This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Billboard Magazine Clueless On Pandora

Wilson was correct on one thing: Anything having to do with market cap distracts and keeps the two sides from reaching an agreement. True. And that's because one thing has nothing to do with the other.

Wilson also accurately pointed out that the music labels are out for themselves; they do not partner with artists as much as they enter into shrewd financial transactions with them. Very true.

High valuations might annoy industry executives, but they certainly would not back down from their positions if private equity and the public market undervalued Spotify and Pandora.

But, let's not get too far ahead of ourselves like Wilson and Werde did.

In a recent article on royalty rates, I made it clear that Pandora and Spotify play by different rules. I think Wilson and Werde know this, however, they both kept comparing apples and oranges.

Pandora pays compulsory license fees set by the Copyright Royalty Board. Spotify does licensing deals directly with individual music labels. I explain that in the above-linked article.

When Pandora asks for "relief," it does so through formal channels when negotiations come in 2014 or, as it is now, via the legislative process. Spotify negotiates with content owners, just like Netflix (NFLX) does.

On the surface, it sounds like Wilson gets the entire music royalty flap, but I'm not certain he does. He argues that it comes down to how much revenue Pandora keeps versus how much it pays the music industry and how much revenue Spotify keeps versus how much it pays the music industry.

Sounds great. And that's the headline, but, at day's end, it's not the fundamental issue. The deeper issue involves the aforementioned notion of compulsory versus direct licensing. That's where the meat of the battle, at least intellectually, gets fought. Not just how much, but how should Internet radio compensate labels and artists. Compulsory or direct.

That's the conversation to have.

Valuation should never enter the dialogue. We all know Pandora and Spotify are overvalued, but, as Wilson ends up saying himself, these valuations are not real; when the dust settles, they mean nothing. Companies will end up being worth what the highest bidder is willing to pay for them. As such, valuation should never enter the music royalty debate.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
LYV $25.25 1.00%
P $16.39 0.43%
AAPL $126.37 2.53%
FB $83.20 -0.13%
GOOG $552.03 0.67%


DOW 17,976.31 +263.65 1.49%
S&P 500 2,086.24 +25.22 1.22%
NASDAQ 4,947.4410 +56.2220 1.15%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs