Pandora Must Promote Indie Artists, Expose Music Industry Injustice

NEW YORK ( TheStreet) -- It took investors a couple years' worth of kicking and screaming to come around to Pandora ( P). Of course, it's easy to jump on the bandwagon as a stock trysts with 52-week highs.

How long will it take the music industry, particularly artist advocacy groups such as musicFirst, to not only wake up to Pandora and the rest of Internet radio, but do something meaningful to benefit the independent artists it claims to represent?

Every few weeks musicFirst fires off a nasty email that trashes Pandora's efforts on Capitol Hill to secure more reasonable royalty rates for Internet radio. The latest came Friday. Neil Portnow, the president of The Recording Academy spews the usual rhetoric: Pandora wants to "reduce (the ability of artists) to earn a fair wage from (their) music."

Simply put, that's crap. If it wasn't for Pandora and other Internet radio pioneers such as Spotify and Rdio, artists, particularly local and independent acts would make much less before or after reform. In fact, Pandora has done more for local and indie artists in the last 30 minutes than the music industry has in the last 10 years.

The Music Industry Should Go After True Injustice

I spend quite a bit of time in Hollywood. I live a stone's throw away in Santa Monica. When you interact with musicians and get a feel for the local music scene in Los Angeles, you realize just how absurd it is that the music industry paints Pandora as the bad guy.

Last week I went to a show at a local bar. When I arrived, the guy at the door asked who I was there to see. I told him the name of the band. That needed to happen 20 times before the band would make any money that night.

For each person after 20 the band gets to keep the $10 cover charge. I counted about 34 people there for the performance. So that's $140 for one hour of performing (plus setting up and breaking down) to split between the five guys in the band. Assuming you're lucky enough to play somewhere every night (obviously that's not realistic), you're not going to get very far in Southern California (or anywhere) living on $28 a day.

Some of the bigger bars and clubs effectively sell musicians tickets to their own performance. If they don't unload a certain number to friends and fans, they're on the hook to account for what's left. A few places, particularly some of the biggies, actually charge bands to play.

It's not like this in other parts of the country, but it is in the ultra-competitive music capital of the world.

And as far as I know, the music industry -- which I broadstroke to include organizations such as musicFirst -- does nothing to right this wrong. They're too busy attacking Pandora over royalties.

If Pandora, Spotify, Rdio and others did not exist, who would play independent music? Terrestrial radio certainly would not. It never has. And there's no incentive for it to start.

The only exposure most "small" acts get comes via Internet radio and in the bars and clubs of the Sunset Strip and similar environments. And they have to fight and claw for whatever they get. How do you expect a band to create and perform music when its members have to worry about filling a venue simply so they can eat?

At day's end, the music industry allows artists to get raped by the machine that's supposed to be a promotional tool. We're not talking about Bruce Springsteen and Billy Joel or Taylor Swift or Maroon 5 here. Upper echelon names don't require anyone's help -- traditional radio, Internet radio, concert promoters and, most of all, the record labels. That model can die tomorrow and nobody would shed a tear and, even though many big acts sign their names to the type of propaganda musicFirst puts out, they know this. They prop up the system much the same way big-name authors do when they sign deals with traditional book publishers.

Here's what somebody -- the apparatus known as "the music industry, Pandora and its Internet radio peers, a coalition of big names such as Springsteen, Joel, Swift and Adam Levine or all of the above -- should do. Find a way to put a stop to the injustice that happens across Los Angeles, Hollywood and other ultra-competitive music scenes. Take the added stress of needing to sell tickets -- literally -- off of local bands looking to get off the ground and gain exposure.

It would be a wonderful promotional tool for Pandora. In fact, it ties right in to what the company is/will be doing and what it should be doing more of.

Last week, Billboard did an excellent job reporting some exciting news. Pandora plans to make a statistical dashboard available to artists so it can access data about the spins it receives. For instance, an artist can see how his or her music plays geographically.

Organizing a tour on a shoe string, pitching a local bar or club? Pandora can provide invaluable information to maximize the effectiveness of that process. Again, a process where in the biggest music markets, performers deal with injustice that has nothing to do with music royalties.

Pandora should tie the above-mentioned into more frequent and aggressive promotion of local shows. I dug into this last week in Does Pandora Do Enough To Promote Local Music? and I Can't Find Pandora's Name Anywhere In Hollywood.

But don't stop there. Pandora can leverage the massive amount of data it collects -- for example, what do people listen to and where do they live? -- to do more local concert promotion, but also front the costs a band has to pay to get into local venues. And/or it can take over the chore of selling those tickets. Organize it as a massive contest. Make it a way of life. I don't care. But set up a situation where Pandora does the dirty work for the local musician.

If it's truly in Pandora's DNA -- and I know it is -- if Pandora really cares about independent music -- and I know it does -- it will take the next step. There's no reason not to. Pandora has everything to gain, nothing to lose. There's little risk and much reward (see the above-linked articles) if Pandora goes all-in with local music, starting in Hollywood and other major markets.

Don't expect the music industry to move anytime soon. Again, they're too busy arguing over and distorting the little picture. As a collective, they have as much foresight as terrestrial radio, which, by the way, pays absolutely zero in royalties.

It sounds great. It's easy to sell. Pandora wants artists to take a pay cut. With zero context, I guess that's true. However, why should the leader of the only space that actually gives independent artists, local bands and relatively small acts a fair shake have to commit so much of its revenue to royalties when other entities commit so little? Sirius XM ( SIRI), cable television, traditional radio and, if it has its way, Apple ( AAPL), all pay (or will pay) a fraction of what Pandora pays in royalties.

But it's not just Pandora. Spotify and others get screwed just as badly. If Internet radio -- a rapidly growing and primary mechanism for spins, sales and promotion of music of all types -- is healthy, artists of all sizes benefit. A healthy Internet radio can put more resources into providing the best user experience possible and sales and marketing, which will pump up local music scenes, sell concert tickets and drive digital record sales.

Internet radio -- no matter how they pay their royalties (compulsory like Pandora or through direct deals like Spotify) and no matter how they deliver their music to listeners -- needs to band together. They must form a bloc to expose the music industry for what it is -- a short-sighted bunch of connected entities committed, more than anything, to keeping things exactly as they are, even as they see patterns of consumption and engagement change around them.

Internet radio would be stronger this way. Working together to promote all music, with a focus on local and independent bands, and tell the real story of the struggling artist, not the one the record labels and musicFirst gets big names like Springsteen to thoughtlessly sign off on.

-- 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.

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