Legacy Recording Industry Claims Pandora Is Playing A 'Sick Joke' In Seeking The Same Rates Others Pay

from the really-now? dept

The ability of the record labels and RIAA front groups to flat out lie about the internet is really quite incredible. There’s been some buzz recently about the crazy fact that Pandora just bought a small terrestrial radio station in South Dakota. Now, you might wonder, why would an innovative company that basically seems to be focused on making terrestrial radio stations obsolete need to own such a station… and Pandora is rather upfront in its answer: because the music collections societies, like ASCAP and BMI discriminate against internet companies, in direct violation of an antitrust agreement that ASCAP signed. Furthermore, ASCAP not only won’t offer Pandora the same rights, but it engaged in highly questionable negotiation practices, such as refusing to tell Pandora what songs it was pulling the rights to, such that Pandora risked huge statutory awards for copyright infringement:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous. Faced with such potential liability, Pandora negotiated an agreement that resulted in increased rates. Shortly thereafter, additional major publishers took steps to withdraw their catalogs from ASCAP, again with respect to Pandora.

ASCAP created additional ways to circumvent its antitrust consent decree. Our motion also describes how ASCAP refused to provide Pandora a license under the same terms as the iHeartRadio service, for only one reason: iHeartRadio is owned by a terrestrial broadcaster.

All of this is in direct violation of the antitrust agreement ASCAP has with the DOJ, in which it’s supposed to make sure that ASCAP can’t use its monopoly power over compositions to discriminate against certain players. Yet, ASCAP is clearly trying to discriminate against internet streaming services, by charging them significantly higher rates.

So, Pandora has bought the station in order to get the same rates as other streaming radio stations that are owned by terrestrial stations. As Public Knowledge points out:

This is a perfect example of the twisted incentives and strange results we get from a music licensing system that is based on who wants a license instead of just what they want to do with the music they’re using. This makes no sense. The law should treat like uses alike. Regardless of how high or low you think performance royalty rates for webcasting should ultimately be, there is no logical reason to give preferential rates to certain companies just because they arrived at the negotiation table first.

And this is only about composition rates, not even getting into the rates that Pandora has to pay for sound recordings, which is infinitely higher than terrestrial radio. Buying the radio station won’t help on that front, because the internet streams are charged differently than terrestrial radio no matter who owns it, but just the fact that it’s paying different rates than everyone else seems ridiculous.

And, of course, the incumbents try to twist all of this. First up, we see that BMI has sued Pandora for buying the radio station. I’m not joking. I can’t see on what possible grounds a lawsuit would make sense. Are they saying it’s illegal for a company to seek to get the same rates that BMI offers radio stations?

But, even worse than that is the reaction of the RIAA front group, MusicFirst, a lobbying group set up by the RIAA and SoundExchange solely for the purpose of lobbying against internet companies and seeking ever higher rates for those companies, to make sure no internet music company can stay in business. That this is short-sighted and stupid never seems to occur to MusicFirst, who is always quick with a blog post arguing that internet companies are up to no good. In this case, it accuses Pandora of playing a “sick joke” in making this purchase:

This has to be some kind of sick joke. Pandora bought an FM radio station to game the system in order to pay songwriters less?

Pandora continues to find new ways to give artists and songwriters a raw deal from the bottom of the deck. In their race to the bottom to see how little they can pay music creators, they have stooped to misleading legislation, bait and switch petitions, and now fronting as an FM radio station.

Oh really now? It’s a “sick joke” to try to get the same license rate that ASCAP and BMI offer terrestrial radio stations? How so? It’s a “sick joke” that the company doesn’t think it’s fair for ASCAP and BMI to discriminate against internet streaming radio services? The only “sick joke” is MusicFirst pretending to represent artists as it seeks to kill off new and innovative internet services that are helping artists build bigger fan bases. No wonder the RIAA-funded MusicFirst has to resort to silly claims like this. The RIAA has never wanted to adapt to an internet world, and is, once again, looking to spread completely bogus propaganda in an attempt to stifle internet progress, which tends to help independent artists, such that they don’t need the RIAA labels any more. What’s incredible is that the RIAA, which set up MusicFirst, has it pretend to represent the interests of “artists” when it’s never been anything more than a big-label front group. If there’s any “sick joke” it would be MusicFirst’s pretend concern for artist’s rights, that just so happen to align entirely with the interests of the big labels.

Meanwhile, David Israelite, the lobbyist for the music publishers has piled on as well, claiming that this is about Pandora “going to war with songwriters.”

