Music royalties and Pandora’s box

It is one of the oldest and thorniest questions of the digital music era: How much should artists and musicians be compensated for the Internet broadcast of their songs? And who gets to decide that rate?

You might think in the nearly two decades since music first began streaming over the Internet that some kind of consensus about paying artists would have emerged. But about the only thing most Internet radio stakeholders can agree on is that the current system makes no sense: Internet radio providers pay vastly different rates than their terrestrial, cable and satellite brethren, and even sometimes each other. Also, even a single company may pay a per-song fee in some cases, and a percentage of its revenues in others. Beyond that, there is vast disagreement, with the political fault lines forming an unusual pattern.

The business stakes of this battle flared up again this week, when the New York-based indie musician Blake Morgan picked a public fight with Internet radio giant Pandora. Morgan had received a feel-good form letter from Pandora founder Tim Westergren that exhorted musicians “to change the course of the industry in a direction that will be far more inclusive and empowering for independent musicians.” In response, Morgan said the “idea that Pandora is intimately interested in the success of independent artists rings quite hollow.” Specifically, Morgan noted that his songs were played nearly 28,000 times on Pandora in the third quarter of 2012, and that he received $1.62 from the company. (As Billboard notes, that is far less than the statutory rate to which Morgan is theoretically entitled.)

In an interview, Morgan said that it was “very dishonest for Pandora” to claim to empower musicians when its royalty payments are so low, and indeed seek to lower them further. Certainly Pandora’s royalty rates are critical to the health of its business. As my Reuters colleague Daniel Indiviglio has pointed out, in 2011 Pandora’s royalties-to-revenue ratio was 54 percent; Sirius XM’s was 8 percent. In an otherwise bullish stock environment, Pandora’s stock tumbled conspicuously on Tuesday when Morgan’s correspondence with Westergren was widely aired, though it has since recovered.

A Pandora spokeswoman declined to comment specifically on Morgan’s charges, but said that the company is constantly in touch with more than a thousand musicians and seeks their active collaboration in setting rates.

SOPA: So much to hate, so little time to stop it

(Updated 12/16/11 4 pm ET)

It may seem that Congress is getting exactly nothing done these days, with the game of chicken over the payroll tax and the possibility for what seems like the 537th time this year that the U.S. government may run out of money.

So you may be excused for not noticing that a full serious assault on the Internet is being considered by the House, and that it might actually see the light of day through the flotsam and jetsom of bigger business.

SOPA — the Stop Online Piracy Act — is the latest ill-considered attempt by some in Congress to solve a legitimate problem by creating an even bigger, totally unnecessary problem.

Tech wrap: New effort underway in Internet piracy fight

Can slower Internet speeds convince consumers to stop pirating copyrighted material online? That’s the assumption behind a new anti-piracy effort launched this week by a coalition of Internet service providers and groups representing movie studios and record labels.

Under the new initiative,  AT&T, Cablevision, Comcast, Time Warner Cable and Verizon have agreed to send customers email or pop-up alerts if it is suspected that their account is being used to download or share copyrighted material illegally. Should suspected illegal activity persist, providers might temporarily slow Internet speeds or redirect their browser to a specific Web page until the customer contacts the company.  Time’s Techland blog calls the effort “fairly reasonable” but points out that “it’s only a matter of time before someone is falsely accused of copyright infringement and throttled accordingly.” Users accused can seek an independent review of whether they acted illegally.

A major hedge fund dumped its stake in Yahoo after an ownership dispute earlier this year cut the value of the Internet giant’s China holdings. Back in May, Yahoo revealed that Alibaba Group, its Chinese unit, had transferred ownership of its valuable online payments business Alipay to a company owned by Jack Ma, Alipay’s CEO. “This isn’t what we signed up for,” Greenlight Capital’s head David Einhorn wrote in a letter to investors. “We exited with a modest loss.”

Judge will get proposal to rid world of physical books

Here’s an idea: Everyone, or at least whoever wants to, gives up their books. The books are taken to a warehouse and stored there. In return the the book owner gets access to scanned copies on Google.

A federal judge has given permission for The Media Exchange Company, Inc. to put that proposal forward, as part of a settlement in Google’s deal with publishers to make millions of books available online.

The Media Exchange Company, represented by the St. Louis, Missouri, law firm of Riezman Berger, says it is putting forward the idea on behalf of book owners.