RIAA Lobbyists Turn Anti-Pandora Desperation Level Up To 11

from the are-they-serious? dept

Fri, Jun 21st 2013 9:50am — Mike Masnick

We've written a few times about MusicFirst, a front group set up by the RIAA (potentially illegally), pretending to lobby for "artists'" interests, but which is entirely about pushing the agenda of the RIAA in increasing royalties. It was originally set up to target terrestrial radio rates, but has had a real hard on for Pandora lately. In April, we wrote about the group's nutty argument that Pandora was deliberately not selling ads to avoid profitability. They honestly claimed that all Pandora had to do was sell additional ads and profitability would be no problem -- leaving out the simple fact that, if Pandora could sell more ads, it would. The ad business is a terrible business, and it's not easy to sell into it. Yet, these lobbyists pretend anyone can just snap their fingers and the ad dollars come rolling in. More recently, they argued that Pandora's attempt to seek the same internet streaming rates that other companies get was "a sick joke." Again, they weren't seeking lower rates as others -- but rather the exact same rates that competitors like iHeartRadio had. And they were told it was a sick joke?

The latest is really just blatant stupidity. MusicFirst commissioned a study from Jeffrey Eisenach, and apparently they gave him the instructions to do anything possible to make Pandora's rates look "low," because the results of the study don't even pass the most basic laugh test. I honestly, expected some reasonable argument, but got the following:

Other Retailers Pay as Much or More Than Pandora: Measured as a proportion of revenues, several major "online" retailers, including 1-800 Flowers, Netflix, and Overstock.com, and "brick-and-mortar" retailers, like Best Buy and WalMart, pay about as much as or more than Pandora for the products they purchase from others and resell to consumers.

Yes, you read that right. They're comparing Pandora to retailers, rather than other streaming sites. But, Pandora is not a retailer like 1-800 Flowers. I mean, you have to be scraping the absolute bottom of the barrel to try to prove your point when the best you can come up with is this totally different and unrelated business of reselling flowers pays a higher rate to its wholesale providers than a streaming radio station pays for licensing its songs. That's not even comparing apples to oranges, because at least both of those are fruit. Even apples to orangutans would be comparing two living things. This is comparing apples to ornamental knickknacks.

Two of Pandora's Major Online Music Competitors Pay More: "Pandora has made much of the high proportion of revenues it pays out in royalties, but there is nothing surprising or uneconomic about a retailer passing through a high proportion of its gross revenues to the ultimate producers of the products it sells – indeed, at least two of Pandora's major competitors, Spotify and iTunes, pay out higher proportions of their revenues (70 percent) in royalties than does Pandora."

Of course, once again, iTunes is not a competitor (well, other than the streaming service they just launched, but that's not what's being discussed here). But, of course, iTunes uses music as an enticement to get people to buy iPhones, not to make money directly off of music. And, using Spotify as an example here actually cuts against their argument, since the rates Spotify pays are insanely high as well, took over two years to negotiate, and yet some musicians are still whining that it's not enough.

Pandora Has Realized Hundreds of Millions in Profits for Investors: "Pandora's initial investors, including venture capital firms and Pandora's executives, have already realized hundreds of millions of dollars in profits since the company's 2011 Initial Public Offering." In addition, "Company founder Tim Westergren sold shares totaling nearly $15 million between January 2012 and June 2013"

Um, then why didn't the RIAA invest? This argument gets thrown out sometimes by people who don't understand the difference between revenue and equity. Capital gains from investment -- especially for startups -- is entirely different from revenue, yet people who don't understand the difference between income and equity like to compare the two as if it means something. It doesn't. It just makes them look ignorant. You get capital gains from taking an investment risk (many of which don't pan out) and it is not related directly to revenue. The fact that someone who put in a lot of equity is able to capitalize on that is very different from arguing that a business is profitable. If you don't understand the difference between equity and revenue, you really shouldn't comment on it, and it's pretty sad to put it in an official "study" as it just seems to scream ignorance about how these things work.

Basically, there's no "there" in the study. The best they can do is pretend that Pandora is in a totally different business to attack it. It kind of shows just how desperate the RIAA is getting.

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Filed Under: jeffrey eisenach, licensing, lobbyists, royalties
Companies: musicfirst, pandora, riaa

47 Comments

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Zakida Paul (profile), 21 Jun 2013 @ 9:53am

I can't wait for the whole house of cards to come crashing down.
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out_of_the_blue, 21 Jun 2013 @ 10:03am

Oh, I get it: $15 million is not revenue, therefore doesn't count!
Investment return is different from revenue, see? It's not real money, you can't count it in the overall picture. Sheesh. That's your lamest ever, Mike. He went to college to learn how to lie about economics like that, ya know.

