According to Billboard, however, Pandora was fast and loose with its prose in the Westergren blog post. The artists mentioned receive roughly 45% of these royalty payments. Pandora sends the money to SoundExchange, who pays the artist, the label and other musicians.

Pandora didn't purposely mislead anybody. Westergren told me this morning that if he had it to do all over again, he would have picked his words more carefully. He stressed, however, that he wanted to focus on the size of the payments, noting that "a lot of these artists" are their own label; as such, they receive more than 45%.

That said, Pandora has done well in the early stages of an advocacy campaign aimed at gaining traction for federal legislation that would bring a more equitable royalty structure to Internet radio.

The aforementioned blog post represents a classic case of pressing your luck. The fact is bears -- and even highly sympathetic bulls -- can poke holes in that blog post all day long. It raises too many difficult questions.

For instance, If Pandora is on the side of musicians, why is it, for all intents and purposes, advocating a pay cut?

While I wish he would have agreed to do it on camera, I have to give Westergren credit for how he answered this over the phone. He acknowledged that it's an "uncomfortable discussion," but it's one that "we have to have."

He argues that, over the long-term, a more equitable royalty rate for Pandora will lead to bigger, not smaller payments for artists. At this point, that's all conjecture; nobody knows how things will play out.

Again, why raise these questions at the beginning of an otherwise solid and so-far successful lobbying effort in Washington? While I appreciate Westergren's point, he could have waited until deeper in the legislative process to make these points. It would have flown better on Capitol Hill next summer than it has on Wall Street today.

As far as the latest competitive threat from Microsoft goes, it's deja vu all over again. Short-term noise. I adequately addressed those concerns earlier this week in Apple, Microsoft Need to Innovate, If They Can.

I am selling around and at-the-money calls against my Pandora position. That means I could be forced to sell a majority of my shares at $9 a share by the end of the week. Even though my cost basis on the stock is $10.19, I am OK with this.

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