Pandora: If We're Getting Taxed So Heavily By SoundExchange, Radio Should Be Too

from the strange-bedfellows dept

Well, this is rather disappointing. Just days after caving in and agreeing to new webcaster rates that will harm pretty much everyone, Pandora has gotten right into bed with the RIAA/SoundExchange in supporting the Performance Right Act (the RIAA Bailout Act) to extend a similar unnecessary tax on radio. Pandora’s reasoning is no surprise: basically it’s saying that if it has to pay such a silly tax to help promote musicians, it’s unfair that radio stations get away without paying something similar. But, still, it’s disappointing. Rather than looking at adding value to the overall market, Pandora has basically decided that it’s “enemy’s enemy is a friend” and is supporting such a law simply because it will harm radio stations. This makes me think significantly less of Pandora.

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Companies: pandora, soundexchange

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Comments on “Pandora: If We're Getting Taxed So Heavily By SoundExchange, Radio Should Be Too”

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76 Comments
Anonymous Coward says:

Re: Survival of the whinniest?

More likely they are trying to co-opt Radio’s substantial lobbying resources to squelch these ridiculous rates. Besides, turn about is fair play. It was the Radio industry that lobbied to treat internet radio as a performance rather than as a broadcast. Looks like they are returning the favor.

Nismoto says:

Re: Re: Re:

Gone down what way? Yeah, Tim is pretty much whining like a little kid but with good reason: traditional radio stations don’t pay the higher performance royalties that internet radio stations pay. He’s just trying to “return the favor” and stick it to traditional radio stations since they’re treated differently.

All the major internet radio stations will have to pay up, not just Pandora. Go ahead and switch to slacker.com, they pay the same royalties as Pandora according to the NY Times:
“Webcasters with significant advertising revenue, like Pandora or Slacker, will pay the greater of 25 percent of revenue or a fee each time a listener hears a song, starting at .08 cent for songs streamed in 2006 and increasing to .14 cent in 2015.”

mklinker says:

Re: Re:

I agree with the above posters, and what’s most disappointing is that I just no more than 2 months ago decided that I should create a paid account.

If I’d only known where that money was going and help to fund, I never would have made the choice. I love Pandora (err, did) but I am definitely looking for a replacement now ๐Ÿ™

NIsmoto says:

Re: Re: Re:

What are you talking about? Pandora’s BEEN battling the royalty fees for years. It should not have been a surprise.

Like I said earlier, Pandora is not the only internet radio station that will have to pay royalties.

I’ve been a Pandora listener for years and will continue to use their service until the bitter end. Thanks Tim!

mobiGeek says:

Working within the system?

I don’t know enough about Pandora’s people/culture, but is it possible that they are taking a “from within the system” approach?

Fighting the RIAA would drain them of resources, specifically management and executive focus, for a long long time, essentially bleeding them to death.

By giving in early, yes they will lose more money in the short run (paying high taxes today rather than fight the long long fight), but they can focus on their business immediately.

So now that they are “in” with the RIAA, by stirring up the hornets’ nest that will be radio stations facing stiff taxes, isn’t Pandora doing lots of entities in the industry a favor? Or at least, isn’t that one potential read?

I mean…I’m just sayin’

Joe K (profile) says:

I see this more as play by Pandora to ultimately get the new rates thrown out or lowered.

If Pandora is successful in convincing the right people that all broadcasters, regardless of method of broadcast should pay the same rate, the traditional broadcasters more powerful lobby would have more luck in negotiating lower rates.

I’m probably way off, but that’s how I would like to see it play out.

Designerfx (profile) says:

Re: Re:

I kind of agree, that Pandora now has a way to demonstrate damages by the agreement they have signed. They have a hard copy to use if this goes to court, none of that “they verbally offered me x” crud.

meanwhile, it’s still a bit of a backwards approach. They could always have done this WAY BEFORE having ever signed a contract instead, but I guess they like going bankrupt.

maclizard (profile) says:

Lets wait and see

I know that this doesn’t look good for Pandora, and believe when I say that I died a little inside when I heard about this, but this could still very much go either way. The obvious, and massively destructive, path that this can take is that Pandora really has stuck its dick into a succubus. However, it is possible that Pandora is just trying to get someone other than Pandora to speak up. Other than a story about a high-school radio station I have heard nothing about traditional radio fighting back.

Note: If Pandora really has gone to the darkside, I will go right back to downloading music via torrents. The RIAA will never win…

JAy. says:

Uhh - I think this sentence needs to be reworded...

