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Pandora Paid Over $1,300 for 1 Million Plays (theunderstatement.com)
599 points by cgilmer 1431 days ago | hide | past | web | 209 comments | favorite



"A good flatterer doesn't lie, but tells his victim selective truths (what a nice color your eyes are). Good PR firms use the same strategy: they give reporters stories that are true, but whose truth favors their clients."

I have no idea if David Lowery's original post about making only $16.89 for 1 million plays was distributed by a PR firm, but it sure feels like it.

PG's thoughts on PR are spot on, and I love referencing his article to both discern truth from half-truth in the news, and, of course, to push my own PR efforts:

http://www.paulgraham.com/submarine.html


I imagine the minority here is aware that Pandora now owns a radio station, and their goal is to use the radio station to get more favorable terms for licensing. (wsj story: http://online.wsj.com/article/SB1000142412788732490400457853... ) I interpret these stories and their timings as a prelude to undermine Pandora's bargaining position. It's clearly PR to extract 'higher' payments, even though Pandora already pays among the highest per-listener rates in the US across all mediums. The blog author and parent are spot-on.


It's also mentioned in the OP.


Yea, the Pink Floyd article suspiciously came out at the same time yesterday in USA Today. And with legislation coming up in congress you know the lobbying pressure is ramping up.


Saw a banner ad for the Pink Floyd catalog being on Spotify tonight. Forgot to screenshot it - but maybe that relates to trashing Pandora?


I always think of the Excorcist quote about how the Devil doesn't lie but rather mixes lies with the truth. That's what makes it truly perplexing.


I love that he only quoted his songwriter royalties (shared with the band), not his performance, and artist royalties.


You raise a very good point aresant. Its a point which everybody should understand.

It is not interesting to post a story which says "Pandora Paid Over $1,300 for 1 Million Plays" but it is very interesting to post a story which says "My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89"

I watched Mike Arrington (founder of TechCrunch) talk about PR on youtube at a startup seminar and he raised this exact point. Regardless of your agenda, a controversial story is far more newsworthy and will get you more coverage then a regular story.


It should be My Song Got Played On Pandora 1 Million Times and All I Got Was $1300.

Compare that to what they would have got had it been on the rotation on Radio 1.

Note as the article says in the rest of the world unlike the usa terrestrial radio does pay for the songs it plays.


"And they were worth it. PR is the news equivalent of search engine optimization; instead of buying ads, which readers ignore, you get yourself inserted directly into the stories."

Great insight - considering now a days PR is also becoming SEO.

By that I mean that a good PR firm provides a service of getting high-end backlinks from highly authoritative sites - media, etc.


A PR firm would have been much more selective with the truths.


This makes sense. Another way to back into the figure:

Pandora spent $82M on content according to the most recent 10Q, with 4.18B listener hours. That implies a cost of $0.02 cents per listener hour. A million plays is roughly 62500 listener hours, which implies a content cost of $1250.


Sorry but ..

"$0.02 cents"? Do you mean "$0.02", or "2 cents" or two hundredths of one cent, or something else?

Is this Verizon writing? ( http://verizonmath.blogspot.com/2006/12/verizon-doesnt-know-... )


I meant $0.02, aka 2 cents.

Sorry about that. It is an easy mistake to make at 2pm in the morning.


Do you mean...2 am?


And... that was the joke :)


Interesting analysis.

Based on their cost of $0.02 cents per listener hour, I wanted to calculate how many hours per day my $36 yearly payment equates to (ignoring their operational costs):

($36 / $0.02) = 1800 hours per year

1800 hours per year = 4.93 hours per day


Sounds like the pricing structure all works together very well, then. 5 hours per day sounds like a good point which plenty of people can easily eclipse, but the majority will not, keeping the service profitable.


Licencing is hardly there only cost.


Yes, but they said it was 50% of revenues. I believe Pandora is profitable, so the sum of all other costs must be less. This means that the breakeven point is actually somewhere between 2.5-5 hours. 5 hours per day is not a magic number- I think 4 or 3 also sound perfectly fine, based on the usage patterns I see.


Pandora is actually operating at quite a big loss:

http://finance.yahoo.com/q?s=P&ql=1


I don't see much value in an analysis that ignores operational costs.


Its easy to complain about the low pandora royalties, but these artists are essentially trying to kill the golden goose. Pandora currently spends > 50% of revenue on royalties. Any increases would almost certainly lead to the end of the company. $0 is a lot less than $1,300 for 1 million plays.


Relevant opinion: http://www.usatoday.com/story/opinion/2013/06/23/pink-floyd-...

> "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?


This is a set of non sequiturs. First, raising money in IPO doesn't mean business is profitable or even viable - it only means whoever bought the stock think it could be in the future. They may be very well mistaken, especially if conditions change - such as royalties are increased or another regulatory or technological change happens. Increasing listeners also doesn't make it more profitable if they spend a lot of money on royalties - if they pay in royalties and associated costs more than additional listener brings in, more listeners means worse situation, not better. For Pandora's sake we'd hope it is not so, but the increase alone does not contradict Pandora's claim that royalties are too much to make a profit.

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.


From the most recent 10Q. Revenue was $125M ($105 Ads / $20 Subscriber). Expenses: $82M Content, $10M hosting, $7M Prod Dev., $40M Marketing/Sales, $14M All Other. Net Result: $28M loss.


I wonder how much of that marketing costs are from their own interstitial ads between songs? I would think the cost to them is $0, but I wouldn't be surprised if they valued it at market rates. Perhaps to keep the IRS happy.


> I wonder how much of that marketing costs are from their own interstitial ads between songs?

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).


This would absolutely not make the IRS happy.


So long as you count it as revenue and aren't publicly traded you are fine.

Pretty sure anyone subject to the real rules is disallowed from doing this thanks to the dot com boom/bust.


If they show a expenditure of $40M in MArketing for pandora ads, they are probably adding that $40M to their revenue


You can't do that with public financial statements. When preparing financial statements, there is a process called intracompany balancing, where you pull out any revenue/expenses that were generated within the reporting entity.

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.


Or they spin off sort-of-separate entities to move the profits around (Hollywood Accounting)


Not allowed. Any related parties have to be disclosed and will be removed on consolidation of financial statements. Unless both parties are totally separate entities with no relation, we are moving into fraud territory.


That only works between entities in different countries, though they can use the strategy to dodge liabilities.


I'd argue that rivaling music, pandora's biggest product is their music recommendation system. It's second to none in my opinion. Google has clearly put together a good system too recently with their generated playlists, and last.fm has had similar recommendations. However, as far as a recommendation system that exposes you to new, different music you would have never selected on your own, Pandora makes good choices with surprising accuracy.

