Pandora: The CRB's New Rates Would Bankrupt Us
August 31, 2007 1:05 PM
comment(s) - last by
New royalties are not the only woes for major Internet radio broadcasters; Pandora founder Tim Westergren shares all
(SoundExchange's recent royalties mandates are set to
induce massive changes
in the fledgling world of online radio. In an effort to better understand precisely what these changes may bring, I
have asked two vastly different webcasters for their thoughts. Our second respondent is
, Chief Strategy Officer and founder of
, which creates personalized radio stations based on information culled from
The Music Genome Project
. Tim is also an award-winning composer, and has over 20 years of experience in the music industry.)
: For the record, can you describe Pandora? What is its purpose and how does it fit in the overall landscape of online broadcasting?
Westergren: It’s a personalized radio service, that allows people to quickly and easily create radio stations that play just the music they like. It’s based on an 8 year old effort called the Music Genome Project, which is this enormous musical taxonomy, that, essentially, has been a process of collecting and analyzing musical DNA for hundreds of thousands of songs, and it’s what drives our whole playlist and creation system.
The goal of Pandora is something I would describe as sort of twofold: one is to create a better listening experience for the public, and to create what will be the best radio in the world, anywhere, any time period. (A modest goal. *laugh*) The second piece is to help musicians, to build a musician’s middle class while allowing a far greater and broader selection of artists to find a large audience.
What is your opinion on the old and current royalty systems? Do you believe they are/were fair to all parties involved (artists, stations, labels, et al)?
Westergren: Well, there are a bunch of royalty systems, and in terms of web radio specifically, I think that they need updating. While it didn't lay out specific rates, the original guidelines that were put in the DMCA were pretty reasonable.
But in 2002, the underlying legal foundation was altered in a way that has made it unfair for web radio and has resulted in this crazy ruling that came out a few months ago. So, I think the guidelines that need updating, and in the process of sort of discussing and negotiating that, I’m hopeful that when we’re all said and done we’ll have something that’s reasonable.
: Compared to the old royalty rates, how do you think the new rates (especially the deal that SoundExchange is trying to push on web radio) are going to affect Pandora?
Westergren: The new rates would bankrupt us, along with every other webcaster in currently in operation. Without a doubt, for us it’s a really misguided decision, and it’s disruptive for everybody, rightsholders included: even if you increase your rates, and if it puts those rate-paying stations out of business, then you’re going to get nothing. These rates essentially don’t rely on the understanding of the economics of web radio. So, I think it’s a terrible ruling and one that needs to be fixed.
Internet radio is one of the real bright spots in digital music, and I think that everybody is well served by providing an economic structure that allows it to thrive. This last rate does not accomplish that.
: How well do you feel that Pandora
were represented in the CRB's process to change royalty rates? How well do the changes serve everyone's best interests?
Westergren: Well, you know the reality is that, years ago, there was a fairly extended deliberation and hearing process around [the royalties rates], and we weren’t present because we weren’t party to the original arbitration process; Pandora wasn't around back then. But web radio was heard by this committee, and the problem was sort of two-fold: Firstly, the committee had to abide by language in the federal statute that sort of dictated how they could rule on that case. And that language was monkeyed with, back in 2002, in such a way that it didn’t really allow them to, in a sense, treat internet radio in a way that’s equitable with other forms of radio; it set a different standard for web radio.
I think the second part of the problem is that the CRB just missed it. If you read the ruling and the rationale as it’s articulated by the royalty board and their subsequent followup to it, it demonstrated a complete lack of understanding of the business that we’re in. I think that there were structural problems and I think that resulted in a really flawed decision handed down.
: Now, there is also a lot of concern that the royalty system is unfair to independent stations, or stations in general that broadcast music that is both registered and unregistered with SoundExchange, or of artists may or may not be participating in it. Given the diversity of its catalogue, I’m sure that Pandora plays music that falls in both categories. How do you think the CRB is going to handle this? Do you think that webcasters are going to pay royalties on everything that they broadcast?
Westergren: I think they are, and I actually think that’s fine. I think that webcasters in general are happy to pay royalties, they just need to pay them at a reasonable rate.
There are sort of a couple of different issues that you mentioned here; one is, "What is the rate?" and that is being hotly debated. The second one is of how those rates are collected and distributed. You’re right that although the law applies to all recordings -- whether it’s from Universal Records or some homemade CD published out of a living room -- the rates apply to all those artists equally.
The real challenge is, literally, getting the artist's mailing address and getting them to register with the rights collecting agencies. Currently, SoundExchange is the largest in terms of centralizing that role and, you know, they’re a non-profit, in some ways they have been the most visible representative of the rights-holders side in the big debate. In truth their function is just to collect royalties like ASCAP. It behooves artists to contact them and register their music and make sure they’re paid, and that is a problem in and of itself. How do you get artists to become aware of SoundExchange and take the time to make sure they get registered?
: A lot of webcasters fly under the radar, choosing not to participate in SoundExchange at all. Together, everyone forms an ecosystem that, like any ecosystem anywhere, can be kind of fragile. Do you see this ecosystem being heavily disrupted by the CRB? What do you see happening to all the rogue, independent stations that decide not to comply with the ruling?
Westergren: Well that’s a hard question to answer. You’re right that, like in every industry, you have a range of actors. You’ve got the large ones, the most visible ones, the ones that get the most attention from the rights holders in general because that’s where the revenue is coming from. In web radio, you’ve also got very small webcasters, most of whom are paying royalties and some of whom aren’t, and in the end it comes down to the artists and the folks that are representing them. What is their disposition towards these services? Are they really damaging? Are they materially hurting artists, and is it really worth the time and effort to find them and shut them down or force them to pay royalties? To the extent that forcing them to pay royalties would put them out of business, is that something artists want to have happen? I think that’s the question, and the artists-and-label community has to answer it for itself.