ANYHOO, gets down to Pandora is making plenty, they can darn well pay the rates demanded, it's merely essential to their biz. Pay what's demanded, or do without.

Is there ANY business that just gets their way by screaming and yelling that their suppliers want an arm and a leg? -- NO. So why an exception to all economics cause it's music?

I'd guess 11 is on a scale of at least 100. It's just Mike's hyperbole.
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Anonymous Coward, 21 Jun 2013 @ 10:06am

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
"Is there ANY business that just gets their way by screaming and yelling that their suppliers want an arm and a leg?"

I dunno about suppliers, but the Recording Industry seems to spend most of it's day screaming and yelling (at clouds, mostly, pun intended).
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wallow-T, 21 Jun 2013 @ 10:17am

I've often wondered if the big record labels (the funders of the RIAA) are, in Western industry, uniquely isolated from their end customers. Retail, to the labels, always seems to be somebody else's problem.

One big-label problem is that there are few to no big music retailers remaining whose existence is bound to music. Wal-Mart, Target, Apple, Amazon -- all of these would happily roll on their way if the public's interest in music dropped to zero.

The investment market is trying to create new businesses which would be dependent on keeping the public interested in music -- Pandora would be an example -- but the labels don't seem to grasp this, they are focused on wringing every short term nickel they can out of the new businesses.
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Nigel (profile), 21 Jun 2013 @ 10:20am

I pitched a tent on their facebook page if anyone wants to join me but, there is nothing happening over there. Just crickets. At least creative america tried lol...

Nigel
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Anonymous Coward, 21 Jun 2013 @ 10:20am

Mike Masnick proving yet again he is a true enemy of musicians.
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Anonymous Coward, 21 Jun 2013 @ 10:32am

This is comparing apples to ornamental knickknacks.

Even ornamental knickknacks are physical objects. This is comparing apples to JPEG images of bowls of fruit.
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crade (profile), 21 Jun 2013 @ 10:35am

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
Yeah that would be because actual suppliers don't start from a point of all their customers already having a limitless supply of their product and then trying to block people from accessing it.
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Anonymous Coward, 21 Jun 2013 @ 10:35am

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
Are you trying to win the 'obvious troll' award?

If you think Investment return and revenue are the same how about you provide evidence that it is instead of laughing it off as the same thing just because you say so.

What's next, you are going to claim that a person didn't lose money on a house when the sell it if they walk around with $20,000 even though the houses value dropped $200k since when they bought it?
HERP DERP money is money! I'm out of the blue and can't do fucking math and expect people reading a technically inclined blog (It's in the god damn name you worthless illiterate shit) can't do math or basic google searches!
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Anonymous Coward, 21 Jun 2013 @ 10:38am

Re:
By "musicians", you apparently mean "the RIAA's incessant refusal to adapt to the 21st century".

If you actually think the RIAA act solely in the interests of musicians, or are in any way beneficial to the music industry, you are sadly mistaken.
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crade (profile), 21 Jun 2013 @ 10:40am

Re: Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
In other words, if all actual suppliers were suddenly, you know, dissapear.. retailers wouldn't have products to sell anymore, they wouldn't be dancing in the streets and saying thank goodness our "suppliers" aren't around anymore "supplying" us with product.
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Anonymous Coward, 21 Jun 2013 @ 10:41am

Re:
Seriously. Apparently the profit margins on delivering fresh flowers are the same as the profit margins for streaming mp4s. There is no universe in which this makes sense.
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John Fenderson (profile), 21 Jun 2013 @ 10:51am

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
Investment return is different from revenue, see?

Yes, that's right. Revenue is the dollars coming in the door, not the dollars left over after bills are paid.

Is there ANY business that just gets their way by screaming and yelling that their suppliers want an arm and a leg?

Sure, lots of them from the huge (Walmart, for example) to the small (almost every small business I've worked with). It's particularly effective when you can show that your suppliers are giving a better deal to other equivalent businesses.
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Anonymous Coward, 21 Jun 2013 @ 11:26am

talking about the comparison to flowers, perhaps it's time that Pandora sent the RIAA a few in the form of wreaths? that might be interesting!
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jackn, 21 Jun 2013 @ 11:55am

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
Pay what's demanded, or do without.

Wouldn't that be awesome if thats how it worked.

Thats same argument used by other ignorant people (like you)

In business real business, it goes like this

Pay what's demanded, or find an alternative solution.
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jackn, 21 Jun 2013 @ 11:57am

Re:
This has nothing to do with musicians are artists.
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Ninja (profile), 21 Jun 2013 @ 12:08pm

Okay, Hollywood employs grocery store workers and the labels employ flower sellers. Makes total sense now. So home taping is killing flower sellers since 1886 apparently.

