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(AUDIO) Kalo: "Artists Are Not Thrilled With The Bill"


Ted Kalo is the Executive Director of the musicFIRST Coalition. musicFIRST was formed to attempt to get radio stations to compensate artists for thier music when its played on the radio. "FIRST" in musicFIRST stands for Fairness in Radio Starting Today. Kalo says the Chaffetz bill is, "a race to the bottom" and, despite what Chaffetz says, artists are not thrilled with his idea. Listen or read the transcription of our interview with Kalo. 
Listen to the interview HERE

RI: You heard what Congressman Chaffetz  has proposed. What do you think?
Well, its a race to the bottom. The bill instead of correcting what is the biggest elephant in the room in terms of disparity in royalties and the fact that terrestrial radio doesnt pay a performance right, the Chaffetz bill would reduce Pandora and other big internet radio stations royalties to be grandfathered below market rate that is enjoyed by less than 5 companies. It is just patently unfair. It takes us in the wrong direction. It would hurt a lot of artists and music creators.

RI: One of the things that he said to us was artists are thrilled about this. I get the impression that you dont believe thats the case.
The Music First Coalition includes the major unions representing artists. I can assure the Congressman that they are not at all pleased with this legislation and the prospects of taking a pay cut for a company that is doing quite well.

RI: What do you think the chances of something like this actually gets through? Do you see it as something that happens during an election year?
The timing of it is curious. The Congressional session is all but over. There are some must-pass items that are going to have to get done after the election and prior to the beginning of the year. It seems highly improbable that legislation such as this could pass between now and then. Clearly, whats going on is an attempt to lay the groundwork for future activity starting next year and also to, frankly, have a bill number out that Pandora can activate grassroots email list to contact Congress and build support leading up to next year. I really think this is kind of the curtain raiser in a longer battle. In terms of its overall probability of success, the bill is so tilted to one side, which is not typically how legislation dealing with intellectual property issues is resolved in Congress. I would say the chance of the Chaffetz Bill passing as currently drafted, is exactly zero.

RI: You have to kind of give Tim Westergren some credit. He saw that these rules now in place were going to perhaps kill the company that he created. He went hard lobbying Congress and he is starting to get some traction, it appears, to change some rules.
First of all, if I may take issue with the premise of the question: I dont think its killing his company.  He is projected to make $5 million in revenue in 2013. It is well known among Wall Street analysts, that the problem with Pandora is not that it pays artists too much. The problem with Pandora is that it hasnt come up with it hasnt fully monetized its own service. I dont purport to tell them how to run their business, but Wall Street analysts have said the fact that they have very little advertising on their service, makes it so that their profit margins are not as particularly as good as they could be. So, blaming artists royalties for Pandoras current problem is kind of like when you go to a mechanic with a flat tire and they sell you a muffler. Its not really the problem. I think you are correct. It is a very skillful diversion. I think as we peel aside the facts to show that Pandora has actually prospered under the current system, and has done better and better every year, with positive outlooks from market analysts, while at the same time the recording industry and artists have taken a hit, people will see that this really doesnt make any sense.

RI: What do you think is the perfect scenario where everybody could be happy? Do you have one in mind that you think would work for everybody?
We had it. In 2009, Pandora sat at the same table as the recording artists and the same table as the record labels, and as part of the Performance Rights that passed the House and Senate judiciary committees, there was an agreement on a standard in a bill that also addressed the elephant in the room which is the lack of a terrestrial radio performance right. The bill also carved out many small terrestrial radio folks, as you know from your coverage of the bill, and represented a global solution to what this bill purports to address. This bill says it is about fairness and to create parity between platforms, yet it picks and chooses platforms and instead of creating parity it creates a race to the bottom, which ultimately will dis-incentivize creativity and will result in less music for Pandora to play.

RI: Do you think if something like this ever gets approved, this bill, that the artists in a few million? Many million? Is there any way to know how big the difference would be?
: At this point, I dont have an analysis that would tell me that. We are extremely concerned and think that the losses would be considerable to our members.

RI: What are your thoughts on these side deals that you start to see with Entercom and Clear Channel and Big Machine that the radio stations will now start to pay the artists on the front end for a little bit of a break on the online in the future?
I was extremely encouraged by the statement of Mr. Pittman of Clear Channel in which he said artists clearly arent paid enough. That was part of the motivation for the deal that he reached, in addition to the self-interest of Clear Channel. I thought that was very visionary and also a real olive branch to artists and record labels. It really stood in contrast to the rhetoric about a performance tax and all the other nonsense wed seen the last few years. I think those deals are encouraging in terms of showing forward movement, but they cant take the place of legislation. They are just one-off deals between one company and one label. Those terms arent necessarily ones that translate to other companies and to other labels. Really only Congress can do that. Ultimately, an agreement between two parties can be broken years down the line. Only Congress can create a right to something. We believe that performers have the right to be compensated when their songs are played.

(9/25/2012 5:37:04 PM)
Radio has always been an ENORMOUS platform for anyone, KNOWN or UNKNOWN, to promote whatever they want to promote... Next thing we'll hear about is the radio-tv intern wanting to get paid because of the enourmous asset(s) it apparently brings to the table.. Recording Ärtist(s): Either you find another way to promote your music, and hopefully better than radio, or you leave things the way they are..., otherwise, you'll kill the goose with the golden eggs...

- Michael
(9/25/2012 11:21:22 AM)
Pardon my cynicism,but Chaffetz is just another Republican beating the drum for "small government",unless it benefits his favorite lobbyist or corporate donor.
Maynard is right.This places a tremendous extra burden on small market radio stations.
And don't count on Congress,especially the House to do what's right.

- Michael P.
(9/25/2012 9:48:06 AM)
What the music folks don't realize is that many of us little guys are still selling spots in the single digit figures...and running on the slimmest of margins. If we have to pay $5,000 a year, for example, there go the profits! I have a hard time feeling sorry for the stars with the big tour buses when I'm driving a 2002 Trailblazer. I'm not even totally opposed to paying some kind of royalties for the music...I just don't want to be buying a second tour bus for someone. Sure, there are starving musicians out there but anyone who thinks they'll see any of the cash is sorely mistaken.

- Maynard Meyer

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