…[Pandora] has basically decided that it’s “enemy’s enemy is a friend”…

Wouldn’t that mean that since RIAA is Pandora’s enemy, and NAB is RIAA’s enemy, then NAB (the enemy’s enemy) is Pandora’s friend, and Pandora should help them?

More like, “If I can’t have cake, no one can!”

Anonymous Coward says:

Pandora is a company. Their options are to die in court or to try to make it work. They’ve announced financial troubles previously. They were attempting to make a free business model work. Now laws have hampered their ability to compete.

I can’t believe anyone would “think significantly less of Pandora” for wanting the competition to play on a level field. Are you suggesting that they should oppose rules for the competition and hamper their own business?

I hope the upside of this is more talk radio. Currently my choices are: Sports Talk, Conservative Talk, and NPR. However, I have 5 top 40 stations that play the same 3 songs, such as “Halo” by Beyonce. I bet it’s on at least one station right now.

I’d love some other talk formats, particularly in the off hours, when music may no longer be profitable. If not, I can only hope that the RIAA loses more money over this.

I’m very curious about how many laws the RIAA supported that weren’t passed, and why these laws haven’t fixed the problem for them? It would seem like writing laws would almost guarantee success.

nraddin (profile) says:

My Enemy's enemy is my allie if not my friend

Good for them, honestly. I could care less if they live or die by the business model they have agreed to let the Music industry dictate to them. And if they can get Radio stations forced to pay the same kind of fees maybe they can die by that sword too. Hopefully EMI and the like will be successful and putting out of business most of the music retail chains as well. And then, just maybe after all the business models that generated income for the major labels is dead and gone we can go back to having Musicians play music for a living, not just a few making millions why the rest make nothing. Maybe some of those millions that the Major Labels make will stay in the market and more bands can make a living at it.

Believe it or not, before DVDs, CDs, LPs, Tapes, 8-tracks, TV, the Internet, or even Radio there was music and people made a living playing it.

I am not holding my breath, but I am happy to see that more and more companies, businesses and individuals are signing up to destroy their own business. The Labels have not figured it out yet but their allies are their enemies even while they are enemies to the public. I am happy to see that one day, with a little luck, the labels will be saying “We have met the enemy and they are us”, as they shutter their doors.

Anonymous reader says:

Smart approach, not dissappointing

This is actually a very smart approach to taking down a ridiculous tax that is being applied to their company. Smaller pandora is using the larger national radio to fight this idiotic tax. I mean, there taking the approach of that little nerd at school who does all the football players homework. No one messes with that kid. This is a way to stand up for themselves without taking a direct hit,(figuratively because they are paying the taxes upfront right now.) I agree that they shouldn’t have to pay the tax if national radio doesn’t, because this is a dumb tax.

you can hate me says:

What do you all do for a living?

So why shouldn’t a business enterprise (Pandora) pay for the inputs (music) it uses to create its very successful product. I don’t get the creed that you all subscribe to – that somehow music should always and everytime be free and anyone who deviates from this is somehow a sell-out to the “man”. It must be nice to live in this simple, binary world. But everyone else (including innovative people like those who run Pandora) must exist in the real world where hardworking artists (and, yes record companies) would like to make a living just like you.

Ryan says:

Re: What do you all do for a living?

So why shouldn’t a business enterprise (Pandora) pay for the inputs (music) it uses to create its very successful product.

For one thing, the inputs are free, so there’s no marginal cost to producers for having their work broadcast on Pandora; rather, it often makes money for the producers to have the free publicity. Why shouldn’t a music distributor pay for the advertising service Pandora is providing? And anyway, the market compelled Pandora to pay for it, then it would. The fact that we need government intervention just proves that doing so runs counter to market forces.

I don’t get the creed that you all subscribe to – that somehow music should always and everytime be free and anyone who deviates from this is somehow a sell-out to the “man”.

Who says music should always be free? If people want to pay for it, they’re welcome to do so. The iTunes store is quite popular if you haven’t noticed. The issue is with lobbying government to force consumers to subsidize poor business models. I feel that when I fart in public, that the people around me should pay me for the pleasure of smelling my fart. They refuse to do so, but I don’t go crying to Congress to enact a bill to force them.

It must be nice to live in this simple, binary world.

It must be nice to make the income you do as an industry shill. I base this assumption on the fact that your argument is simplistic, banal, and misrepresentative of others’ views.

But everyone else (including innovative people like those who run Pandora) must exist in the real world where hardworking artists (and, yes record companies) would like to make a living just like you.