Also, since we are comparing apples and ornamental knickknacks I'd say this is a case of insane apples trying to burn the apple tree while still in it.
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Ninja (profile), 21 Jun 2013 @ 12:09pm

Re: Re:
Welcome to RIAAland, where time does not pass and you still live in the 80s.
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John Fenderson (profile), 21 Jun 2013 @ 12:10pm

Re: Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
Pay what's demanded, or find an alternative solution.

Also, in real business the "alternative solution" may be negotiating a better price from your supplier.
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Anonymous Coward, 21 Jun 2013 @ 12:25pm

Re: Re:
Well I'm a musician and I can tell you that the RIAA *is* looking out for us musicians. And it's sadly obvious that the tech lobby most certainly ISN'T.
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Anonymous Coward, 21 Jun 2013 @ 12:30pm

Re: Re: Re:
I think I have to assume that is sarcasm, because I can't imagine any parallel universe where the actions of the RIAA translates to "looking out for" musicians. "Taking care of" maybe....
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dennis deems (profile), 21 Jun 2013 @ 12:30pm

"Apples to Orangutans" is my Talking Heads cover band.
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Anonymous Coward, 21 Jun 2013 @ 12:33pm

Re: Re: Re:
Tech lobby?

Who is this "tech lobby", exactly? And be specific.
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crade (profile), 21 Jun 2013 @ 1:03pm

Re: Re: Re:
lol, highly unlikely but I guess theres a first time for everything.

what the heck is the tech lobby? are you talking about the electorate?
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DanZee (profile), 21 Jun 2013 @ 1:08pm

Re: RIAA
I would suggest the RIAA ISN'T looking out for artists. It directs the royalties to the record labels that keep 90%-95% of what's collected. ASCAP and BMI do a slightly better job, but as discussed on TechDirt before, their surveys only cover big-name acts. Indie and low-grossing artists get left out!
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MonkeyFracasJr (profile), 21 Jun 2013 @ 1:09pm

This makes PERFECT sense.
Clearly they are trying to reinforce their concept that listening to streaming music is a consumer behavior and not transient use of intentionally arranged sound waves, aka music.

Listening, reading, or watching do not equate to CONSUMPTION! NOTHING is lost in the act, except perhaps a little time.
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crade (profile), 21 Jun 2013 @ 1:20pm

Re: Re: Re: Re:
You have to turn a pretty serious blind eye to history to imagine the RIAA guys looking out for musicians interests.. RIAA is looking out for RIAA's interests.. and even that they are doing a piss poor job at.
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Anonymous Coward, 21 Jun 2013 @ 1:27pm

But, of course, iTunes uses music as an enticement to get people to buy iPhones, not to make money directly off of music.

Tough shit. Maybe Pandora should adapt and change its business model.
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Julian Perez, 21 Jun 2013 @ 1:33pm

Re: Re: Re:
The pet food lobby isn't looking out for musicians either. I don't see why it's the responsibility of an utterly unrelated field to ensure the success of another.

That's why, even taking away the utter impossibility of it, and the lack of knowledge that makes such an absurdity even sound plausible, I don't understand why the RIAA and others believe it's Google's responsibility to protect their business model based on scarcity.

As nearly as I can decipher the "logic" of these people, they believe that Google has a Magic Wand somewhere that if they wave it, will eliminate piracy forever. The fact they're not makes them big meanies.

But even if such a magic wand existed, why should Google care about waving it?

That is something musicians need to understand: they must adapt to technology. Technology has no responsibility to adapt to them.

Finally...tech lobby?

You are aware that the EFF and the rest were outspent 3:1 last year in lobbying in Congress, right? I know "Big Tech" sounds scary, but this is laughable. It's like a giant pretending a midget is twice as tall as him.
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JEDIDIAH, 21 Jun 2013 @ 1:34pm

Send in the B-52s
It's really not Pandora's problem. This is a great example of someone cutting off their nose to spite their face. The real victim here will be the RIAA as they will no long have any outlets doing marketing and promotion for them.

It's like they decided to carpet bomb all of the terrestrial radio stations. That would make about as much sense.

Soon the RIAA will be whining that no one is buying any of their stuff and they will have only themselves to blame.

It's not 1960. There's a whole world of distractions out there. The new generation might completely miss this whole Radio-MTV-Pandora thing if you continually kick it in the balls.
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A Monkey with Attitude, 21 Jun 2013 @ 1:39pm

Re: Oh, I get it: $15 million is not revenue, therefore doesn't count!
You really have no idea of how a Vendor/Customer relationship works if your idea isn't that EVERY BUSINESS CUSTOMER on the PLANET yells at their suppliers to lower rates/costs/find effeciencies/cost savings.

