promotion for the performer. What's in it for the songwriters?
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Gabriel Tane (profile), 10 Aug 2011 @ 8:39am

Re: Re: Re: "The issue isn't so much Pandora..."
"The SEC is just assuming that Pandora discloses this clearly important "restriction" on their business so that investors aren't tricked into buying something that likely won't be profitable when the major discounts come off.

The SEC is not saying "the environment is untenable for business". That is BS and you know it."
Ok... the SEC is not saying the environment is untenable in so many words... but they are saying this: your business is relying in subsidies that will not be around forever and your model will not survive when those subsidies dry up (something Pandora has admitted). The SEC even acknowledges that the reason for that unsustainability is the rates...

"and that ordinary rates, not subject to such extraordinary measures, to which you may be subject upon the expiration of these exceptions make your current business plan unsustainable"- SEC
So what part of that ISN'T saying "the rates are too high for your business model"?

Now, you could argue that Pandora should adjust thier business model to fit with the fee schedule and just poo to them if they can't find a way to make it work. But if the fans want such a service, and you're in the way of it... how are you helping the creative innovation wanted by your customers?
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Gabriel Tane (profile), 10 Aug 2011 @ 8:44am

Re: Re: Re: Re: Re: Re: Re: Re: The real problem is...
I'm glad we agree that much of the model is broken. And until you point out what purpose the royalties acutually serve except a welfare system, I'm sticking with my opinion.

"I also don't agree that there are many artists getting "ridiculous sums of money for something they did long ago". "
You're right... that list is restricted to the ones who sue and who lobby for extensions to copyright to the point that we get into the 50+ year timeline. And all for no reason other than the sense of entitlement that they should always get paid for anything they ever do. And I disagree with that... that's welfare.
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Jeffrey Nonken (profile), 10 Aug 2011 @ 9:18am

Re: Greedy bastards!
"...Pandora should keep complaining to journalists that the rates are set too high."

Wait a minute. This isn't Pandora complaining, this is the SEC pointing out that Pandora's model won't fly because of the rates.

Straw man argument and blaming the victim in less than once sentence. Nice.
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Jeffrey Nonken (profile), 10 Aug 2011 @ 9:28am

Re: Re: Re:
"If You're Arguing That Pandora 'Deserves' Their Business Model To Work, Your Argument Is Wrong"

I don't think that's the argument. I think the argument is that Pandora's business model should work, and the only thing keeping it from working is the unreasonably high license fees being charged. Either because the Copyright Board is greedy (figuring that charging more automatically makes higher profits) or vindictive (pretending to offer licenses but pricing them too high to allow a sustainable business model, thus shutting down any businesses they don't like).
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alex (profile), 10 Aug 2011 @ 9:42am

Re: Re: Re: Re: Re: Re: Re: Re: Re: The real problem is...
Ok. Here's one:

A system where royalties are paid on sales of tracks can lower the cost of bringing new music to market. It means that a label can release a record relatively inexpensively in the hope that it will one day become profitable. In the absence of such a system, a band would want to be compensated up front for the time that they have worked on the album, knowing that is the only payment they will receive.
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Gabriel Tane (profile), 10 Aug 2011 @ 9:53am

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: The real problem is...
Ok... I see what you mean. And that is what I meant by "recouping the costs"... but when you do the math on how much is collected and paid to the industry, the theory falls apart in the light of applying it. If what you're saying is true, and given the numbers that are being paid, the industry should be discounting the creation costs to damn near zero.

And why should this industry be so protected? When you talk about creating at a reduced cost in the hopes that it becomes profitable... that's the risk of business. I don't see the Mom & Pop sandwich shop down the street from me being given such a wonderful guarantee of ROI.

Seems rather shady that this one industry is so well-favored by the government (thru laws) that it's damn near guaranteed to succeed. If only we were all so lucky.
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Anonymous Coward, 10 Aug 2011 @ 10:10am

Re: Re: The real problem is...
And all this time I thought is was the amazing algorithms they designed which pick songs based off of similarities between songs and artists that made the service good.
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Jeffrey Nonken (profile), 10 Aug 2011 @ 10:31am

Re: Re:
Ah, the old confusing $0.0025 with �0.0025 trick.

For the record: $0.0025 is �0.25, which is 1/4 of a cent. That's 100 times as much as �0.0025, which is what was quoted before.

Funny how many people see $0.25 and say "twenty-five cents" but shift it right and they get confused: $0.0025 is "point oh oh two five cents". Only it isn't. And some guy goes to Europe or Asia or something and pays 100 times as much for his cell phone data connectivity as the customer service drone quoted and who gets to eat the difference? Not the phone company.
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Jeffrey Nonken (profile), 10 Aug 2011 @ 10:33am

Re: Greedy bastards!
http://edgar.sec.gov/Archives/edgar/data/1230276/000119312511032963/ds1.htm#toc119636_22

Turns out it's $0.0025, which is 1/4 of a cent, not �0.0025, which is 1/400th of a cent.

There is a non-trivial difference.
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John Doe, 10 Aug 2011 @ 10:34am

Re: Re: Re: Re: Re: Re: The real problem is...
Yes and no. With movies, Netflix (or others) should be able to buy 10,000 copies of a movie and stream up to 10,000 customers at any given time. It should not need licensing. With music, Pandora isn't much different than radio and radio always paid minimum licensing and was free to the listener. Just because it is broadcast over wires instead of the air should make no difference.
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Anonymous Coward, 10 Aug 2011 @ 11:22am

Hell yeah! It's about time the SEC stands up to the RIAA!
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Anonymous Coward, 10 Aug 2011 @ 12:42pm

Clarification
I said:
>>>Pandora should keep complaining to journalists that the rates are set too high.

I was not referring to the above article - obviously, I thought - but rather making a general statement. I find that Pandora complains about what is essentially its cost of goods. And I pointed out that it could also raise its revenue in one of several ways.

FYI, since several people asked, Pandora pays royalties to performers and labels, and to songwriters. In the U.S. traditional radio only pays royalties to songwriters.

The other difference between Pandora and traditional radio is that Pandora has WAY fewer commercials. Perhaps it should run more. That's really my points - the SEC is pointing out that Pandora doesn't seem to be on track to make a profit, because its revenue isn't high enough relative to its cost of goods. Mike blames this on the cost of goods being too high. But you could just as easily say that revenue is too low.
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mike allen (profile), 10 Aug 2011 @ 12:46pm

Its time all the internet stations stood up to the IRAA and told them not one penny then put servers in a more er sympathetic country.
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gthomas, 10 Aug 2011 @ 3:54pm

Pandora's Copyright woes
What does Pandora receive for proving promotion and sell through? Does Pandora (or any other music listening/discovery service) get a piece of each sale made through their service?

When Live365 started letting people make little radio stations, the cool part was playing/promoting artists/genres you liked, maybe even sneak tracks to bands your affiliated with onto the show. I felt the button on the player allowing the user to buy any of the tracks played, where I, the DJ make nothing, was good payback to the labels for promoting their music. Can't do that with radio easily, well now with Shazam you can, but when labels ask Internet broadcasters to pay per listener to promote their artists for free seems ridiculous too. The more popular stations, songs or artist would make more sell throughs.

If the labels want to get paid at the rates requested the services should pull the sell button and promotional/artist info part (the true value add).

Pandora and all the Internet broadcasters are being forced to pay to provide promotion and sales for the labels.
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