> "We've heard Pandora complain it pays too much in royalties to make a profit. (Of course, we also watched Pandora raise $235 million in its IPO and double its listeners in the last two years.) But a business that exists to deliver music can't really complain that its biggest cost is music."
Sounds reasonable enough to me. Do they have any other major expenditures besides hosting?
If that nonsense was allowed, then every company would show revenues in the billions. The finance department would pay the the HR department for HR services, the marketing department would buy millions with their own company, etc.
It is common for internal accounting books to record these intracompany expenses/revenues for record keeping. For instance a TV Show pays for ads on the same network, but before Disney reports profits publicly all of that accounting cruft must be removed.
Zero.
Marketing and Sales is primarily the cost of selling advertisements, including all the required employees. Selling $100M worth of ads isn't easy, (unless you are google).
Pretty sure anyone subject to the real rules is disallowed from doing this thanks to the dot com boom/bust.
Part of that is their Music Genome Project where human beings listened to every song Pandora hosted and rated every aspect of it. I'm sure now they just have a ton of other useful data from listening habits. Regardless, I think the music could almost be seen as secondary.
If all Pandora wanted to do was have me pay $36 dollars for a weekly, automated newsletter telling me of new songs I might like and then collecting my feedback for future newsletters made for me, I'd likely pay for that. They could even alert me to new concerts in my area. Of course, the music streaming ties that all together in a really compelling way.
So, I think if anything you could say that about 50% to musicians and 50% to programmers and staff and overhead sounds about right. Hopefully they manage to eek out a profit to stick around.
They'll be greatly missed if all that's left one day is iHeartRadio and the same old industry pushing the same old method of selecting hits.
Pandora is undeniably a good way to listen to music, and all anyone wants is to ensure they have a fair way to compete.
No one likes seeing artists go hungry. But we all also recognize that if there's anyone being unfair to artists, it's the mega industry from the prior era.
The new industry involves artists owning their work and paying $50/year at TuneCore or similar companies to get their music distributed to companies such as Pandora. Or, they sign up to traditional album sellers like BandCamp or CDBaby. It's simply the most efficient way to do it now.
Absolutely we appreciate the music industry for almost a century of fantastic art and culture. But they either need to adapt or gracefully accept their new role, which is a purveyor of American classics and the niche hype machine for the few mega acts of pop music who actually get good terms on their contracts with major labels.
Also, Pandora does not complain that their largest expense is music, it complains it is so large that it prevents the possibility of them being profitable. It may be true or untrue, but the opinion in USA Today distorts it. Pandora doesn't claim it doesn't want to pay it all, it just wants to pay so that they still could be profitable.
Additionally, even if Pandora did make enough money per listener, the fact they spend a large portion of their revenue on royalties indicates that if this portion increases, their profit margins will vanish very easily. This is not contradicted neither by size of their IPO nor by number of their listeners, because this is a marginal game, not summary. So their argument is "if royalties increase, we die". The opinion you quote does not refute this. Of course, you could say "ok, so Pandora dies, who cares, good riddance, they should have built their business better" - but that'd be completely different argument. And on this argument one should notice that in this case the authors probably would get $0 royalties for internet performances if no viable business would be possible for it.
Instead, the public starts from the stance that music should basically be free, and artists are lucky to be paid anything at all.
The purpose of statutory rates is to create an economic environment where businesses can operate without constant negotiation, and creators can earn a living.
Virtually no one is earning a living from Pandora or Spotify, so, it isn't working. Meanwhile the public has access to a functionally infinite amount and variety of music for nothing, or next to nothing.
I'm pretty sure they made the money from selling the music people heard on the radio.
a song isn't an advertisement for ANYTHING for the songwriter. It is the entirety of the songwriter's creation. The songwriter does not make a living from t-shirts, ticket sales, endorsements, or hosting a reality TV show.
http://blog.startmysong.com/2010/01/02/songwriting-how-much-...
The linked blog do nothing of the sort. It simply state that song writers get in average an $800,000 for radio and TV for a "hit song".
It doesn't say how much is TV vs radio. It doesn't say what a hit song mean, or how many CD's such song will in average sell. It doesn't say what the average number of songs of a singular author is in such CD. It doesn't say what the average income from digital downloads are from producing such hit song, or how it effect sales from the authors other works.
And worst of... Its a blog without any source for its data, and has a disclaimer at the bottom that says: ... the information is the opinion of the author only.
I didn't realize I need a citation to explain what is obvious to any music industry professional: performance royalties from radio play are a major source of revenue for songwriters of hit songs.
If the passle of you want to wave your opinions around for decades while literally enabling and rationalizing the destruction of an industry through targeted technology (napster, for example, originally ONLY supported mp3s) maybe you should do your own research and educate yourself, and not expect me to footnote every assertion.
Otherwise, just admit you want everyone else's IP for free and stop making up justifications.
Why is that obvious? If violating copyrights was impossible, I would probably just be exposed to a lot less music, and would thusly end up spending less on music (I pay for iTunes Match, usually spend $50-100 a year on albums, and $100-200 a year on concerts).
Oh? If Pandora already spends half its revenues on the music, how is observing that doubling (for example) royalties would cause music costs to eclipse revenues, bullying and threatening? It sounds like Pandora is the one that should feel threatened.
Wait, no, it wouldn't be wonderful, because then you'd be angry that every company was making 50% net profit off you left and right.
I'm not sure most average people use bit torrent anymore. And the web is an extremely inconvenient way to try to access illegal content.
Google searching for 'pink floyd the wall' and clicking the three most obvious links in order gets you a well seeded torrent file. None of the links on the page obviously lead you to somewhere to pay to stream/download the album legally (although there is an iTunes link for the movie at the bottom).
Pirates are still winning on convenience, let alone cost.
Yeah, many people don't - because of Pandora and Spotify. Take those away and people will go back to piracy.
Citation?
I don't think that's obvious, I think it's an empirical question. With N subscribers, Pandora currently makes $36 * N per year. If they raise the cost to $50, they'll make $50 * (N - x), where X is the number of subscribers they'd loose.
Of course, all the profit is basically split between the licensors. Pandora currently keeps nothing.
You are suggesting that 50 * (N-x) is "obviously" bigger than 36 * N, but I would suspect that Pandora has already tested it, and $36 provides the maximum possible revenue. If they haven't tested that, they are truly incompetent.
The Pink Floyd article mentions their IPO, but doling out IPO money to licensors is a temporary solution, and probably one Wall Street wouldn't take particularly kindly to. So the choice really is "the current licensing terms, or $0".
http://blog.pandora.com/2012/10/09/pandora-and-artist-paymen...
Also, eliminating Pandora might (or might not) increase royalties via other media.
Artists, get over yourself. The market is huge now, and your product value is approaching zero. But keep on flailing in the noose.
EDIT: Half credit. Per dllthomas, "Per the article, FM radio pays royalties to the songwriter but not the performers."
To be a prospering model, rather than a struggling one, they might have to raise prices on customers while trying to hold royalty payments to a steady %.
The biggest potential threat to Pandora, other than the labels killing them with royalties, is Apple and Google.