The difference you so kindly jumped and ignored is that in this case the RIAA IS A FUCKING MONOPOLY, no one else to go to, no one else to "make" it more effiecent.

Maybe you should try one of the Junior College Courses on basic Business practices.

Some day soon MPAA and RIAA and their member companies are going to join the rest of us in the REAL WORLD where MONOPOLIES DONT WORK, and they dont get to just sit and collect money while screwing the people making their products (you know the artist you shit on day in and day out...) and their customers. They will have to join the competition or die.. Either way i dont care.
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Anonymous Coward, 21 Jun 2013 @ 2:12pm

Re: Re:
Apparently the profit margins on delivering fresh flowers are the same as the profit margins for streaming mp4s. There is no universe in which this makes sense.

In a completely free marketplace the margins in different businesses should all trend towards the same value. People and capital shift from low margin businesses to high margin ones to make it so.

This has, of course, nothing whatsoever to do with the fraction of revenue that each business must pay to its suppliers, since overhead and other costs of doing business are not the same. It's bizarre to even try to describe the music labels as suppliers.
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gorehound (profile), 21 Jun 2013 @ 2:22pm

Re:
Me Too ! I have Hated the Big Labels since the Mid-70's and if anything I hate them even more now.
I am an original punk rocker from the 1976 scene.I still play some music and I became a punk for two reasons.
Big Label Hate and Politics !

MAFIAA Must Be Boycotted ! New Artists please do not Sign with the Greedmeisters !
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John Fenderson (profile), 21 Jun 2013 @ 3:27pm

Re: Re: Re: Re:
The pet food lobby isn't looking out for musicians either.

May I use this? It better encapsulates a point I've been making for a long time.
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Anonymous Coward, 21 Jun 2013 @ 5:12pm

Re: Re: Re: Re: Re:
Pet food makers aren't ripping off musicians like tech companies do, are they?
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Anonymous Coward, 21 Jun 2013 @ 5:21pm

Re: Re: Re: Re: Re: Re:
So how much stolen money did the RIAA return to you?
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Anonymous Coward, 21 Jun 2013 @ 11:04pm

Re: Re: Re: Re: Re: Re: Re:
Can't answer the question can you, Freetardo?
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PaulT (profile), 22 Jun 2013 @ 12:11am

Meanwhile, the RIAA are directly opposing Pandora's ability to get those licensing dollars from the other 6 billion people on the planet whose feet are not currently planted on US soil, as they could before the RIAA stopped them. Amazing.
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PaulT (profile), 22 Jun 2013 @ 12:13am

Re: Re: Re: Re:
The fantasy Google cartel who's taking all the money from the record labels, obviously! Certainly not the tech companies who are trying to make their products more useful and available.
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PaulT (profile), 22 Jun 2013 @ 12:15am

Re: Re: Re: Re: Re: Re:
Tech companies only rip off artists in the fevered imaginations of morons like you. Other tech companies like, say, Pandora are trying to get you as much money as possible but you block them on regional and platform grounds from servicing most of the potential customer base. Don't blame the tech sector for your own stupidity.
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PaulT (profile), 22 Jun 2013 @ 12:16am

Re: Re: Re: Re: Re: Re: Re: Re:
When you have no valid point, pretend you're a 3 year old in a playground. RIAA classic tactics.
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PaulT (profile), 22 Jun 2013 @ 12:16am

Re:
Or maybe the RIAA should change their rather than whining that other people have found a viable business model...
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Anonymous Coward, 22 Jun 2013 @ 2:14pm

Re: Re: Re: Re: Re: Re: Re:
Why do you bother lying like this, Paul? You're not fooling anyone. You know that, right?
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AC Unknown, 22 Jun 2013 @ 5:10pm

Re: Re: Re:
Citation needed.
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Anonymous Coward, 23 Jun 2013 @ 12:14am

Re: Re: Re: Re: Re: Re: Re: Re:
Clearly you can't answer the question either. Now we're even.
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PaulT (profile), 23 Jun 2013 @ 1:14am

Re: Re: Re: Re: Re: Re: Re: Re:
Only in your idiot mind is what I'm saying lying. Pandora are blocked from servicing any person outside of the US, by your glorious corporate masters. That's a fact. Only in your delusional head does this mean that Pandora are the ones taking money from the artists.
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Niall (profile), 24 Jun 2013 @ 8:44am

Re: Re: Re: Re: Re: Re: Re: Re:
Paul's right, plenty of people would pay for access to Pandora but can't because of Idiot Geoblocking.
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