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.


Arguing that high royalties make it hard for Pandora to do business is just bullying and threatening. Obviously if sharing songs via violating copyright weren't an option, listeners would happily pay a little more for Pandora premium or endure a few more commercials.

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.


> Obviously if sharing songs via violating copyright weren't an option, listeners would happily pay a little more for Pandora premium or endure a few more commercials.

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).


Arguing that high royalties make it hard for Pandora to do business is just bullying and threatening.

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.


Oh, but isn't that just a failure of their business model? If I can only survive by offering cakes for $5 and buying them for $1 the "threat" would be wholly self inflicted (At least, that is the song which is sung on HN to artists, the "too bad your business model sucks")


Yeah, it would be wonderful if all businesses operated with enough profits they could absorb doubled costs, but that isn't generally how it goes.

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.


If wishes were horses, we'd all be eating steak. Talking about "if" something that is true weren't doesn't seem very useful to me here. Illegal music sharing is reality and shows no signs of stopping, or being stopped.


I used to believe that, but now I am not as sure.

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.


Are you being serious? Google "Youtube to Mp3" and have fun. The only real dent in piracy I have seen is that I can't find clips from my favorite episodes of The Simpsons and other Fox properties.... which is annoying because I tried to share a funny scene from Bob's Burgers and the clip was simply unavailable... viral advertising anyone? Sure some clips are available on Hulu... the ones they have pre-screened, but not the one I wanted to show. The networks are short-sighted in my opinion.


I just ran a little experiment, because I'm out of practice on that sort of thing and too lazy to use anything but Pandora and Rhapsody anymore.

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.


> I'm not sure most average people use bit torrent anymore.

Yeah, many people don't - because of Pandora and Spotify. Take those away and people will go back to piracy.


Hit up grooveshark.com and go to town. It has never been easier.


youtube


According to Pandora about 800 musicians received over 50k a year from them and 2000 received 10k a year. So some people are making a living off Pandora. As Pandora currently has 7% the listeners of radio, it's entirely possible upwards of 10k musicians could make a 'living' off Pandora.

http://blog.pandora.com/2012/10/09/pandora-and-artist-paymen...


> Obviously if sharing songs via violating copyright weren't an option, listeners would happily pay a little more for Pandora premium or endure a few more commercials.

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".


Did any musicians ever make a living off radio?


Often the money went the other direction: http://en.wikipedia.org/wiki/Payola


Exactly. People would pay radio stations to break records. Then people would buy those records.


You'd have to be getting an insane amount of airplay indefinitely to make any sort of living.


Yes. Entire generations of songwriters made their living from writing songs which were played on the radio.


[citation needed]

I'm pretty sure they made the money from selling the music people heard on the radio.


downvote me all you guys want. People in the tech community consistently conflate performing artists (bands and stars you recognize) with composers (songwriters, the people creating the intellectual property, and who are most screwed by the modern economy)

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-...


I downvoted you, because your reply do not include a source that supports the claim that an entire generations of songwriters made their living from radio royalties.

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.


It is really hard for me to realize how ignorant of the music industry tech people are. Maybe that's because you guys seem delighted to pontificate all day long, without mentioning you have no clue whatsoever how any of it works.

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.


But they make money when the music is sold, which is what Semaphor said.


Where the $800K for radio/TV performances figure came from?



Are they not still making money off the radio?


They make more from Pandora than they ever did from radio... and their music accesses a larger audience.


This is patently untrue.


It's easier said than done to think that charging more and putting more commercial will still allow Pandora to retain the customers. If rdio, Spotify, Rhapsody all are offering similar service at lower rate, what's to stop the customers from going to other services?


Pandora as it operates today is a money-losing enterprise. So assuming those competitors pay the same licensing rates, and barring one of them inventing some genius new revenue stream, the answer to "why won't users just switch to those other services" is that those other services will just go out of business.


Virtually no one is earning a living from Pandora or Spotify, so, it isn't working.

Citation?


That's a really shitty golden goose.


Does that even matter? Since the marginal effort on the part of the performer is exactly zero? (which is to say they don't have to "do" anything to be on Pandora, they just collect checks from BMI/ASCAP). If a musician is arguing that they are being driven into poverty by poor royalties, losing them completely seems to make them worse off.


Your argument applies retrospectively to past creations, not prospectively to future creations.

Also, eliminating Pandora might (or might not) increase royalties via other media.


I would argue eliminating the streaming services would more likely make the pie smaller. I don't think all the people paying x a month or ads supported are going to suddenly start buying albums.


Compared to what, FM radio? Which pays NOTHING?

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."


FM radio pays royalties.


Per the article, FM radio pays royalties to the songwriter but not the performers.


Its reverse. Record industry pays to have their songs played on the air there's even term for it, payola.


Huh, so that's where the term comes from. Interesting.

http://en.wikipedia.org/wiki/Payola


At my latest gig (new media), my employment agreement actually has a whole section on payola. #TheMoreYouKnow


Forbidding or encouraging? :-P


Definitely forbidding :-D


Plastic goose?


Spare a thought for Spotify - they are contractually obliged to pay out in excess of 70% of their revenues to the record labels.


Judging by what I have read, Pandora is not making much (if anything) so there's a limit on how much they can pay. Maybe the is not a feasible business model, or maybe someone else--other than the artist--is getting the lion share of the royalties.


It's clearly a feasible business model. They've survived a long time, and haven't bled out. With some strict cost cutting, they can probably break even, and that's more the problem.

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.


What I think is missing from this whole discussion is the ability to make a living. Sure the industry is opaque to outsiders, and some of the established practices are weird (radio paying only songwriters, not performers), and now it's all being disrupted.

But forget about the numbers for one song. Let's say a guy like the OP of the other article works full time as a singer song-writer. He writes a few songs, performs some of them, has others (more popular artists) perform some of them, and maybe he plays a few gigs himself (either as a musician in someone's band, or good enough to do his own shows). Let's say he's median successful. One or two of his songs (either recorded by him or someone else) is close to charting. People are listening to it online and radios are playing it. Other songs are getting played but not getting the same traction. He works 50-60 hours a week on music, either writing, recording, or performing. What kind of living can he make?

a) 20K and lives off of another job? b) 40K and struggles to pay rent? c) 60K and can survive? d) 80K and considered successful? e) 100K and lives comfortably doing what he loves? f) More and can live in expensive parts of the country (NY-SF-LA)?

