Cahill, Alexandra. "Pocket Streams." Billboard. 28 March 2009: 7.
Cahill's article examines the role that iPhone apps are affecting the way that users listen to music. Her main point is that applications created for the iPhone as well as other mobile devices have expanded the reach of online radio. She refers to two music streaming websites, Pandora and Clear Channel, which both have applications available for download on an iPhone. The work often cites Pandora founder, Tim Westergren, who states that Pandora has added 20,000 listeners each day as a result of their app and that between 10% and 20% of its audience comes from an iPhone or iPod touch. While there's no way to measure the number of unique listeners yet, experts cite that it will only be a matter of time before third-party measurement services begin to track it. The overall conclusion is that the distribution of radio is constantly evolving due to new technology and the mobile phone industry is simply the next step in this progression.
The fact that people are experiencing these radio streaming services and other web-based content through devices like their iPhones reinforces the desire for a multi-modal technological experience. It reveals that if music-streaming sites want to be successful, they must find a way to incorporate all forms of developing technology into their brand. This theory can essentially be extended to all parts of the internet experience. If apps are the way of the future, all websites from social networking to blogs to stores should be working to create their own unique app. Additionally, Pandora is one of the clearest examples of Chris Anderson's long tail theory. The site streams music to you based on your previous preferences and as a result, a whole new library of music is opened up for you for the first time. Thus, the long tail theory can be extended not just to the experience browsing the internet from a PC but to the mobile world as well.
Tim Westergren, founder and chief strategy officer of Pandora, spoke on behalf of the Digital Media Association (DiMa) at the hearing on “The Future of Radio.” His testimony first introduces Pandora and the Music Genome Project. He emphasizes that Pandora is unbiased in the song selection for its listeners. Through a completely democratic process, listeners can vote “thumbs up” or “thumbs down” if they like the song, and that respective song will gain or lose more exposure. Pandora plays songs from a wide range of artists with about 70% of the sound recordings belonging to artists not affiliated to major record labels. It equally reviews any CD that is delivered to them and selects songs solely based on their musical composition.
Westergren’s statement focuses on the benefits of the internet radio technology. Internet radio offers more stations and diversity content than broadcast, satellite, and FM radio. Virtually any artist or song can be found on the internet. Westergren reports that in a study “Pandora listeners are three to five times more likely to have purchased music in the last 90 days than the average American.” He emphasizes that internet radio is the best way to promote artists and music.
On the issue of royalty rates, Westergren highlights that internet radio has the smallest of all radio revenues yet it pays the highest royalties. The increased rates are not economically sustainable, and unless a new resolution is made with SoundExchange, Pandora and other internet radio companies will immediately shut down. Pandora and DiMa have supported the SaveNetRadio campaign, which has urged support for the Internet Radio Equality Act. Westergren provides words from listeners and musicians who are extremely grateful to internet radio. In his own words, Westergren states, “It is my hope, indeed the reason I started this company, that we are at the beginning of the development of a musicians’ middle class, as radio services like Pandora allow musicians to find a fan base and maintain a steady career making music, which is a real alternative to the major-label system that makes you an enormous star or leaves you unemployed.”
Westergren’s statement is important for my paper, since my argument completely supports his ideas and beliefs. The internet radio is extremely beneficial to the public and I agree that it is the best way to promote an artist’s work. If the royalty rates are increased, this will put a halt to the promotion of cultural diversity. Although not all listeners end up purchasing CDs or songs, the word-of-mouth advertisement for performers is tremendous, this benefits them in the long run. Westergren’s ideas and beliefs are fair and justified. He is not completely against the payment of royalties, but he demands a fair standard to be used for the rate determination, which is what my paper will discuss.
Pandora has become one of the nation’s most popular internet radio stations. It has about one million listeners daily and 40,000 new customers a day. Pandora has made it to the top ten most popular applications for Apple’s iphone. Listeners can create their own stations according to their musical tastes. All of Pandora’s success, however, may soon reach an end with the increasing royalty rates.
Royalty fees are paid to a single agent SoundExchange, Inc. The organization represents performers and record companies, and it supports the higher rates on the basis that musicians deserve a larger fraction of internet radio profits. “Our artists and copyright owners deserve to be fairly compensated for the blood and sweat that forms the core product of these businesses,” said Mike Huppe, general counsel for SoundExchange. The organization also believes that internet radio has not done enough to profit from streaming music.
Some musicians defend Pandora and other internet radio stations on the other hand. Webcasters argue that internet radio offers a larger range of music than traditional radio and also promotes independent musicians. While traditional radio does not pay royalties and satellite radio pay 6-7% of their revenue, webcasters must pay per song and per listener. With the new royalty decision doubling the per performance rates, Pandora and other webcasters may go out of business. Tim Westergren, founder of Pandora, predicts that royalty fees will amount to $17 million this year, which is 70% of the projected revenue. “We’re funded by venture capital,” [Westergren] said, “They’re not going to chase a company whose business model has been broken. So if it doesn’t feel like it’s headed toward a solution, we’re done.”
