RIAA Lobbyists Turn Anti-Pandora Desperation Level Up To 11

from the are-they-serious? dept

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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Companies: musicfirst, pandora, riaa

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Comments on “RIAA Lobbyists Turn Anti-Pandora Desperation Level Up To 11”

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47 Comments
out_of_the_blue says:

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.

Anonymous Coward says:

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).

crade (profile) says:

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.

Anonymous Coward says:

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!

John Fenderson (profile) says:

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.

jackn says:

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.

A Monkey with Attitude says:

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.

wallow-T says:

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.

Julian Perez (user link) says:

Re: 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.

PaulT (profile) says:

Re: Re: Re:4 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.

Anonymous Coward says:

Re: 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.

JEDIDIAH says:

Re: 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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