How was it in the old system of labels and DJs? How has it changed with Pandora and iTunes?


The ability to make a living is not a right, it's an opportunity.

The same opportunity that made it possible for artists to record once and resell in the millions is now working against them.

Where where they when the distribution companies who used to make a living from the music industry was laid off? Or the record stores?

It's not a right, it's an opportunity.


This is simplistic. Major labels still have the relationships which allow them to dictate favorable terms to these services that supposedly are so great for indies. These favorable terms mean that the services need onerous terms from the indies in order to break even. This effectively means the indies are subsidizing the major labels. That dynamic needs to change before we can argue that this meets some level of fairness.


Thats a whole different discussion though.


My point was we're trying to judge the merit of an entire system by one tiny facet. What's a fair amount of money for this guy to get if it's not X? What if I was a QA tester and I complained on my blog that my dev team was unfairly closing the bugs I open as invalid, thus depriving me of my bug-based bonus? Seems crummy, but maybe that just how the industry goes and I'm still living comfortably.

Obviously, there is no "right" to earn a living in the legal sense of a right. But it seems moral to say that if someone puts in average work, and they're average talent, they should make an average living out of some industry that is still in demand.

You raise an interesting point about the producers and salespeople of the industry. Why shouldn't they have a "right" to make an average living as well. Indeed, but they could also follow the technology, eg from "curating" a record store to "curating" a recommendations website. Or, since they also have more portable jobs, they could produce or sell other products or talents.

The musician, on the other hand, is stuck. If musicians can't live from their music, even if they are in demand, will stop making music for us consumers.


You last claim is simply not true. There have never in the history of human history been so many artists out there. If anything it's the amount of competition amongst musicians that is pushing the returns down.


"Average work with average talent" should NOT equal average wage because people should be self-selecting in to things they are above average at as a profession. As a society, we don't want a bunch of mediocre musicians, we want only good ones.

This sort of explains why many areas are winner takes all or extremely exponential in wage/quality.


When you take the timeline of the history of the planet Earth into account, there was a not so distant past where an artist, musician, etc. could make a living based solely on the support of a single benefactor. It seems as though the past 50 years is likely to be seen as a blip on the trend of how an artist is compensated for their work.


What you say may be true, but it's only relevant to the question of what we do with that part of the discussion. It doesn't, by any means, mean it's not something we should be aware of.


Having lived of music myself in my younger years I am all too familiar with the discussion.

The problem is that once you start digging into it, the reality is that claiming "i wrote this song" is a much more muddled claim than you might think and so is the claims about how much one should earn and that others are stealing when pirating.

In reality 99% of the people playing music wouldn't be able to do it if it wasn't for the same technology that is now making it impossible for them to make a living.

So deal with it and find a way to make money or quit. That's really all there is to say IMO.


"So deal with it and find a way to make money or quit. That's really all there is to say IMO."

I listen to music, I don't create it[1]. This is not the choice that I face, and there's plenty else to say in terms of how I want to direct my attention and my dollars.

[1] at least, not for other people [2]

[2] or at least, they don't appreciate it when it is...


When unions are discussed here on HN, will you have the same opinion?

Many unions force companies to pay workers inflated wages which are well above the current rate.


I am not sure I understand the question. Care to elaborate?


I'm fairly sure that the vast majority of musicians throughout history have not been able to sustain themselves with nothing but music.


I would have said a). The long-tail factor is huge here. I know people who are starting to "hit" in this way - songs on cable shows, even a national commercial, one with a major song placement that became a hit (performed by another artist). None of them are the types with comfortable incomes, health insurance, and Roth IRAs.


I would say (d). A friend of mine was on a plane next to someone (I think in Deerhunter) and she was talking to him about his salary oddly. I remember it being around 80k but he wasn't working 50-60 hours a week. I think someone at that level is closer to 25-40 hours.


> and some of the established practices are weird (radio paying only songwriters, not performers), and now it's all being disrupted.

Might as well pay royalties to sound engineers and producers, for that matter. To me it is a question of whether or not someone was a dedicated member to the group or simply someone who was hired to do a set job. I mean, some musicians do all the songwriting and playing, some are hired to play a given sheet music verbatim, etc. The latter is not very different from a sound engineer who is hired to work on one album for a fixed hourly pay.

It's kind of interesting how the musicians are the heroes of the music world and always the one that are focused on when it comes to "fair pay" etc, but the world of music isn't simply divided into the working musicians and the record label suits. Some people have suggested donating to the musicians directly instead of buying their albums (opting to pirate them instead), and that works of course the band was behind financing the whole album. If they weren't, though, then it glosses over some of the other players...


I wonder what the performers/songrwriters think of the fact that I purchased (used) Aerosmith's Hits CD about five years ago for $3.00. I've probably listened (in various formats) to that CD about a hundred+ times in the last five years. There are 10 tracks, so, 1,000 plays for which everyone (Songwriters, Publishers, Performers, Distributes) - all received $0.00.

Multiply that by 1,000 Aerosmith fan's who bough a used CD, and you have 1 Million plays that generate $0.00 for the music industry.

I wonder if the Music industry feels that they are being treated unfairly by the Used CD Marketplace? Or how they feel about people just purchasing $4-$5 CDs used (S&H included) off of Amazon - the combination of low cost + convenience.

Ironically - in the last year, I signed up for iTunes Match ($25/year), so in theory, every time I listen to this CD the various contributors are once again receiving revenue.


As a performer/songwriter, I don't have a problem with that used cd bit conceptually. All those cds were originally sold full price, generating full revenue.

The original purchaser bought it for full price, and assuming I'm a major artist like Aerosmith, that's big money in the aggregate. A cd isn't rent, it means you get to enjoy that stuff for as long as you own it. If the original purchaser wanted to transfer that ability to someone else even for free, I don't have a problem with it. I don't see cds as somehow being linked to the original person's lifespan, or a time-value of how long he's likely to listen to it. It's the existence of the cd, period. The fact that he got three bucks for it, more power to him.

Now, if he instead ripped the cd to continue his enjoyment and then sold or gave it away, to me that's the same as keeping the cd and letting you rip it (either for free, or for three bucks). That's not okay. He clearly liked it enough to "keep" it, so he should have kept it. In which case (if everyone else acted the same way), you would have bought a new copy, which means more money for the artist.

At any rate, you, by purchasing a used cd, did nothing "wrong" from any perspective in my book, because it can't be on you to ensure that the seller will no longer listen to or enjoy the music. But people that sell their used cds, technically they're stealing if they keep their rips after they sell it. Or at least "stealing", in the sense that it's the same as letting someone else rip/burn their copy.


