In What World Is Having Three Judges Set The Price Of Streaming Music 'Free Market Capitalism'?

from the just-wondering dept

Citizens Against Government Waste, a conservative think tank, accused Pandora of trying to undermine the free market.

Michael Pachter, a research analyst with Wedbush Securities, believes Pandora will eventually thrive but that its attempt to legislate lower costs is misguided. "The bill is idiotic," Pachter said. "It's insulting to Congress to say you want regulation to lower your costs at the expense of artists. Did you see who was on stage with Obama helping him campaign? Jay-Z and Bruce Springsteen. That's the Democrats, and how many Republicans are going to want to legislate against capitalism and the free market?"

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Greg Sandoval over at The Verge has an interesting post about "Pandora's PR problem" concerning its attempt to get out from under ridiculously draconian royalty rates that are clearly unsustainable. I agree that Pandora has failed on almost every aspect of the PR front, though the article seems seriously one-sided on a few points. First, it compares Pandora's situation to Spotify's, where Spotify has also been criticized for its royalty rates at times, and yet its reputation isn't quite as bad. Recently Spotify has signed some "big" name artists to publicly support its platform. Of course, the way it did so was to throw aof money at those artists. And there's a strong argument that Spotify's current royalty rates are even more unsustainable than Pandora's -- it's just that Spotify has a long runway and is choosing to put off the eventual day of reckoning it's going to have to face over royalty rates for internet music. Furthermore, the article seems to ignore the fact that much of the "controversy" and PR failures by Pandora are actually the result of a coordinated campaign, set up by a RIAA front group, focused on flat out lies and bogus attacks Of course, Pandora isn't blameless in all of this, but I put a lot of blame on Pandora's stupid decision back in 2009 to agree to the ridiculous rates it now realizes are impossible to sustain (something that many people pointed out at the time). But, the craziest part of the article is the claim that Pandora's attempt to lower rates somehow goes against free market capitalism. Sandoval mentions this argument twice. First, in noting that some "conservative" groups made this argument:And then again in quoting an analyst who makes the same argument:But neither of those claims makessense at all. When it comes to royalty rates for web streaming. In fact, the status quo is so far away from the free market or capitalism as to be laughable, and it seems like anyone claiming that it represents some sort of free market is either being purposely misleading or is totally uninformed.The rates for web streaming sites like Pandora fall under what's called "non-interactive digital music streaming" -- and the rates for those are, known as the Copyright Royalty Board. If someone can explain to me how a selection of three judges flat out setting prices is a "free market," that would be good to know, because last I checked, the government setting prices is kind of the opposite of a free market. Of course, the last time the CRB set those rates, they set themthat it was impossible forto pay those rates. That's how completely clueless the CRB tends to be. So, in response, Pandora and other webcastersnegotiate lower rates, but those rates were still impossibly high . Some might argue since Pandora's current rates are those "negotiated" rates, it is a free market, but that's clearly not true either. The "fallback" that the record labels had in those negotiations was "fuck you, here's what the CRB says the rates are, pay up or go out of business." When they have those CRB rates as the fallback, their negotiating position is obviouslystrong, and the results are obvious. The "negotiated" rates are impossibly high. Pandora's big mistake was agreeing to those rates (even though it felt it needed to if it wanted to actually live to fight another day).No matter how you look at it, that's not free market capitalism. Coming up with a way to change those rates may not be free market capitalism, but to argue that moving away from the existing rates goes against free market capitalism makes no sense. So, if either Citizens Against Government Waste or Michael Pachter can explain how three out of touch judges with no market experience setting the official rates is "free market capitalism," it seems like, perhaps, they shouldn't argue that Pandora is trying to "legislate against capitalism and the free market."

Filed Under: capitalism, copyright royalty board, economics, free market, michael pachter, music, royalties, streaming

Companies: citizens against government waste, musicfirst, pandora, riaa, soundexchange, spotify