: Do you have anything that you’d like to add?
Westergren: Sure. I think one of the important things to recognize about internet radio is the diversity of music that it plays. I think that, in terms of why we need internet radio, a typical online station plays a much more diverse collection of music than broadcast radio. With Pandora as an example, we play the music of over 40,000 artists, and we have over half a million songs in our collection. On a daily basis, 94% of those songs play, so every day, 94% of that enormous collection is played. Of those 40,000 plus artists, 39,000 are not being aired or have never been played on any form of broadcast radio, so it’s a real vital channel for artists, and I think it’s one that needs to survive and it needs to be nurtured. Not to say it gets a free pass, but as we resolve this rate debate, we need to really keep in mind the value that it’s offering for musicians.
This article is over a month old, voting and posting comments is disabled
Squeezebox + Pandora = Bliss
8/31/2007 10:37:57 PM
I've been a paid Pandora subscriber since Slim Devices (Logtech) Squeezebox began support and integration with the service. It would be a travesty if it went bankrupt, and a major loss for my Squeezebox!
RE: Squeezebox + Pandora = Bliss
9/1/2007 7:01:05 AM
How do you become a paid subscriber, I would like some extra cash myself ;)
RE: Squeezebox + Pandora = Bliss
9/1/2007 7:53:10 PM
LOL - yeah, I meant "paying" subscriber. Oh and... I also meant "Logitech"...
Pandora - great idea, but flawed
9/3/2007 2:40:24 AM
The flaw that I found with Pandora, and equally with Yahoo, is that the sound quality on some songs is really poor for many of the songs. I find this to be especially true of parts that may contain something like a bell, or if there is a higher pitch to the singer. It starts getting clippy, and it sounds terrible. I had hoped to avoid needing to buy CDs and always struggling with having the burden of the discs, but I'm now coming to realize that radio isn't a solution yet because of the poor sound quality. I guess it's the same for old school radio. I've heard that the fidelity on radio is terrible, and unfortunately this seems to be even worse on internet radio, even when one pays for it. This is a real shame.
Pandora was interesting (until it banned me for being unAmerican - I'm a Canadian in S. Korea). I liked how it molded itself to my preferences. It does that far better than Yahoo's personalized radio function. It was saddening to lose it when they started checking out people's IPs.
“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads
SoundExchange Offers Webcasters New Rates
August 24, 2007, 9:30 AM
Latest By Tom Corelis
SSLStrip Makes Ignorance of HTTPS a Costly Mistake
February 25, 2009, 5:34 PM
Prosecution Alters Charges While Plaintiffs Fumble in Pirate Bay Trial
February 25, 2009, 7:19 AM
Censorship Head in Beijing Arrested on Corruption Charges
February 25, 2009, 7:04 AM
Microsoft Lets Laid-Off Employees Keep Extra Severance Pay
February 23, 2009, 7:30 PM
New Conficker Update Dispenses with Need to Phone Home
February 23, 2009, 6:39 PM
Updated: Microsoft a Little Too Generous with Severance Pay, Wants Some of it Back
February 23, 2009, 9:01 AM
Senate to ISPs, Anyone with Wi-Fi: Keep Access Logs to Save the Children
February 23, 2009, 9:00 AM
The Pirate Bay: 80% of Our Torrents Are Legal
February 22, 2009, 9:46 AM
Hacker Unveils Stealthy Memory Injection Attack in Mac OSX
February 20, 2009, 7:30 AM
Pirate Bay Trial Begins with a Bang in Sweden
February 17, 2009, 8:10 AM
FTC Targets Google Again for Advertising Practices
May 24, 2013, 1:17 PM
Google Engineer Finds Microsoft Security Flaw, Says Company is Hostile About It
May 23, 2013, 10:51 AM
Survey: 94 Percent of Teens Use Facebook
May 22, 2013, 2:53 PM
Congress Looks to Force Extra Protection on Utilities to Combat Cyberattacks
May 22, 2013, 2:24 PM
U.S. Military Cuts Guantanamo Bay Wi-Fi After Alleged Threat by Anonymous
May 21, 2013, 11:00 AM
Yahoo Acquires Tumblr for $1.1 Billion
May 20, 2013, 11:12 AM
Most Popular Articles
High School Student Creates Storage Device that Can Charge in 20 Seconds
May 20, 2013, 6:51 AM
Apples Tries to Use Decade-Old Patents to Ban Samsung Galaxy S IV
May 22, 2013, 3:00 PM
NASA Awards $125,000 Grant for 3D Printed Food on Long-Term Space Travels
May 21, 2013, 1:32 PM
Microsoft Announces Voice-Controlled "Xbox One"
May 21, 2013, 12:55 AM
Seawater Cooling Saves Data Center Big Bucks, Energy, Despite Jellyfish Issues
May 17, 2013, 3:23 PM
Latest Blog Posts
Lumosity: Does it Work?
May 22, 2013, 8:20 PM
Quick Note: Sony "Teases" PS4 Ahead of Xbox Reveal in New Video
May 20, 2013, 12:33 PM
Nokia Introduces Instagram-Like App of Its Own to Help Lumia Sales
May 20, 2013, 7:10 AM
Parents of Pre-Teen Drivers Commonly Practice Distracted Driving Says Study
May 9, 2013, 7:16 AM
Apple's iOS 7 Running Into Internal Delays Due to Massive Overhaul
May 1, 2013, 4:26 PM
More Blog Posts
Copyright 2013 DailyTech LLC. -
Terms, Conditions & Privacy Information