The labels would outlaw used CD sales if they could. I know in a couple of states, efforts have been made:

http://www.wired.com/listening_post/2007/05/used_cd_sales_l/


On some days, I wish companies like Pandora, Spotify, and Rdio would just voluntarily shut down. If the music industry thinks streaming companies are ripping them off, the music industry is welcome to build their own streaming business and show everyone how it's done.

Musicians were complaining about royalties and payment long before the internet was invented and they'll be complaining long after we're all gone. Keep that in mind when they act like streaming is the new scourge of music.


Spotify is owned partially by the music industry: http://www.guardian.co.uk/music/musicblog/2009/aug/17/major-...

I'm sure the labels are very happy to keep making the same margins they used to with these new distribution channels. The music industry is doing fine here, it's just the artists who are getting a small piece of the pie.


Maybe this is the crux of the issue. The labels would like to shut down the competition and control the channel as did before. It would explain the PR blitz.


Indeed. Pay to play, every singe time things are played they want you to pay, and be in control. What is missing often from these discussions is that a lot of bands and musicians could deal direct with a service like Spotify. But that would cut the record companies out of the loop and hey are fighting this tooth and claw. So they essentially have a cartel controlling Spotify and making sure the pressure is on for the rest of the industry. It will be interesting to see them end up in the middle, making millions as they have manoeuvred themselves into controlling something hat could hav been an efficient market with few middlemen.


I don't think the music industry has a problem with streaming (Pink Floyd who started this renewed debate yesterday just got added to Spotify). The problem is that Pandora wants royalties cut - because their business model doesn't work. If they can't afford to distribute the product they need to raise prices or shut down. They can't make the producer look like the bad guy. Trying to get the producer to lower prices because your business model is a failure is ridiculous.


Try to make the distributor pay you disproportionate to what consumers are willing to pay for your product(music) is fucking ridiculous.


Disproportionate would be more than 100%. As you said: the consumers are willing to pay a certain amount. A share of that amount can never be "disproportionate". Are you demanding the same humbleness of yourself when you negotiate your salary?


It is disproportionate given Pandora, after all is said and done, is yet to turn a profit. If Pandora was making millions or billions in income, its easier to argue they ought to pay a larger share to the musicians.


No one's arguing they should pay a larger share - just that they shouldn't pay less than they are currently paying.


And yet no one has explained why they shouldn't pay less than they are currently paying, when their competition pays far less.


Really it is a pretty horrible business to be in. You are totally at the mercy of the publishers, should you be really successful at customer acquisition and monetizing then you will be rewarded with higher royalties.

As it stands I don't see how it would be possible for Pandora to ever do better than small profits.


How do we know what consumers are willing to pay? How do we know this is a fixed number and can't be altered by other factors?


Not when you have plenty of other avenues to get revenue from and cutting off this specific one own't have much impact on you.


Coming up next: An article titled "I coded in Silicon Valley for six years and only made $1,000[0]"

[0] Not including salary.


would be more like $10,000[0]


why the downvote? :(


I have said it before and I will say it again.

20 years ago that and thousands of others songs wouldn't even have been played anywhere and definitely not a million times.

If you want to live off of making music or as an author or anything else you have to think like a publisher not an artist.

Playing music is a joy, something you can enjoy whether you make money or not from it.

Living from making music is an opportunity not a right.


Actually, I think that if you want to live off of making music you should think like an artist and plan on making most of your money by actually playing music instead of hoping that you can make a living off of music you played decades ago. Intellectual property and royalties were only invented less than 200 years ago and there's no guarantee that people will be able to depend on that as a source of income in the future.


That was not my point at all. Sorry if that was unclear.


> 20 years ago that and thousands of others songs wouldn't even have been played anywhere and definitely not a million times.

Ironically that song was a hit exactly 20 years ago... so no, it managed to do just fine without a streaming service.

But yeah, I would never go back to the old model of radio and music only being on physical media. In fact, we can't at this point.

> Playing music is a joy, something you can enjoy whether you make money or not from it.

Other than an on average greater passion than in other professions, music sometimes has the potential to be "just a job". You might dream of coding the next greatest physics engine, but you are stuck making the same boring apps in a domain you don't care about. Similarly, you might dream of composing and playing rock operas but you are stuck doing crummy session work for R n B artists. It's not that R n B is bad, but not every musician is necessarily a person that has passion for all kinds of music and all kinds of gigs in the music industry.

But yeah, making a living from it is not a right, just like any profession.


But many musicians unfortunately argue as if it is.


"Pandora advertised my product to 1 Million people and only paid me $1300 for it!"


I can't speak to Pandora specifically, but Spotify is often pitched as an alternative to buying music and it also pays comically low royalties.


Comically low compared to what? Sure, compared to a CD sale they are low, but the royalties on a CD sale cover all future listens, by all future owners of that disc. Royalties on radio playback pay for one listen by tens of thousands of people. Royalties from a stream pay for one listen by one person, of course they are low.


Exactly. If I'm not mistaken sometimes terrestrial radio stations are PAID by the labels to promote certain shitty pop songs. Why do you think they play the same ones every hour?

Here's another thing I don't get thought. I listen to albums every day on Spotify. I also bought a few on iTunes. How much of that $9.99 does the artist get for my unlimited usage?


Pandora didn't advertise the product. They delivered the product. The product is the MUSIC YOU ARE LISTENING TO. The experience of listening to music. If you don't understand that, you shouldn't even participate in the conversation.


Or you could say that playing one song is an advertisement for the album or for the artist. There are many artists I wouldn't have otherwise known about if it wasn't for pandora.

"If you don't understand that, you shouldn't even participate in the conversation."

This is childish. "If I can't conceive of any other perspective, then you shouldn't open your mouth!!!!"


Seriously, you can SAY a Honda Fit is an advertisement for Honda cars in general. But the car is still the product. Only with music. With no other product than music, do people in our culture so consistently rationalize getting one thing for free as exposure or advertising for some hypothetical other revenue stream that will one day happen down the line.


That's not an analogous situation. When you buy a Honda Fit, you selected it specifically at the dealership (down to choosing the color and possibly extra add-ons like GPS, smart-key, etc), agreed on a sum of money to exchange and then took ownership of it and drove it home. When you listen to a song on Pandora, it's likely that you've never heard of that song (or even the artist) before. Combine this with the feature that lets you purchase the song (or album it came from), and it's not a far stretch to view of plays on Pandora as advertisement to the benefit of the artists.


