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Pandora Isn't the Enemy, the Music Industry Is, Part 1

Stocks in this article: P SIRI CCMO

NEW YORK ( TheStreet) -- I heard a curious interview via Bloomberg Radio on Tuesday.

I suggest you take the time to give a listen to as much of the 9 minute 15 seconds with Indie artist Blake Morgan as you can. From there I will explain why, as well-intentioned, passionate and incredibly talented as he is, Morgan, sadly, has no idea what's he talking about. He rants what is, by and large, a fatally flawed argument.

This response to Morgan's Bloomberg interview comes in two parts. Part 2 outlines how the deck is stacked against independent artists.

Right out of the gate, Morgan distorts Pandora's (P) position on Internet radio royalties. After the Bloomberg hosts intro'd the interview with one of his latest songs, Morgan quipped "if Pandora has their way I won't get very much."

And Morgan doesn't get very much. On almost 30,000 spins at Pandora, Morgan reports income of a little more than $5.00 in total royalties over a three-month period.

When you dive into exactly how royalties are paid and divvied up among the various players, things get way too complicated for their own good. Recently Billboard did a nice job making sense of it all. I don't get deep into it here because such minutia only clouds the larger and most important points in what really shouldn't even show up on the radar screens of indie artists.

Salient Point 1: Pandora pays what it is supposed to pay. The company does not set royalty rates. It simply sends checks, at a board-mandated rate, to Sound Exchange (to cover licensing payments to labels and artists; Sound Exchange takes an administrative fee) and, as a result of a deal with the performance rights organization (PRO), to cover publishing rights for songwriters and composers. You can read a bit deeper into how that works over at The Verge.

In any event, it's no lie. Guys like Blake Morgan do not make very much money when Pandora plays their music. Drake. Usher. Taylor Swift. Bruce Springsteen. They all do relatively well. Cumulatively -- as in, take all of the spins under a particular label's umbrella -- the music industry does all right.

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