I want to make a living selling my farts to random passersby! Should the government pass a law for my benefit to ensure my income? Or should I find a better business model? Music is approaching free because the marginal cost of additional copies is zero; it is a scarce good. Unlike you, some of us have actually taken Economics 101 and understand the basic concept of a supply and demand curve. Musicians are in no way prevented from making a living; they just need to adapt their business models. Unless, of course, they’re not innovative and use the government to prevent innovative people like Pandora from making a living.

you can hate me says:

Re: Re: What do you all do for a living?

I frankly think that basing your economic arguments on the relative value of your own farts is quite simplistic and banal, but that is a topic for another day.

Inputs are not free. Whether you agree with the concept or not, we have placed value on intellectual property in this country since its founding (see the Constitution). You may disagree with the monetary value placed upon it and/or the extent to which IP owners should be able to leverage it (both arguments I totally accept and would argue are best left to the market to decide), but the notion that Pandora’s inputs (ie music are “free”) is ridiculous and wouldn’t hold up in the business school I attended before becoming a shill for industry.

Government involvement here is required mainly to create a compulsory license environment for companies like Pandora. It also creates a performance right for artists so they can legally exercise some control over their creations.

iTunes isn’t the right paradigm for your “free” argument. And, unfortunately the choice over whether to pay for a good can’t reside with consumers as you suggest by saying “if people want to pay for it they can”. People may want the 42′ flat panel in your living room. Is it OK for them to take it if they don’t “want to pay for it”?

You simply have to view content, music, movies, software, whatever as a good that has value. The fact that its movement aroudn the world via the Internet carries no marginal cost is irrelevant and would be unpersuasive to any economist. If you do not subscribe to this fundamental reality, then you are right, and I will forever be doomed to a simplistic and banal worldview that cannot persuade your enlighted fart economics.

you can hate me says:

Re: Re: Re:4 What do you all do for a living?

fair enough. i’m not an expert on both, but theories are just that, right? I know the scarcity of goods theory has been used (maybe not ad nasueum yet) to explain the demise of the record industy and promote P2P. i agree that record companies have made big mistakes along the way. But I’m not sure that the abundance of goods theory alone is enough to construct an environment where the “goods” in question here should only be able to capture value thru downstream efforts such as ticket sales and t-shirt sales for the lucky few. Why is it so economically unsound for a small band on an indie label to want to make a few bucks every few months because their song gets played on the radio or on Pandora? sure they are getting publicity, but you can’t eat publicity.

Didn’t Starbucks apply the abundance of goods theory in putting a store in every building in America only to shut many of them down??

you’re right that this is a crazy system that 100% of economists would never construct in a million years. I don’t defend the industry and how it operates, I jsut defend the rights of artists to own what they create and get compensated (if they choose to)when their creations are used by others for financial gain. And you cannot escape the reality that radio and webcasters use music to build their business. this is great, but shoudl they not pay for music in the same way they pay for the electricity to power their stations??

Anonymous Coward says:

Re: What do you all do for a living?

You’re right, you’re completely right. What’s wrong with a company having to pay thru the nose for the privilege of selling my product, even if that means that added to all the other costs it will actually COST them money to broadcast instead of having that thing, how’s it called. Profit? Dividends? Anyway, if they play my music they should give me 75% of the money, even if they already used 50% of it to cover expenses. What? What do you mean they can’t pay 125% of the money they collect? Well it doesn’t matter because the music is MINE MINE MINE MINE!

SteveD (profile) says:

This is no time for idealists

Pandora is doing what it needs to do to survive. If the only route to that is to work with the system (and don’t try and tell me they haven’t pursued every other possibility), then so be it.

Mike’s stance is hopelessly idealistic. Pandora are arguing for a level playing field on which to compete. Web radio is never going to be able to fight the RIAA alone, but if FM radio is forced into the same position we’ll see a lot more lively discussion of the issues.

Eric says:

You guys responding don’t know what you are talking about. Pandora is saying that it’s patently unfair to tax them because they are for all intents and purposes the same as radio. They (Pandora) know that a tax like this WILL NOT FLY on public radio, and in as much, will probably cause a reversal of their own tax.

so many youngsters posting these days.

you can hate me says:

Re: Re:

you don’t know what you are talking about. first, this isn’t a “tax”. I know it feels good to use that term and it’s become part of the robotic attack on paying for content, but you’re all being played by falling for that.
Second, even if the radio broadcasters beat back the effort to get them to pay for the music they use, webcasters and satellite and cable, etc will still have to pay. Your ‘reverse psychology’ theory is nonsense. The requirement that Pandora and others pay a statutory licensing fee is federal law. that isn’t going away no matter what happens to the broadcasters. Sorry, you’ll need another theory.