A better analogy would be that a test drive is an advertisement.

If I can get a "test drive" of the music whenever I want, all the time, then yes, I'd be less likely to buy it. And so there's likely a crossover point where too "smart" streaming systems will cut into revenue. You see fear of that in e.g. last.fm's restrictions on number of skips per hour for the web player.

But it is pretty clear that a lot of peoples music buying habits involve first getting to know an artist or a specific song via exposure to it. All the music I buy comes as a result of that.


There are many things people might generalize about the brand from having experience with one instance of that brand. By driving a bmw, for example, you might get to experience the luxury offered by bmw-built cars.

You can keep asserting what you like, but I don't think what I just said is unreasonable at all.


If Pandora's streams 'are the product' then why does Pandora have a 'Buy' button? It's not a tip jar: Pandora doesn't let you listen to a particular song on demand, or offline.


Spotify does though.


Not only is your analogy flawed for the good reasons described, but you also don't understand Pandora.

If you stay on a single station very long, you will hear it repeat. Their catalog simply isn't that large. I can name the THREE whole Calvin Harris songs I've heard in ALL of my EDM artist playlists on Pandora.

On the other hand, I've bought a ton of albums from new artists on Amazon that I'd found through those stations.

Of course, now Spotify is just superior in basically every way and I'll happily pay for it (Or Google Music, still debating)


Interesting way to look at it. No doubt it is an advertisement, but it's also the product itself.


If I told you there was an e-commerce company without a profitable year in over a decade of existence despite federally-mandated price ceilings placed on their suppliers, you'd be incredulous. If I then added that the same company was lobbying in Washington to get the price ceiling lowered, the pitchforks would be out.

But then mention it's a company selling music, and people shrug, "Oh, well music should be free anyway... The artists should be happy they get anything."


But then you told them that the suppliers used a cartel model to prevent true competition in the marketplace......


I'm not sure what you're saying here. Are you claiming that what's stopping the average artist from selling as many records as Justin Timberlake is collusion among the major record labels?


No, he's saying that what's stopping the average artist to get a high a royalty percentage as Justin Timberlake and stopping pandora from paying radically less for the music is collusion among the major record labels.


Not if the price ceiling were selectively enforced against only one type of radio station. In your analogy this would be the e-commerce company has to buy twinkies from their supplier at 8x the price everyone else pays by government mandate.


Why's the price matter? Any store that buys merchandise it can't sell at a profit is making a basic business mistake.

Separately, to your point about unfairness, I suspect that both radio and internet streaming prices are lower than what the market would set if the government didn't intervene.


Remember, copyright exists for the public good. Would radio still exist if it paid significantly more than current internet prices instead of less? Would that be preferable to the current situation?


If, simultaneously, congress removed the compulsory licensing radio had to pay (or, alternately, raised it to match Pandora's on a per-listener basis) and the FCC also removed restrictions around Payola, record labels big and small would probably be happy to subsidize the difference for radio stations because radio (unlike Pandora) is super-effective at advertising higher-revenue-generating products like local concerts and physical CDs.


Do you have a reference handy for your statement "radio is super-effective at advertising higher-revenue-generating products..."?

I don't necessarily doubt it is more effective for certain things, like local events (although Pandora could move that direction I suppose). I'm just wondering why radio would be so much more effective. Is it because they have so many more ads per hour of play, and radio "personalities" to shill local stuff?


If an e-commerce company and Walmart both paid federally-mandated price ceilings, except Walmart enjoyed a much lower ceiling, there may well be pitchforks. But not on the side that you seem to think.


Well, the suppliers may face a federally-mandated price ceiling, but they also have a federally-mandated monopoly on their own product (copyright).

It's not like you have a natural right to prevent people from copying your stuff - we grant that right as a society, subject to very definitive limitations.

The real issue here is piracy -- if Pandora didn't have to compete with free, they could raise their prices and this whole issue would go away. As long as piracy exists, the price of music will be driven down. You can't blame Pandora for that.


The copyright here is essentially nullified by the compulsory licensing. Without congress, Pandora would have to negotiate directly with the labels (see Spotify's much higher payouts and upfront licensing fees), and with congress, the labels can't even take their music away from Pandora if they don't like the price.


But without copyright, Pandora could simply copy the music and sell the service without paying any royalty at all. It's only by government fiat that Pandora has any costs, period. Copyright hasn't been nullified, it's just been altered.

Without congress, Pandora wouldn't have to negotiate with anyone at all, because there wouldn't be any copyright on the music to stop them.

You can argue that compulsory licensing is good or bad for artists/distributors/consumers in the long run, and it's an interesting debate. But it's not like there's some default natural right that is being violated here.


wait, who has gone a decade without a profitable year? because it's certainly not the music industry.


amazon.com?


1 million plays on Pandora is like one play on FM radio with an audience of 1 million, or 10 plays with an audience of 100,000. Either way, their royalties are more expensive than ones of radio stations.

Pandora just bought an FM radio station in an effort to reduce its royalty rates. http://www.engadget.com/2013/06/11/pandora-buys-fm-radio-sta...


If I learned anything from reading this article, music royalties are an extremely hard and complicated thing. Hat tip to them for even attempting to do business in this kind of insane environment.


Considering that I have bought several CDs because I heard them on Pandora, I am sure everyone is getting money, but it usually is never enough. I don't know what exactly the cost of running a Pandora company means financially, but with all the upgraded, changes, improvements I expect from it, they definitely need money to pay the developers, so that we, the listener can love the music and buy the albums, which I would think is what the artist ultimately wants.


> I don't know what exactly the cost of running a Pandora company means financially

Well, Pandora is a public company, so they have to disclose all that stuff. Which means we can look it up! Transparency is awesome.

According to their latest annual report (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...), in fiscal 2012 Pandora brought in $274 million on $285 million in operational expenses.

Of those expenses, $149 million were for content licensing. Product development accounted for $13 million.

Of the money they made, the vast majority ($240 million) came from advertising.


At risk of sounding stupid, $274-$285<$0. How does that work?


How does a company lose money? They didn't start from nothing--they have money in the bank from equity infusions (e.g.-going public). You lose money if you make less than you spend. That's what happened here.

Edit: Also, these numbers aren't just cash. Revenue is realized when it's earned, not when it's actually paid. So, for example, if Pandora provides $50MM of advertising, and then bills that, it records $50MM of revenue, even if it hasn't received all of that yet. Instead of being counted in cash, it's counted in accounts receivable (commonly abbreviated as A/R). This adheres to GAAP (in the US).