David Israelite, CEO of the National Music Publishers Association (NMPA), tonight interrupted his state-of-the-industry speech at the group’s annual meeting in Manhattan to lash out at Pandora’s decision to acquire a radio station in South Dakota. “Pandora is going to pursue lawsuits and gimmicks,” Israelite told the hundreds of songwriters and composers in attendance. “Pandora is hoping to fraudulently sneak in the back door. Any shred of credibility that Pandora had is gone. They are at war with songwriters ”

Once again… huh? Asking for the same rates that radio pays to stream music online is “going to war”? How does that compute? It’s as if the music publishers, collection societies and the RIAA can’t help but lie because they have such distaste for Pandora actually figuring out a service that people like online, when they’ve spent so many years trying to ensure that online services fail. If there’s any “war” going on here, it’s the legacy recording industry against online services that fans seem to love.

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Companies: ascap, bmi, musicfirst, nmpa, pandora, riaa

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Comments on “Legacy Recording Industry Claims Pandora Is Playing A 'Sick Joke' In Seeking The Same Rates Others Pay”

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77 Comments
That One Guy (profile) says:

So then...

Given how much they are protesting that Pandora is trying to ‘take money away from the artists’, I’m sure they would have no problem whatsoever with an audit from an independent third party, to see how much exactly they pay the artists from all those licenses, and in particular to see if the increase in license rates was matched by an identical increase in royalty rates paid out.

Anonymous Coward says:

Re: Re: So then...

So if Pandora buys a radio station and they simulcast ONE broadcast so what? If they do the same thing the radio stations do they should get the same rates. But if they do something different… I dunno, say allow user defined algorithmically generated personal playlists per user… well, then, that’s a different service and requires a different rate. Pretty simple really.

Mike Masnick (profile) says:

Re: Re: Re: So then...

So if Pandora buys a radio station and they simulcast ONE broadcast so what? If they do the same thing the radio stations do they should get the same rates. But if they do something different… I dunno, say allow user defined algorithmically generated personal playlists per user… well, then, that’s a different service and requires a different rate. Pretty simple really.

No, they’re asking for the same rates that ASCAP gives iHeartRadio for ITS algorithmically generated personal playlists.

It amazes me how you folks keep spewing off about this without even knowing what you’re talking about.

They’re not asking for the same rates that radio pays. They’re asking for the same rates that radio stations pay FOR THEIR ONLINE STREAMING SERVICES THAT ARE JUST LIKE PANDORA.

Anonymous Coward says:

All of this is in direct violation of the antitrust agreement ASCAP has with the DOJ, in which it’s supposed to make sure that ASCAP can’t use its monopoly power over compositions to discriminate against certain players. Yet, ASCAP is clearly trying to discriminate against internet streaming services, by charging them significantly higher rates.

Isn’t it true that the agreement applies only to treatment of similarly situated players? Like all terrestrial radio stations. I don’t think there’s anything in the agreement that requires them to treat internet, satellite and broadcast identically.

Anonymous Coward says:

Re: Re:

Isn’t it true that the agreement applies only to treatment of similarly situated players? Like all terrestrial radio stations. I don’t think there’s anything in the agreement that requires them to treat internet, satellite and broadcast identically.

Mike doesn’t care about the truth, and he won’t discuss the merits. Sorry, honest person. You’re on the wrong site for that sort of thing.

Anonymous Coward says:

Re: Re: Re:

Given the dramatic changes in the music industry over the past half century, the Department and ASCAP concluded these changes are necessary to improve competition in music licensing. Specifically, the modifications would:

* expand and clarify ASCAP’s obligation to offer certain types of music users, including background music providers and Internet companies, a genuine alternative to a blanket license;

http://www.justice.gov/atr/public/press_releases/2000/6404.htm

Thank you.

jupiterkansas (profile) says:

Re: Re: Re:

All the little guys and upstarts can go suck it. And yes, Pandora’s still a little guy.

The only people they want playing the game is a handful of big companies with wads of cash to throw around. They only want a couple of partners to negotiate with – just enough to keep the anti-trust people away. Apple, Clear Channel, Walmart – companies they know will give them juicy deals because they can afford to.

If you can’t make them a better offer than Apple, they don’t want you in the business. They want their money, and they want it now, because making that big deal now is how they get promoted or get early retirement.

Anonymous Coward says:

if there exists an antitrust agreement between ASCAP and the DoJ, why is there nothing legal happening to ensure it is enforced? i would have thought that would have been a better option than keep posturing around trying to get Dotcom stitched up using all the lies and bullshit they have so far. but then i remembered that Dotcom hasn’t bribed anyone there and isn’t a member of the USA entertainment industries!! silly me!!

Anonymous Coward says:

Re: Re:

“if there exists an antitrust agreement between ASCAP and the DoJ, why is there nothing legal happening to ensure it is enforced?”

Yeah. Can you imagine what would happen if the same thing happened to legislation? You could end up with a situation where a party could issue tons upon tons of false DMCA take-down requests and not be punished like the law requires…uh…

…never mind…

Matthew Cline (profile) says:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora?s scale, such liability would be enormous.