Adam says:

Wow there is alot of people who don’t understand what pandora is doing. Some people got it, but alot didn’t. This is Pandora’s way of fighting. If i have to pay well then they have to as well. They know they will complain and it will either be lessened or changed to be more manageable. If anything I think alot of these fees/taxes are just another way the RIAA execs can get more money they dont deserve imho.

Ms Escape says:

HA!

If pandora has to pay to bring a variety of music to the masses, regular radio stations should have to pay to keep playing that cookie-cutter craptastic noise over and over again.

So what if it happens to fall in league with the RIAA? It’s obvious that the RIAA keeps shooting itself in the foot. I mean, just because you might be mad at your mother doesn’t mean you’re going to jump off a bridge just to spite her … some sensibility needs to be left to self-preservation.

This is an excellent plan, bringing in the big guns to fight. Let’s bring as many sectors and people in on this as we can!

Lamer says:

Get more groups strongly onboard the hate bandwagon

I think this is a great way to get even more, larger, and old time businesses to turn on the RIAA. Its not enough that the RIAA and every computer user in the country hates them. Now they will get the wrath of the Radio industry. Do not understimate the power of Clear Channel, CBS, when they get upset.

Anonymous Coward says:

Pandora is probably one of the most innovative music services ever, and legally is essentially at the recording industry’s mercy.

The current ridiculous rates will probably kill Pandora (and its competitors) eventually, but applying the same rates to the already far more competitive broadcast radio industry will pretty much kill it all instantly (how many radio stations have margins well above 25% now?).

However you feel about whether radio stations should be paying the recording industry or vice versa, it’s in no one’s best interest to kill all radio. Using this “level playing field” argument is Pandora’s best chance to improve its negotiating position.

(Personally, on broadcast radio I more or less only listen to NPR and my local classical station (for which, in my opinion, it makes a lot more sense for the station to be paying royalties to the performers, since my being exposed to a piece of music isn’t as likely to lead to my buying that particular recording).)

Anonymous Coward says:

Just to make it a bit clearer that Pandora is not “in bed with the RIAA” note that in this legislation, the recording industry is trying for a 0.5%-3% tax on radio station revenue that will extract some nice money for the RIAA without killing the stations.

What Pandora is saying is that, for the sake of fairness, this should instead be 25%, which the RIAA most definitely doesn’t want, since it would just kill radio rather than letting them extract money. The idea isn’t to get a 25% law passed for radio (which no one wants) but rather to get the web rate lowered (ideally, I’m sure, to zero).

Anonymous Coward says:

Re: Re:

The idea isn’t to get a 25% law passed for radio (which no one wants) but rather to get the web rate lowered (ideally, I’m sure, to zero).

That won’t happen.

Now that the RIAA has Pandora dancing like a puppet on strings, they’ll do and say whatever the RIAA wants them to. If the RIAA wants radio to pay a broadcast fee, Pandora will come out singing and dancing in favor of it. Pandora’s hoping that if they kiss the RIAA’s ass enough, then the RIAA will give them some payola to offset some of the webcasting fees they’ll be paying.

Killer_Tofu (profile) says:

Sad but they deserve it

This is very sad to hear about Pandora.
I will have a hard time using them now knowing that they are part of this crap with royalties.
The NAB and others really do have this coming though. They have spent so much time trying to screw over their competitors instead of competing, that they really do deserve this.
What I love about the increased rates for all is that once they are all out of business, the companies forcing these rates will have a drastically decreased income.
That should expose all of this for the sham it is.
It really is sad though that so many people just let this happen and never talk to our representatives. Although, yah, I know they wouldn’t listen to us anyways. Just maybe though, if enough people stood up, they might. Maybe. One can hope.

Anonymous Coward says:

I guess I’m not seeing this play by Pandora. Everyone says they settled to draw the radio lobby into the fight? Isn’t this the same radio lobby that lobbied for the Pandora tax in the first place?

The radio lobby will fight the tax for themselves. Actually they already are by carpet bombing ads on the radio about the tax, telling everyone to call their senator to complain. Funny, they don’t mention Pandora or internet streaming at all in those spots. Too bad Pandora didn’t do the same thing. The only spots I’ve heard in Pandora relate to needing a passport to get into Canada.