This newspaper article is important for my paper because it portrays the trememdous effect the new royalties will have on Pandora. Westergren repeatedly states that the company will go out of business, and this is important for my paper. Performers will not be paid more for their work if there is no internet radio station that will be in business to pay them. In order to ensure a fair royalty rate, the company must not be threatened to close down. My paper defends another model for determining the royalties and argues against the latest copyright ruling on the royalty rates. This article is important because it not only demonstrates the copyright ruling from Pandora's point of view but also from SoundExchange's perspective.
Matt Nathanson is a songwriter, performer, and recording artist. He is also the most played artist on Pandora.com. In his testimony at the hearing on “Music and Radio in the 21st Century: Assuring Fair Rates and Rules across Platforms,” Nathanson emphasizes the importance of internet music and internet radio. Before iTunes, Amazon, and other internet music sources were available, only a handful of artists succeeded. Nowadays, with internet radio stations, such as Pandora and Yahoo!, people are exposed to a variety of music and different genres. Nathanson relates how his own success was contributed by his exposure on internet radio. Internet radio has given independent artists and labels an opportunity to be heard by the public. Customers buy from a much broader group of artists thanks to internet music.
Nathanson also discusses the financial concerns behind the royalty debate. “When a song I write is played on broadcast, satellite or Internet radio, they pay me an amount which is reasonably related to their revenue. Higher revenue stations pay a bit more; smaller stations and services pay a bit less. But when a song that I perform is played, broadcast radio pays me nothing; satellite radio pays me a reasonable royalty that when combined with other artist payments effectively equals 6% of its revenue; but Internet radio services pay me and other artists a per-song fee that is unrelated to the revenue of the service, which when combined with other artist payments effectively equals 30 or 40 or 70 percent of their revenue or more.” Nathanson argues that it is wrong for the smallest industry to be paying the highest royalty rates. He reports that internet radio is the most important way for independent artists to be heard. He concludes his testimony asking that the royalties changes be made fair for internet radio and demanding that the board keep in mind the future generation of artists.
This source provides another perspective of the royalty rate issue for my paper. Nathanson's musical career and success demonstrate the tremendous benefit that internet radio has for the public. His testimony is important for my paper because it is supporting evidence that the copyright ruling is unfair. Nathanson, a musician who receives royalty payments, completely supports Pandora's fight against the increasing royalty rates. His testimony makes a strong case for my paper since he opposes SoundExchange's argument that performers need to be paid more on the basis of fairness.
On July 29, 2008, Joe Kennedy, the President and Chief Executive Officer of Pandora Media, Inc., gave a testimony on “Music and Radio in the 21st Century: Assuring Fair Rates and Rules Across Platforms.” Pandora has become the largest internet radio service in the US with more than 15 million registered users. It is located in Oakland, California, and employs about 140 people. Pandora uses a unique music taxonomy known as the Music Genome Project, which aggregates songs with musical similarities. Pandora treats all artists equally and relies only on musical relevance to connect songs.
Kennedy testified on behalf of Pandora and the Digital Media Association. He urged a revision to the Copyright Act that would ensure fairness among all participants in the music industry. Kennedy’s testimony gave a description of the four main problems Pandora and other internet radio services currently face. The first is the matter of basic fairness in determining royalty rates. Kennedy strongly recommends the four factors standard test found in Section 801 of the Copyright Act, which has proven successful in the past. Kennedy emphasizes that internet radio services have the smallest of all radio revenue streams, but they are the ones who pay the highest royalties. Kennedy states, “There is no possible way that Pandora or our sophisticated investors would be a "willing buyer" of sound recording performance rights at a cost equaling nearly 70% of our revenue – because that royalty level is simply unsustainable and will bankrupt us and force the layoff of our 140 employees.”
The second problem Kennedy reports is consumer recording. SoundExchange and recording industries claim “streamripping” is an issue, although Kennedy states there is no evidence or justification for this. Pandora is a business aimed at programming and promoting music, and no additional technological fees should be made for this purpose. The third issue Kennedy brings up is resolving the confusion of “interactive service.” The definition of this term should allow programming based on the listener’s preference. Kennedy defends Pandora by explaining that listeners have no control over the song or artist that will be played, therefore they are not violating statutory law. The fourth point Kennedy discusses is the royalties on sound recordings reproductions. While typical radio stations require only one copy of the sound recording, webcasters need several copies in order to accommodate different technology services and access speeds. Kennedy remarks that internet radio services should not have to pay a fee for these copies, since they do not have any additional value.
Kennedy concludes his testimony with a last plea for the equalization of royalty standards. “…so that fair competition prevails and Pandora and other DiMA member companies can grow and realize the full potential that Internet radio offers.”
This testimony is an extremely useful source for my paper. It offers a complete description of the royalty issues Pandora is facing directly from the point of view of the president of Pandora. The four main points that Kennedy brings up are also key topics for my paper, since I am defending that the new royalty ruling is unfair. It was extremely interesting to read this direct testimony from Kennedy, and it will definitely help defend the argument of my paper.