The way I’m reading that is that Pandora is asking “Would doing X be infringing”, and the response was “if it is infringing, we’ll tell you after you do it”. But I’m pretty sure that can’t be right, so what does the above quote actually mean?

dante866 (profile) says:

Re: Matthew Cline's Post

Basically, ASCAP and the publisher had decided that a list of X songs were no longer going to be offered for Pandora to use. When asked what those songs were, so that Pandora could remove them and prevent people form listening to non-licensed tracks, ASCAP and the publisher refused to share that info.

This would have meant that Pandora would be liable as the distributor for non-licensed, copyrighted material, and liable for the “up to $150,000.00” fine per infringing copy.

Richard (profile) says:

Re: Re: Matthew Cline's Post

This would have meant that Pandora would be liable as the distributor for non-licensed, copyrighted material, and liable for the “up to $150,000.00” fine per infringing copy.
But surely – under their twisted doctrines – not supplying that information would amount to contributory infringement (if anyone else did it of course)

That One Guy (profile) says:

Re: Re:

Nope, you’re reading it right, they were indeed refusing to tell Pandora what songs would be legal for them to air, meaning Pandora would have to treat all of them as infringing lest they get sued, an impossible situation.

Of course given the utter contempt the collection/shakedown agencies have shown towards alternative broadcasting companies like Pandora, one has to wonder if the reason they refused to say which ones were legal to air was so that no matter what Pandora aired they could just say they were infringing, and sue them out of existence.

Matthew Cline (profile) says:

Re: Re: Re:

IANAL, but that’s sounds like something which would really piss of a judge, which is why I thought I was misunderstanding it. I mean, there’s the legal doctrine of “minimization of damages”, which means the person who’s (potentially) being damaged is supposed to take reasonable steps to minimize the damage they take, yet when ASCAP has a chance to minimize damages fall into their laps, they do nothing.

out_of_the_blue says:

Internet stations have THE WHOLE WORLD for market.

They’re potentially able to gain FAR more than any single radion station is, the reach of which is limited.

But ya nearly had me convinced, college boy, until I thought on the FACTS of the case. Differences are sheerly a matter of market scope, not necessarily any intent to ruin the internet.

Here, take this link: shoutcast.com and then tell me that it’s overly difficult to stream. THOUSANDS manage it. You’re just favoring Pandora for whatever reason, besides as always attacking copyright.

JEDIDIAH says:

Re: Re: Re: Internet stations have THE WHOLE WORLD for market.

Of course the radio station in some town in Idaho you’ve never heard of should be paying the same PER LISTENER price as some “global provider”.

The problem we have here is that one play on Pandora is a single person. A play on radio could be 100,000 people. Clearly those are NOT equivalent.

Anonymous Coward says:

Re: Re: Re:2 Internet stations have THE WHOLE WORLD for market.

A per listener rate should be the basis for any charges, whether for a local radio station or a global providers.
The only thing I am unclear about is how much music publishers should be paying the radio stations per listener for their advertising.

RadialSkid (profile) says:

Re: Re: Re:2 Internet stations have THE WHOLE WORLD for market.

Apparently that’s their excuse for the higher licensing rates.

It’s the same as the TV networks and Aereo, and Megaupload for that matter. It fundamentally comes from the entitlement complex of the entertainment industry hating for anyone to make money they don’t get a slice of, whether they deserve it or not.

Anonymous Coward says:

Re: Internet stations have THE WHOLE WORLD for market.

Arguably, a radio station can also “have the whole world for market”. It’s just a matter of beaming the signal to other continents via satellite, and then broadcasting it with ground stations as usual.

Of course, the infrastructure is prohibitively expensive. But that’s a situation that business experts refer to as “Waaah! Waaah! Cry some more!”.

Anonymous Coward says:

Re: Re: Re:

These links present arguments from musicians along those lines:

http://trustmeimascientist.com/2013/06/03/pandoras-epic-pr-fail-and-the-future-of-internet-radio/

http://www.huffingtonpost.com/2013/05/06/tim-westergren-emails-pandora_n_3223603.html

The funny thing is that the US is one of only three or four other countries who don’t pay performers. Europe certainly never had any problem running profitable radio stations while paying performance royalties.

I believe Clear Channel has already worked out a deal with most of the labels to begin paying performance royalties. Apple’s new radio service looks to be doing the same. So, Pandora is going to be left in the lurch on this desperate move, I suppose. It’ll be hard to claim they can’t make money when the majors will be able to point out that others are doing so just fine, and raking it in, presumably.

I have a feeling this will backfire in a good way. I don’t think terrestrial radio will get away with not paying performance royalties for much longer. That was a raw deal from the very beginning that was slid by against musician’s wishes.