Ideally, the artist wants you to come to their concerts. Even better, they want you to come to their concert, go to the merch table, and buy two of everything they have available for sale. In the traditional model, the vast majority of album revenue goes to the record label. The artist makes the most money from band merchandise sales (think KISS), followed closely by concerts.

If you truly want to support the artist, go to every single one of their concerts and buy three t-shirts.


Every couple of months, I visit my Pandora profile, go through songs I have liked since my last splurge, and just click the "Buy on Amazon" links all the way down.


Half the artists I discover are due to Pandora.

I'm guessing I've bought dozens of CDs and gone to multiple concerts thanks to Pandora.


The graph is funny. Pandora agrees it is roughly accurate.

So, a payout (revenue; before expenses) of $1372 for 1,159,000 plays.

Well, let's look at it in terms of an album where all songs are played equally. In reality, some songs will be played more than others. Assume an album of 10 songs.

Okay, that's $1372 for 115,900 complete album plays.

Well, you can sell an album for $10. More, actually, but let's say $10 since that's the digital rate. And you hope for repeat listens out of an album... ten listens? 100 would be pretty great, actually, maybe that's a true fan.

Well, 115,900 complete album plays for $1372... at ten bucks apiece, that's akin to each purchase being played 1,000 times.

In other words - ignoring other benefits of Pandora - you don't want to use Pandora to "sell" your music unless you have reason to believe that album purchasers would listen to your album 1,000 times or more. Only at that time would Pandora be worth it.

That of course doesn't take Pandora's discovery benefit. I don't know if that would be enough to knock the numbers down to 100 or 10 album listens, but I suspect people often overestimate Pandora's discovery benefit. Just because a listener might discover a lot of new music doesn't mean that an artist gets a lot of new fans from Pandora.


I should offer my own counterpoint here. That analysis ignores the question of whether Pandora plays "rob" from anything else. But since Pandora songs aren't available upon request, it doesn't rob album sales. It's basically gravy.

Now, someone who makes a lot of money off of radio plays, and sees radio plays shrink as Pandora plays increase, they might still feel they have a beef due to the lower songwriter royalty rates.

Spotify, on the other hand, is different. Spotify does rob album sales.


It seems the biggest problem is the metric used to establish royalties. Broadcast mediums like radio can't accurately account for how many listeners they have, and so their licensing terms are based on plays. Pandora on the other hand knows exactly how many listeners it had, because the stream is per individual, nit broadcast. Neither medium accounts for inactive listeners, but I would expect the distribution would be similar. The bottom line is that Pandora is closer to every individual having their own radio station and so of course you cannot evaluate their worth the same way, despite what the original article was trying to do.

Pandora's model actually works better for the artists, since there is metadata that could be used to spy on American citizens... whoops, wrong story; that could be used to connect to fans in markets the artist may not have had access to previously. Maybe Pandora should be selling that information to the artists and labels, although I don't know that they don't do that already.

Both radio and Pandora are more appropriately described as advertisement. Playback restrictions of both formats means that listening to something is not purely selective in the part of the listener. I can't request that Pandora play Cracker's Low, anymore than I can shout that request to my radio. However both give me exposure to music that I might not otherwise hear. Extra credit goes to Pandora for giving me easy access to the Artist, Album, and Song Title, as well as up sell links whereby I can purchase the music I'm listening to.

Pandora provides much more value than terrestrial broadcast - value for which the music industry should probably be paying Pandora. I fully appreciate the positron Pandora finds themselves in, but they aren't in a fair fight, and the artists that should be supporting them don't seem to understand that distinction for their own good.


Not much has been made of the fact that skips count as plays... I wonder what proportion of plays are skips.

Does anyone have information on what a radio station pays for one play of a song, when they have an audience of, say, 100,000?

Edit: ah, I should have finished reading the original link, they make the latter point well.


From the original post: "I am also paid a seperate royalty for being the performer of the song. It’s higher but also what I would regard as unsustainable. I’ll post that later this week."

Footnote from this post: "He does clarify in the footnotes that $16.89 is only for 40% of the songwriting and there is a separate performance royalty, but certainly the headline & coverage could leave many with the impression that $16.89 was everything."

I'm not defending Lowery—he clearly wrote that post in an effort to draw negative attention to Pandora's practices—but he stated that the documents he threw online were outlining songwriting revenue—he made that delineation in the very first line of the post.


Arguably songwriting is kind of a dead field anyway since in recent decades bands mostly write the songs they perform.


I don't know what channel you are listening to, but in general there have always been musicians (and bands) writing their own music as there were have always been musicians performing songs composed by others with lyrics written by others. Songwriting is about as dead as cooking.


From what I've seen, it depends on what you listen to. Pop, country, and R%B are largely written and produced by someone other than the performer (hence, they are called "acts"). Most rock/inde/actual "bands" will do their own writing 90% percent of the time.


With the fields dominated by acts, how people make a living gets even more convoluted. Some songwriters who regularly work in-house for a label get paid "advances" that are really more like salaries (regular monthly payments, sometimes considerably higher than the expected royalties). That's especially common for career songwriters in-house at places like Nashville. Young pop or hip-hop songwriters hoping to use it as a stepping-stone to become an act themselves might not get paid a salary.


> "On the contrary, it seems quite likely that others should be paying more."

Not that have knowledge of royalty proportionality, but it also seems unfair to have royalty costs dwarf any other business costs. I have no idea how much it costs Pandora to stream a song, but if it's a fraction of the ~$0.0012/listen they seem to pay in royalties, it seems like the royalty is disproportionate and unfair. On the other hand, if the royalty is more than ~2 orders of magnitude less than cost to stream a song, then maybe there is an argument that it's too low.

(of course the above is assuming you agree with royalties at all.)


> Not that have knowledge of royalty proportionality, but it also seems unfair to have royalty costs dwarf any other business costs.

Why? Their business model is to take other people's work and distribute it to subscribers.

It seems to me that acquisition of the actual product should be the majority of their cost.


Excessiveness in the injection of normative notions to a market seems like a bad idea.

In any case, the content is only an aspect of the value, and without the value add many services would be rather useless. If the cost of content dwarfs the use's value add, something with potential becomes something untenable.

I mean without streaming, multiple platform support, browsing/searching, etc., what would Netflix be? The delivery method and interface themselves have value, and it's not insignificant at all.

Remember the purpose of copyright isn't to give creators rights. It's to drag as much out of them for as little cost as possible for the sake of the enrichment of society as a whole.


