Wednesday, June 26, 2013

Pandora responds to Pink Floyd’s op-ed on lower royalty rates

Tom Cheredar/VentureBeat

Internet radio service Pandorahas responded to a strongly worded opinion piece recently written by the remaining members of legendary rock band Pink Floyd.

In the op-ed piece, Pink Floyd’s members argued that Pandora is advocating a 85 percent cut to the amount of money it pays in royalties to artists. The band also pointed out that the majority of artists make less than $5,000 per month on all digital royalties. In the band’s opinion, that makes the idea of cutting the licensing fee unreasonable. Pandora pays fractions of a penny every time a song is played by someone on its service, which may not seem like a lot of money, but it adds up — making music licensing the biggest expenditure for the company. And considering that terrestrial radio stations don’t have to pay anything, Pandora feels that a lower rate is reasonable.

Pandora sent me the following response to Pink Floyd’s op-ed:
“We have enormous respect for the members of Pink Floyd, and their amazing artistic contributions. We also respect the genuineness of their opinion. Unfortunately, they have been given badly misleading information – the result of a well-orchestrated campaign by the RIAA and their lobbying arm to mislead and agitate artists. A glaring example is the assertion that Pandora supports an ’85% artist pay cut.’ That is simply not true. We never, nor would we ever, support such a thing. In fact, Pandora has suggested solutions that would guarantee no reduction in artist payouts while also nurturing the growth of internet radio — a medium that is crucial to thousands of independent musicians who don’t enjoy major label support or FM radio exposure.”
The company also made a formal response to independent artist David Lowery’s strongly worded blog post. In it, he compares Pandora’s monthly royalty check to what he makes off the sale of a t-shirt.
“Mr. Lowery’s calculations grossly understate Pandora’s payments to songwriters. In truth, Pandora paid many times more in songwriter royalties to play the song referenced in his article. The post also neglects to mention that the rates Pandora pays were set by the very organizations that represent songwriters and publishers. These organizations – BMI and ASCAP – are the very same groups that recently agreed to a long-term licensing agreement with the terrestrial radio industry to pay songwriters significantly less than Pandora.”
Pandora also reaffirmed that it pays out more money in licensing than any other radio service. (And to clarify, on-demand music services like Spotify or YouTube do not qualify as radio services.)

“For perspective, to reach the exact same audience, Pandora currently pays over 4.5 times more in total royalties than broadcast radio for the same song,” Pandora said in a statement to VentureBeat. “In fact, at only 7% of U.S. radio listening, Pandora pays more in performance royalties than any other form of radio.”

There’s a very good reason for why Pandora pays the most money, too. First of all, satellite radio and cable TV providers (yes some offer a radio service) pay a lower rate than Internet radio services, while terrestrial radio stations don’t have to pay a licensing fee to play music. Second, Pandora is by far the most popular Internet radio service with 2.5 million paid subscribers and over 200 million total active monthly listeners. And third, Pandora pays a higher royalty rate than some of its rivals (such as Clear Channel’s iHeartRadio) that own both Internet radio services and terrestrial radio services.

If there’s a take away here, it’s that music licensing is complicated and doesn’t pay artists enough. And even if Pandora doesn’t get a lower music licensing rate, at least it’s getting something else it’s been asking for: a decentconversation with artists about the music business.

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