Pandora is a good idea, but seems to be managed horribly, and I think that they are too inept to scheme up some grand plan to draw the NAB to their side of the fight. The NAB will fight for radio and only for radio.

PRTV (profile) says:

Radio RIP

I personally hope the radio performance fees go through. We’ll see EXACTLY the same thing that happened to MTV when they were getting charged. Radio will switch over to talk format (2 music stations in my area have already announced they are going all talk this fall), Sure there won’t be any more music radio (I don’t listen anyways because it’s only crap that’s on) then the RIAA and the majors will loose another revenue stream, will shoot themselves in the foot and REALLY start hurting financially and the structure will collapse. Then we’ll hopefully see a better, more independent music industry rise from the ashes. I think in order to do this the current slate needs to be wiped clean and start over.

TimW (profile) says:

from Pandora

Very interesting to read all of these posts.

Our support of this bill comes from a very simple place:

1) I, and we as a company, believe artists should be paid for the value they provide radio (in all of its forms). In spite of the rough negotiation we’ve been through, we’ve NEVER suggested Pandora shouldn’t pay royalties – only that we should pay less than the rates established by the 2007 CRB ruling. Artists deserve compensation. It’s fair and it’s the right thing to do.

2) It’s wrong that different forms of radio pay different amounts. The bill includes language establishing parity across all radio. We compete directly for listeners, and we provide all of the same benefits to artists that broadcast radio does. There’s no justification for the inequity.

These are the reasons we are supporting this bill.

It is of course true that we compete with broadcast radio – so advocating for a royalty that negatively impacts their business can be seen as a competitive swipe. But that’s not what this is about.

Tim (Founder, Pandora)

Geowil (user link) says:

Pandora

REally, i could give a crap what pandora does as long as they dont shut down or make us pay to use it or limit the songs we can listen to in a month (hearkening to the end of Launchcasts golden days essentially).

Ever since Launchcast got royally raped by nbc or who the hell ever took over it, pandora has been my go to place for streaming music.

I found a lot of metal bands that I like on there.

though I do think someone has to assassinate the RIAA, they are really mucking everything up these days.

Anonymous Coward says:

All of the people saying that Pandora is selling out are a bunch of idiots that need to learn how to read and follow the news and politics before they open their mouth and follow what the original article poster said.

Why is Pandora saying that Radio stations should pay the same royalty charges so bad? Have you geniuses ever even stopped to think about it?

Pandora, and any medium that lets a user listen to music, should have to pay royalties to the person who composed the music, that is how it should be. It is FAIR that way. In that case, how is it FAIR that Pandora (and other internet radios) should pay royalties but not broadcast radio?

With that argument, explain again why Pandora’s stance is so bad, please.

Anonymous Coward says:

Re: Re:

Pandora, and any medium that lets a user listen to music, should have to pay royalties to the person who composed the music, that is how it should be. It is FAIR that way. In that case, how is it FAIR that Pandora (and other internet radios) should pay royalties but not broadcast radio?

With that argument, explain again why Pandora’s stance is so bad, please.

This story isn’t about songwriter royalties, which by the way radio *does* pay, but *performance* royalties.

Maybe you should learn what you’re talking about before going around calling people idiots so that you don’t look like so much of one yourself.

Billy Hume says:

There are a couple of things incorrect about this article. First off, this is not a tax. Taxes go to the government. This is to collect royalty that is paid to the musicians that perform on the songs that are being aired on the radio. Only 4 other countries besides the USA don’t collect this royalty, those being: North Korea, Iran, Rowanda (can’t remember the 4th).

Second, this is not being collected to ‘promote’ musicians, it is being collected to pay musicians. If u had any idea about how musicians are paid, or actually, ripped off on most major and indie label recordings you’d have a different opinion about this.

The reason so many people spout the incorrect info that I’ve read in this article is because there is a concerted smear campaign against this bill. You are falling for a bunch of lies.

Anonymous Coward says:

Re: Re:

First off, this is not a tax. Taxes go to the government.

This is a tax. A financial charge or other levy imposed by gov’t is a tax. The gov’t can direct those funds elsewhere (for example, to Soundexchange), but it is still a tax.

Only 4 other countries besides the USA don’t collect this royalty, those being: North Korea, Iran, Rowanda (can’t remember the 4th).

Unless you can produce a credible citation for that, I’m calling bullshit.

If u had any idea about how musicians are paid, or actually, ripped off on most major and indie label recordings you’d have a different opinion about this.

More bullshit. I do and I don’t.

You are falling for a bunch of lies.

From the likes of you, it seems.

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