Apple's store does the same stuff and takes a 30% cut. They aren't directly comparable, but they are charging the 30% for similar services (streaming/downloading, platform support, browsing/discovery, and they add payment and distribution on top of that...)


I'm sorry, but what you are writing here is incoherent. If what you were suggesting made any sense, as Pandora lowers their infrastructure costs and overhead, so too would the royalty payment go down, and all the profit would go to Pandora only. The one has nothing to do with the other.


You're the one expressing a non-sequitur. Proportionality of royalty should enable other services to compete with Pandora on the same playing field, so profit would also be proportional to decreased costs or Pandora would risk being wiped out by competition. There'd be no ability for collusive cartels of copyright holders to act as market deciders, or for single players to succeed at profiting disproportionately with respect to their costs.

I guess maybe this would require a corollary of compulsory licensing, but I'm pretty sure that already exists to a large extent.


Amazon pays a 70% royalty for ebooks that were published directly by the author. Is it unfair for this royalty to be so large?

(I realize that this is more complicated than "70%", see https://kdp.amazon.com/self-publishing/help?topicId=A29FL26O...)

I think it's a sign of efficiency that a large portion of the money goes to content creators. Content creation will get cheaper as technology improves, sure, but in fields like music and writing, content creators struggle to make a decent wage. Therefore as content distribution technology improves, the percentage of money given to content creators should increase.


> Content creation will get cheaper as technology improves, sure, but in fields like music and writing, content creators struggle to make a decent wage.

As well they should--it's an ultra-competitive field, swarming with competitors, the market is so flooded it makes New Orleans after Katrina look like a kiddie pool. Unless you're the cream of the cream of the crop, you're going to struggle in this industry. And not one of the content creators has an inherent 'right' to make a profit from their work. The market decides winners and losers, and inevitably in this market it's going to be mostly losers. Whether or not it's 'fair' is irrelevant, life isn't fair.


> And not one of the content creators has an inherent 'right' to make a profit from their work.

Agreed.

> The market decides winners and losers, and inevitably in this market it's going to be mostly losers.

But the problem is that royalty rates are decided by law, rather than by negotiation between interested parties. This isn't a market economy, this is a planned economy.


> But the problem is that royalty rates are decided by law, rather than by negotiation between interested parties. This isn't a market economy, this is a planned economy.

Those are the breaks. Copyright itself isn't a market economy, it's a "temporary" monopoly that's granted by the people and it comes with stipulations. The royalty rates perhaps aren't what the content creators would like them to be, but complaining about that when the term lengths for copyright are so outrageously generous just smacks of greed. For most working people, you get paid for your work once, and not for the rest of your life plus an additional 70 years.


> The royalty rates perhaps aren't what the content creators would like them to be, but complaining about that when the term lengths for copyright are so outrageously generous just smacks of greed. For most working people, you get paid for your work once, and not for the rest of your life plus an additional 70 years.

This is a non-sequitur. "Musicians are paid royalties for the rest of their life plus 70 years, therefore they should not complain about how large the royalties are." Obviously if our top musicians earned $10 over a 120 year period they would rightly complain about wages. Also obvious is that a $2 million per year royalty due for a song whose composers died nearly 100 years ago is excessive and wrong.

What is not clear is how to pay musicians. Since you seem to care about this problem, suggest something.


I don't have the answers. I'm just pointing out that writing, recording, and selling music doesn't entitle one to profits, and if you're in a saturated market like the music business you should expect that you're probably going to fail in your business ventures there unless you're in the top 0.1%. Perhaps the answer is for musicians to lower their expectations about making a business out of their art, because even with the system working as designed most of them already operate at a net loss.


Apples and oranges. Amazon - a customer pays them money - 30% net margin Pandora - ad-based revenue


On what basis do you believe as content distribution technology improves, the percentage given to content creators will increase? This is in direct contrast to historical examples such as monopolies and amazon clearly wants to become a near-monopoly; further, even if the percentage increases, if the absolute amounts fall the content creators still end up worse off. See eg recent articles on HN about the economics of movies being damaged by the move from dvd purchase to $4 or $5 digital rentals.


Go read that article again. That article talks about how content creators needed a ~10% profit margin to survive. The introduction of DVDs meant that half of that profit moved into long-term DVD sales, so studios decreased short-term margins and made bets on long term gains. When digital distribution took profits from DVDs, content creators were suddenly running at ~5% margins because the long-term bet had flopped. Or, in summary, we are in the middle of a market correction.

I don't know much about the movie business, and I'm not sure about my predictions. But I wouldn't want to draw conclusions by narrowing my focus to big-budget Hollywood movies with traditional distribution models, especially if the newer content distribution technologies are disrupting that model.

I also wasn't trying to make a statement about absolute amounts.


Why do you think other business costs are pertinent to royalty rates at all?


One way they would be pertinent would be if the royalty rates are the reason the business is unsustainable, then the question arises if the goal is to have other folks hear the music or not.

So there is a cost to deliver songs (servers, bandwidth, devops, engineering) which is analogous to the old radio days of the engineer, power, transmitter, tower maintenance, etc. And there is the revenue from advertising and/or subscriptions. And there is the royalty rate.

If you are managing your on-going costs to a minimum, your ability to sell advertising/subscriptions is a market thing (people will or won't buy the service based on the perceived value to them) and then your royalties come out of that.

How would make an argument that royalty rates aren't pertinent?


Well, I don't really believe in royalties to begin with, but if you're going to have them...

I think royalties should be set in a way that maximizes what I'd call the versatility of utility. If royalty costs are far beyond the actual infrastructure or service costs, it seems as though entire industries and uses of content cease to exist.

It also seems pretty clear that huge differences between prices and real world costs are what lead to extensive piracy - people develop a perception of being cheated when you try to charge $25 for an e-book or album download. On the other hand most consumers seem to feel fine about paying $1 or $5 for a song/album/e-book.

You could argue that 'oh, the creator should have the right to control what they make as much as they want and charge whatever they feel like,' but it seems pretty clear that given free reign, copyright holders feel entitled and abuse copyright in ways that entirely undermine the whole system.

I'd say that if you believe in copyright there's a legitimate interest in restraining royalties to reasonable amounts so as reinforce the legitimacy of the whole system. After all, the perceptions of gouging and rights abuses create large masses of people like me who no longer believe in copyright as a whole to any great extent.

Ensuring the liberalization of restraints and apparent reasonableness of exercised privileges allowed creators seems key to creating a copyright institution that can survive and appear legitimate in the long run.


I think content is always the majority of the cost in these revenue share deals.

