The Music Business Sucked Before Spotify

Because the record company, Rosie, just gave me a big advance

--Bruce Springsteen, "Rosalita"

NEW YORK ( TheStreet) -- Several readers, including the Future of Music Coalition, took exception to Thursday's column, Lazy Musicians Wasting Time Complaining About Royalties:

As much as I like and emotionally align with these guys and others like them, they require perspective. Some tough love. Thankfully, I'm not the only one around to provide it. Tim Worstall comes through at Forbes with another excellent article, There's An Awful Lot Of Nonsense Being Talked About Spotify Royalties:
Yet another piece in The Guardian about how appalling it is that Spotify doesn't make no name bands with three songs and two fans to their name rich enough for the cocaine and Lear jet circle. The thing that seems to be being missed is who gets to decide whether your music, or your productive efforts in any walk of life, earns you any money.

That's not an anti-artist statement; it's pro-reality.

And it strikes to the point I attempted to make with Thursday's 'Lazy Musicians' article. While I can't come down quite as harsh, politically conservative or wildly free market as Worstall, his overall argument makes sense. I just wish he would take it to an ultimately more constructive place.

Let's lay out some reality, address what we hear from many small and/or independent artists and review a way forward.

For many musicians, Internet radio such as Pandora ( P) and Spotify provided airplay they never received via traditional means. The Internet exponentially kicked up piracy, but not until Internet radio exploded did most indie bands receive spins they actually could get directly compensated for.

Prior to Internet radio, particularly the success of pure-play Pandora and on-demand style services such as Spotify, these bands received nothing and were, through non-action, told by groups such as the RIAA to like it. They could complain, but there was nothing for the indie band to do; by and large the economics of traditional broadcast radio did not and still does not allow for indie airplay.

Consider this excellent LA Weekly story from January 2009 about the death of one of the nation's top indie music stations that broadcast in the nation's second largest market, Los Angeles:
Indie 103.1 FM, a renegade music machine built from scratch by two guys over Christmas break in 2003 after a $2,500 shopping spree at Amoeba Records, was an anarchic and influential juggernaut in the L.A. music scene ...
The station's fate was sealed, in hindsight, this past October (2008), when what Sovel calls a "perfect storm" hit the station ...

Long story short, the idea of a terrestrial radio station doing something different, playing and truly trying to promote independent music butted up against reality. Indie tracks simply do not fly in the mainstream commercial space, at least when you're playing music to the masses.

It's funny, not once ... not one time did I hear anybody from the independent music community complain that the meager royalties they received if and when Indie 103.1 played their music were too low. (Of course, unless the performer doubled as songwriter, he or she was not receiving royalty payments from Indie). They were just happy that somebody, somewhere was playing their music, hopefully selling discs and helping deliver fans in seats throughout Hollywood. Relatively big names never felt the need to stand up for the supposedly downtrodden.

Now, with Pandora, Spotify and others taking the promotion of independent music to exponentially higher levels, quite a few voices feel the need to be heard and complain about some perceived injustice. Let's be clear ... more indie bands and labels than the RIAA and its friends would have you believe love Internet radio, but, based on what's been happening in the ether, it's obvious quite a few do not.

For whatever reason, the folks who complain see Internet radio as emancipation from royalty structures Internet radio did not construct. The royalty systems most musicians -- save a select-few big names -- have never made any meaningful amount of money from existed long before Internet radio hit the scene. Internet radio merely came to the table and, through direct licensing (i.e., Spotify) or statutory rates (e.g., Pandora, Songza) cut performance royalty deals. On the songwriting side, it negotiated agreements with groups such as ASCAP and BMI*.

But, more importantly, Internet radio generated exposure at a scope and scale Indie 103.1 could have never made possible, even if broadcast radio economics provided a more favorable playing field. Indie 103.1 simply could not spin as much music as Pandora or Spotify. It could only play one song at a time to its entire audience. Of course, via their platforms, services such as Pandora and Spotify generally play one song at a time per person -- personalized radio -- while helping listeners discover music they most likely would not have otherwise had such convenient access to.

