Last year, after singer Taylor Swift gave Spotify the proverbial middle finger by pulling her songs from the music streaming service, I became a fan.
Although my music collection is a schizophrenic cacophony of metal, punk, hip hop and jazz, I made room for some pop music because Taylor Swift said something I’ve believed for years …
“These services perpetuate the perception that music has no value and should be free.”
Hell yeah!
When giant record labels had no real competition, artist satisfaction wasn’t real high on the priority list. At least not for any band or artist that hadn’t gone gold. And while many artists, including myself, found this truism to be frustrating as hell, there was never really much of a difference between how record labels treated new artists and how employers treat entry-level employees.
In life, you start at the bottom and work your way up. Assuming you’re not a Hilton spawn or don’t have a trust fund . As a musician who spent six years of my life on the road, I jumped through all the hoops, slept on a lot of floors and ate a lot of tuna fish in the back of a van that was blanketed in clouds of filth and the DNA of disgusting creatures.
It wasn’t custom-built Prevosts and private chefs for us. It was low-rent Spinal Tap with a healthy dose of hustle. And while the hard work did pay off, and the sacrifices were many, I had no regrets. In fact, I would argue that my time on the road further solidified my belief that hard work is good for the soul.
So when Taylor Swift, a mega-super start with loads of cash, called out the inconvenient truth that art does have value, I applauded, while others through temper tantrums.
You’re So Greedy!
Quite a few folks immediately lobbed the obligatory response of “Oh, you’re so greedy. It’s all about money.”
God damn right it’s about the money! How many of these folks work for free?
Most people go to work for the paycheck, not for fun.
Now I’ll be honest, I don’t really know how Spotify compensates artists that appear on the service. I’ve been told that artists barely get a percentage of a penny. I suspect much of this has to do with how contracts are negotiated and who owns the publishing rights to the songs.
In that respect, there’s little difference between how Spotify operates and how most record labels operate.
However, if an artist is having his or her stuff streamed on Spotify, and that artist’s songs are owned by a label, the artist in question is getting royally screwed. Which is why the golden age of major record label dominance is over.
Sure, they’ll still exist for superstars that they manufacture and groom. But the music industry has been democratized. And that’s a good thing for artists that are smart enough to bypass the record label altogether and hustle 24/7. I’ve seen plenty of bands and artists that you’ve probably never heard of that actually make decent livings because they’re constantly working, creating, promoting and doing deals – all without the shackles of a record label.
This is also a good thing for companies like Spotify and Pandora (NYSE: P). Although Pandora’s Q4 may have you shaking your head.
A Fair Valuation
Pandora’s fourth quarter sales were up 33 percent from one year prior to $268 million. However, this did come in below the company’s expected range of $273 million to $278 million. Analysts were looking for $277 million.
The company also cut revenue forecasts for Q1, 2015 and FY, 2015. This did not impress the market, and the stock fell about 20 percent.
I suspect the company is still going to be spending a lot in operating costs going forward, but this spending is a necessity if the company has any intention of staying aggressive. And while this will probably pressure the stock this year, if Pandora can continue to grow in terms of new users added and longer listening times, it should be OK.
Truth be told, I always thought most analysts were being too generous on price targets with this thing, anyway. I’ve seen them as high as $44 a share. I don’t get that at all.
The way I see it, $15 a share actually seems pretty fair right now, and if I had to put a one-year price target on this thing, I’d go as high as $19.
It’s definitely going to be a rough year for Pandora, but don’t think for a moment that this media company has lost its mojo. It’s just slowing down its groove in order to build back its strength.
I will, however, be looking for any significant dips along the way for a quick one.