  Hulu: 70% [1]
  YouTube: 55% [2]
  Google Adsense: 68% [3]
  Spotify: 70% [4] 
[1] http://www.businessinsider.com/henry-blodget-hulu-turns-prof... [2] http://www.theverge.com/2013/3/4/4062810/youtube-partners-co... [3] https://support.google.com/adsense/answer/180195?hl=en [4] http://m.diamondbackonline.com/mobile/diversions/article_f94...


NetFlix has the exact same problem. Its an issue with any industry where you are trying to resell a primary service.


Why do entertainers feel so entitled to high payment? Why is this even a story?


You seem to be under the impression that being an entertainer is easy, or that they shouldn't make a living wage, or be able to profit from their work...

Everyone's gotta eat. What we're seeing now is the natural give and take within the industry adapting to new norms and business plans. From a higher level view, it's fascinating.


"You seem to be under the impression that being an entertainer is easy"

No I'm not. If something is not profitable, then do something else that is. Don't complain that you're not being paid enough.


You are projecting feelings that the op didn't mention.

No one is entitled to a meal in a capitalistic society. You have to "earn your keep" so to speak. Everyone does have to eat, but that doesn't mean you're entitled to eat off of your music. If music isn't working out maybe these artist should get a "real job".

Most of these artist are still following a a business model that is broken. I'm not sure why they feel they are so entitle to high income. Maybe it has something to do with that carrot that the record industry dangles out there. Every feels like they should be making Beyonce money or something. Why is it that radio royalties and album sales seem to be all they focus on when they get such a little cut anyway. It seems like building a following and then getting that following to pay to go to your concert and buy your merchandise directly is much more profitable.

There are some musicians that recognized they would never make as much as they would like in that business. Look at someone like 50 cent. He realized that royalty payments wouldn't be enough. From the start he created a brand around his name and his crew G-unit. From that they were able to sell clothing, get exclusive sneaker deals, negotiate for their own label, etc. With that money he invested in outside deals like Vitamin water which made him much more money than his music did when it was sold to Coca-Cola. This is someone that understands the business and how to leverage it to benefit you more than it benefits the industry.

It's been shown time and time again that artist do tend to get fucked, but it's not just internet radio providers doing said fucking. How much of the royalties get paid out to labels, managers, and anyone else that has their hands in the artist pocket. Maybe if they could negotiate better terms they would get a bigger piece of the royalty pie.

Look, I get paid what I think is a decent amount at my job. My employer has no obligation to pay me that much. They do it because I have valuable skills in a competitive market that they are willing to pay for. I also provide much more value than the salary that I earn. If for some reason those skills weren't desired or I wasn't able to make a living from them I would attempt to move on to something new.

I really don't know why I'm rambling so much. I do wish artist could make a living, but I don't think they are entitle do earn a living wage making music. Watching this industry try to keep their failing business models alive is pretty interesting though.


It's part of a larger discussion. If even stars don't make enough money to live, a lot less music may be created in the future.


> Why do entertainers feel so entitled to high payment? Why is this even a story?

"Why do programmers feel so entitled to high payment? Why is this even a story?"


Maybe.. just maybe... the market is beginning to correct the monies earned by musicians. The heyday of yesteryear when (successful )musicians were paid obscene amounts was due to 1. fewer mainstream musicians and 2. overcharged customers who had no other means of acquiring music and had to pay the price record companies saw fit.

Unsuccessful or moderately successful musicians didn't make a lot even back then.

Now, musicians are basically fighting for attention among a greater number of competitors. The choices are more varied. The output per year has grown significantly and internet has brought international music into the fold further increasing competition for 'ear-time'.

This should make one ask the question: what is the worth of musicians? Why was the high figures of the last decades the 'right' level of earnings and why are they being 'ripped off' today? Is the alleged ripping off due to content delivery platforms (like Pandora) truly taking a larger cut of the revenues compared to delivery platforms of the past (record companies and retail distributors)?

It is not exactly pertinent to put past and present in the same basket, compare the numbers and bring out the pitchforks. Circumstances have to be looked at, and that little question of what the musicians are 'worth' needs to be thought about. What makes musicians worth more than a farmer or a checkout clerk. An even fairer comparision - why is their an income discrepancy between a successful musician and a successful calligrapher. If the worth is more, the market will decide. A given musician will have to continue making music despite low pay if music is their true love. If not, time for career change.

The music industry and consumption is maturing. Musicians need to do the same. There's no point fighting the ebbs and flow of the market by crying foul. My opinions here are bound to be 'polarizing'. Do discuss.


So http://masswerk.at/404 just got 1,017,260 hits this month generating no revenues at all ... (as of June 26, partly thanks to a post on HN earlier this month)

Meaning: all this "1 million of anything must be worth tons" isn't really what everything should be all about.


I don't quite get the point of this. The original article already said what it had to be said:

For frame of reference compare Sirius XM paid me $181.00 Terrestrial (FM/AM) radio US paid me $1,522.00

All the artist cares about is how much it gets at the end of the day.


Please actually read TFA: artists get performance royalties from pandora, but not from terrestrial radio, but these were not included in the $16.89. Also, terrestrial radio plays likely reached many many more listeners than pandora did.


Satellite pays performance royalties. The fact the terrestrial is listen by more people is actually a plus for the artist, I think (more happy listener = more potential CD buyers)


I think you're screwing up your logic here. While I will agree that more listeners per royalty means more CD purchases, think through the implications of that. It means that the best situation for CD purchases is one with minimum royalties, in fact it's a situation with negative royalties causing large play counts. Also known as payola. Which means your original argument about royalty payments is disproved...


If you could BUY a download or certain number of plays of the song for a nickel or a few cents (one-click and without transaction costs making it impractical)...

Would you?

patent issued... demo built and tested... its called a pooled-user-determined account which forms the root for an internet wallet.

I'm a terrible entrepreneur but despite that the concept seems to be making progress... especially for its potential in lobbying.


"Industry is shady, it needs to be taken over Label owners hate me, I'm raising the status quo up" - Jay-Z, Izzo

There are way too many hands in the cookie jar and it's way too easy for artists to connect directly with fans and sell to them directly. The current model serves the labels and associated organizations.


"I'll prove to you that I am bad enough to get into hell, because I have been through it! I have seen it! It has happend to me! Remember: I was signed for Warner Brothers for eight fucking years!" - Frank Zappa


Holy cow! Anyone else thinks the Record Company takes way too much of the profits??


Should've gone Vadio.com / Terrestrial. Exposure + better pay per spin/play.




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