Raymond M. Hair Jr., the international president of the American Federation of Musicians, took to the virtual pages of Roll Call to publicly wonder why Pandora is telling Congress one story and Wall Street another.
Hair noted that Pandora is working Capitol Hill in an extended effort to get its royalty payments down, which musicians claim would amount to an 85% cut in the amount of royalty payments from the internet audio leader.
However, when Pandora is on Wall Street rather than Capitol Hill, its puts its sobbing violins in their cases and discusses the rosy future it is poised to enjoy.
Hair believes Wall Street is the venue that is getting the truth. He wrote, “When you look at the facts, Pandora is shooting straighter with Wall Street than it is with Washington. Westergren and company do not need a sweetheart royalty deal, particularly one that would stiff professional musicians — the folks who make Pandora’s business possible.”
If its true that royalties eat up half of Pandora’s income, Hair says it makes perfect sense. Without music, Pandora has nothing to sell.
He also wonders where the other half of the income is going, stating that the company has only about 880 employees and little overhead.
“If growth and profits aren’t the issue, what is?” he asked. “It could have something to do with [company founder Tim] Westergren’s growing stock cash-outs. According to a recent article in Digital Music News, he has now cashed $15.1 million in Pandora stock since the company went public — that’s about $1.2 million per month. My question for Westergren is: How many millions must you earn before you stop trying to pick the pockets of professional musicians?”
Hair concluded, “Pandora doesn’t need a royalty cut, and musicians can’t afford one.”
RBR-TVBR observation: We do believe musicians receive a benefit when their work is disseminated. And while Pandora may have enough critical mass to break through the profit barrier at some point, most online services do not seem to have that luxury. All we know for sure is that this has been a very hot issue for the past few years, and the heat shows no sign of letting up. Stay tuned.