And, somehow, there's a problem with this because a few big players (particularly the RIAA), followed by the helpless souls they convince to drink the Kool-Aid, don't believe Internet radio pays enough.

Decrying Internet radio for, seemingly, not paying enough in royalties does nothing but hurt and misdirect the energy of independents.

Getting your music played -- unless you're a massively popular name -- doesn't turn into dollar signs. It didn't prior to LA's Indie 103.1. It didn't when Indie 103.1 was on the air. And it didn't as Internet radio emerged in full force shortly after Indie 103.1's demise. Getting your music played equals exposure. That exposure, in and of itself, does not and should not equal a huge payday, unless, of course, you reach, say Taylor Swift-level.

If you think it should, yes, you absolutely are lazy -- from an intellectual if not physical standpoint -- and certainly unimaginative. As in, without vision or the capacity to consider long-term prospects and potential.

The advent of Internet radio does not signal an entitlement to riches or some fleeting rate you deem "fair" for the use of your music. To think it does ignores historical reality. It also exhibits a gross sense of self-entitlement. For better or worse, you don't get paid for how hard you work or, often times, the quality of work you produce; you get paid commensurate with the critical mass, mass appeal and, sometimes, critical acclaim you achieve.

Being a musician -- particularly one not anointed by a major label -- is a tough racket. Always has been. Always will be. It's difficult to make a ton of money, let alone a decent living. It's not Internet radio's job to right this perceived wrong or, more appropriately, change stark reality. Internet radio owes independent artists nothing.

Musicians, regardless of their size and stature, are nothing short of delusional if they believe Internet radio should do more than pay the going rate. Internet radio has no obligation to serve up independent music. It does because it can. And many of its founders believe deeply that indie music deserves to be heard. As Worstall explained, ultimately it's up to the consumer -- the individual Pandora or Spotify user -- to decide who will be successful or not.

But it doesn't stop there.

While Internet radio exposure does not necessarily equal dollar signs, it absolutely does signal opportunity. In a debate that hyper-focuses on royalties we lose sight of -- many never even realize or acknowledge -- what's possible when musicians view unanticipated mass exposure as massive opportunity. That's where the cream can rise -- or not -- to the top.

If Pandora, for instance, plays your stuff, don't come calling for a handout. Pandora took nothing away from you. In fact, they have provided you with an incredible stage.

Stop biting the hand that feeds you. Instead, pick up the phone, send an email, schedule a meeting -- whatever you have to do -- and put pressure on Pandora (and Spotify and others) to partner with one another as well as the startups that creatively use data to help bands generate revenue beyond the always-elusive, broken and busted royalty scheme. Demand that Internet radio use the data it collects on its users demographics and music preferences to ensure that more independent bands have the ability to connect with existing and prospective fans in traditionally grassroots and newfangled digital ways.

It's at that point the value of your music, your message, your stage presence -- whatever you have going for you -- will have the chance to resonate (or not) with the end user. You will succeed or fail on your own merits. Internet radio gives more musicians the ability to face this test, more often, than the established music industrial complex ever has.

I'm telling you. I know a lot of these Internet radio guys and girls. If you veer, just for a minute, away from the perpetually dead-end road of royalties and reach out to them. Call Spotify. Call Pandora. Ask for Daniel Ek. As for Tim Westergren. Open a dialogue on promotions, touring, heat maps, data and such. You will give yourself a fighting chance at success in a business that sucked before Spotify and Pandora came along, but has only gotten better thanks to their arrival and subsequent success.

Internet radio doesn't hold the independent artist back. Out-dated, conventional thinking and self-proclaimed and disingenuous indie music advocates do.

*This article focuses on performance royalties. As I argue in an article that summarizes my discussion with ASCAP's Paul Williams, songwriters have the most legitimate beef in the royalty dustup. As songwriters, composers and publishers move forward, they should look less to Internet radio for their fair share and start barking up the labels' and performers' trees.

-- 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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