Mike Masnick (profile) says:

Re: Re: Re: Re:

I believe Clear Channel has already worked out a deal with most of the labels to begin paying performance royalties.

Clear Channel is leading the lobbying campaign against paying performance royalties, so… that’s interesting.

Apple’s new radio service looks to be doing the same.

All internet services have to pay performance royalties. You seem to be confusing the rules for terristrial radio and internet radio.

So, Pandora is going to be left in the lurch on this desperate move, I suppose.

Pandora already pays performance royalties. The move in buying a radio station is not to get out of paying those, but to get the same rates that radio stations already get for their online streams.

It’ll be hard to claim they can’t make money when the majors will be able to point out that others are doing so just fine, and raking it in, presumably.

Who’s making money from online streaming today?

JMT says:

Re: Re:

“Pandora is just trying to get wealthy on the backs of musicians.”

Pandora are asking to pay the same rates as terrestrial radio stations, an action you claim is them “trying to get wealthy on the backs of musicians”. So are you implying that terrestrial radio stations are already getting wealthy on the backs of musicians? Because that’s the only logical conclusion to make from your claim. So where’s your rant about terrestrial radio stations getting wealthy on the backs of musicians? Should I look on The Trichordist?

Karl (profile) says:

Re: Re: Re:

Pandora are asking to pay the same rates as terrestrial radio stations

To be clear:

Pandora is asking to pay the same rates as terrestrial radio stations do for streaming on the Internet.

That is, if you’re a terrestrial radio station, and you run Internet streams in the same way that Pandora does, the terrestrial radio stations pay far less for their Internet streams.

Anonymous Coward says:

Now, you might wonder, why would an innovative company that basically seems to be focused on making terrestrial radio stations obsolete need to own such a station… and Pandora is rather upfront in its answer: because the music collections societies, like ASCAP and BMI discriminate against internet companies, in direct violation of an antitrust agreement that ASCAP signed.

Ooh, let’s look at that. Back up the argument that the “antitrust agreement” is being violated, Mike. You surely wouldn’t repeat it as fact unless you had the goods to back it up, would you?

out_of_the_blue says:

HOLY COW! Thanks RIAA for protecting me from tyranny!

Pandora is MUSIC NAZIS! FORCES one to listen to ensure you get the ADVERTISING! :
‘Until May 2009, six skips per station were allowed per hour, further limited to 72 skips every 24 hours; giving a
“thumbs down” response, or a “don’t play for a month” response, count as “skips”. On 21 May 2009, the skip limit was altered such that it counts total skips from all stations with the limitation of twelve total skips every 24 hours. If a listener gives a song a thumbs-down or “don’t play for a month” after the limit has been exceeded, the song will continue to play; it’s only after the song has completed that it becomes subject to the listener’s restrictions. This limit was not applied to the Vista gadget. Play of a single artist is limited. Pandora provides similar music, not a play-on-demand service.’

If THAT’S the future you want, kids, you are insane. I can’t imagine letting that “service” use me. — But NOW I see why Mike likes it! FORCED ADVERTISING! Is that the “new business model” you’ve been keeping secret?

Togashi (profile) says:

Re: HOLY COW! Thanks RIAA for protecting me from tyranny!

If that’s what you think about Pandora, I’d love to hear your thoughts on old school broadcast radio.

Oh no, this radio station is FORCING me to listen to half an hour of nonstop ads! And they play songs I don’t like, and they don’t let me skip them! I can’t turn it off or change the station or they’ll EAT my SOUL!

Not an Electronic Rodent (profile) says:

But...?

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work.

Hang on! I thought only the government was allowed to have secret interpretations of what’s legal and what’s not!

…Oh, wait… the RIAA is the government, isn’t it? Carry on…

Anonymous Coward says:

I think theyr'e trolling...

I just read the blog post on “Music First”, it reads like a tirade from OOTB, seriously the only thing missing is the obligatory stab at Mike.

I seriously hope they are just trolling, but somehow I think they may be serious.

In any event, its them who are the sick joke, not Pandora, too bad they don’t realize the irony of themselves.

jackn says:

to be honest, those terrestrial rates only include about 12 of the lamest songs. The terrestrial stations are forced to play thes same dozen songs, over and over and over and over.

Pandora should deal with unsigned songwriters/performers/bands directly. We could get some new blood and creativity, and stick it to the legacy monsters.

That One Guy (profile) says:

Re: Nice idea, but wouldn't work

Wouldn’t matter in the slightest if they aired nothing but music by unsigned artist/bands, the shakedown agencies would still claim that they pay up just the same, ‘just in case Pandora played music by a label musician’.

It’s the same reason it’s all but impossible for any business to have independent bands play at their establishments, because they get fined the same no matter what is played.

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