This Day On The Street
Continue to site
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

Record Labels Screw Pandora, Spotify, Artists, Consumers Every Day

Pandora pays music royalties via a compulsory licensing scheme. That means the rate it pays is set by a regulatory agency. Spotify, like Netflix, uses direct licensing, meaning it negotiates directly with labels. Irrespective of who you think employs the better model, the labels ultimately give both companies the shaft.

As Pandora's fight plays out in Congress (it wants a more equitable royalty rate come 2015), Spotify should back its competitor. At day's end, compulsory licensing -- as structured today -- and direct licensing both stink. We need a fair rate across the board no matter how you choose to deliver your music.

The one thing few people talk about -- though Tullo brought it up with respect to Adele -- is that the streamers, particularly Pandora, have more leverage than the labels give them credit for.

Those optimistic music sales figures CNBC's Amanda Drury spoke of as she introduced Tullo? Thank Pandora, Spotify and other Internet radio entities for driving that action. And both companies provide a voice to thousands of artists (A) the music labels have no time for and (B) the traditional models of terrestrial and Sirius XM (SIRI - Get Report) never touch.

With reasonable cost structures, companies such as Pandora and Spotify can cut loose and innovate. And that will be good for musicians -- large and small -- as well as music lovers.

As I explained earlier this year, expect Pandora to eventually branch out into local concert promotion.

The company, however, can't juggle too many balls in the air at once with the royalty situation going forward undecided. Congress needs to deal with it this year, pre-emptively, so we can get on with business and bust the broken model the record labels so desperately wish to hold onto.

-- Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
2 of 2

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NFLX $89.64 0.30%
P $9.28 -0.64%
SIRI $3.90 0.64%
AAPL $92.49 -0.80%
FB $118.66 0.72%


Chart of I:DJI
DOW 17,646.16 -14.55 -0.08%
S&P 500 2,046.02 -4.61 -0.22%
NASDAQ 4,700.6070 -16.4870 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs