Pandora and Artist Payments

Have you heard of Donnie McClurkin, French Montana or Grupo Bryndis? If you haven’t you’re not alone. They are artists whose sales ranks on Amazon are 4,752, 17,000 and 183,187, respectively. These are all working artists who live well outside the mainstream – no steady rotation on broadcast radio, no high profile opening slots on major tours, no front page placement in online retail. What they also have in common is a steady income from Pandora. In the next twelve months Pandora is on track to pay performance fees of $100,228, $138,567 and $114,192, respectively, for the music we play to their large and fast-growing audiences on Pandora.

tim-map.jpgAnd that’s just the tip of the iceberg. For over two thousand artists Pandora will pay over $10,000 dollars each over the next 12 months (including one of my favorites, the late jazz pianist Oscar Peterson), and for more than 800 we’ll pay over $50,000, more than the income of the average American household. For top earners like Coldplay, Adele, Wiz Khalifa, Jason Aldean and others Pandora is already paying over $1 million each. Drake and Lil Wayne are fast approaching a $3 million annual rate each.

This revenue stream is meaningful. I remember the many years I spent in a band when earning an additional thousand dollars a month would have been the difference between making music an avocation and a hobby. We’re talking here about the very real possibility of creating, for the first time ever, an actual musicians middle class.

It’s hard to look at these numbers and not see that internet radio presents an incredible opportunity to build a better future for artists. Not only is it bringing tens of millions of listeners back to music, across hundreds of genres, but it is also enabling musicians to earn a living. It’s also hard to look at these numbers, knowing Pandora accounts for just 6.5% of radio listening in the U.S., and not come away thinking something is wrong.

Pandora was founded on the principle of supporting artists and we’re proud to pay performance fees. We think artists could and should ultimately earn even more. But all of this revenue is coming from a single company. A predatory licensing fee orchestrated over ten years ago by the RIAA and their lobbyists in Washington has devastated internet radio. Few now deem it worthy of major investment, including most notably, virtually every major broadcaster. After spending years building an audience, the original three largest webcasters (AOL, Yahoo! LaunchCast and MSN) fled the business after the last rate hike was imposed. This is not a recipe for a sustainable industry. It is a destructive stranglehold that is putting at risk a much larger reward for musicians everywhere.

I believe we can do better, both for artists and music fans. Driven almost entirely by our commitment to this business, internet radio is now the fastest growing form of music listening in the US. And even more encouragingly it has proven to have a positive effect on both music sales and the curtailing of music piracy. In fact, Russ Crupnick, senior vice president of industry analysis for The NPD Group, citing the annual Music Acquisition Monitor study, states, “Overall music purchasing was down in the last year, while the average Pandora listener purchased 29% more music during the second quarter of 2012 compared with last year. Additionally, Pandora listeners’ music acquisition came increasingly from legal purchases, while non-listeners showed a decline.”

Consumers have spoken, and they love personalized radio. It has earned its place in the music ecosystem. It is time to embrace progress and harness this innovation for artists.

Congress must stop the discrimination against internet radio and allow it to operate on a level playing field, under the same rules as other forms of digital radio.

Making performance fees fair for internet radio will drive massive investment in the space, accelerating the growth of the overall sector, and just as importantly accelerating the development of new technology that leverages the incredible power of the internet to build and activate new audiences. That’s where the great opportunity lies in the long run. The short-term reduction in revenue would be rapidly swamped by the overall growth of the sector. Imagine the impact on artists if this industry grew to become 25% or even 50% of radio listening.

Artists, this is your future. Own it.

Rascal Flatts ($670,351), Iron & Wine ($173,152), Bon Iver ($135,223), George Winston ($85,239), Zac Brown Band ($547,064), The Four Tops ($65,173), Ellie Goulding ($609,046), Mumford & Sons ($523,902)…

Tim
Founder, Pandora

Tim Westergren

Founder http://www.pandora.com/profile/tim

78 thoughts on “Pandora and Artist Payments

  1. This is a great post, and it sure sounds unfair to me (though I wonder whether it might be fair for Pandora to pay a bit more than traditional radio, because it’s somewhere between traditional-format and music-on-demand).
    But there’s one disturbing thing in what you said. Lesser-known artists like the ones you mentioned get a disproportional amount of their income from Pandora, compared with big-name artists. Let’s say Pandora’s fees were decreased, and FM radio fees were increased, to meet somewhere in the middle. This would mean less money for the small artists and more money for the big ones.
    Is there a way around that?

  2. No comments yet? Ok, I’ll start with a question: What does Pandora pay artists per play of a track? Does this amount change depending on an artist or track’s popularity and if so, could you please explain in what ways? Thanks and congratulations on your success.

  3. As Carl said above, instead of quoting what an artist is earning, can you please quote how much is Pandora paying to each artist every time one of his tracks is played?
    Or could you quote how many times one has to listen to an artist so that he can earn $10.000/year?

  4. Did I understand your message? In one sentence you’re touting how much you’re paying artists and in the next you’re saying you want to pay them less?
    I’d love to hear the answers to the questions above as well.

  5. Congratulations!
    Just imagine how much that could increase if you’d let people from outside the US pay and use Pandora. I’d be happy to pay for this instead of [other service I currently use] :)
    I’m waiting since 2005 for this…

  6. It’s pretty crazy to blog about how much you’re paying artists, but fail to mention that Pandora is seeking to slash these payouts by like 80%.

  7. @Mary Williams: Why?
    This article is trying to point out that they’re doing a huge service for musicians–building a distribution & revenue stream for artists who wouldn’t have it, and paying far, far more than traditional radio.
    Meanwhile they’re not even able to be profitable, as they’re paying hand-over-fist for the “predatory licensing fee” mentioned.

  8. I’d bet that there is not a flat rate across the board for royalties paid to artists… So answering the question, “How much do you pay an artist per play?”, may be a bit more complex an answer than could be addressed here.

  9. I don’t understand the problem. If it were bad for the industry, let the industry fail. Seems to me like the industry is still thriving. If it is bad for new artists, play them more. Just because Pandora wants to supplant radio is not a valid reason to call in the infantry. “Unfair” is playground language; it has no place in law, politics, business, or the economy. The statistics presented may have a weak appeal to emotion (“nobody needs that much money”) but they barely present a case for mistreatment, foul play, or even “unfairness”.

  10. Those bad laws related with internet radio problably have something to do with riaa together with big labels. Internet radio shows underground artists.
    With payola big labels control what people see [and so know (and so is able to buy)], even if they sell less with piracy, the amount if still WAY higher than if all those competitors (underground musicians) “joined the competition”. People will buy more music, but this means nothing to big labels if that is not from their ones.
    Thats why riaa propose stupid things, like making online stores pay each time a person listen to a 10 seconds samples of a song. Sound super strange why a organization that is suposed to do that, would think about this idea, and if someone say that to you without saying sources you would say he is saying bullshit. But after you think about it you know why they do that.

  11. The initial argument, that three seemingly unknown artists are being paid too much money, fails to acknowledge the percentage of that money that is actually paid directly to the artist as compared to the record label. I don’t know the actual statistics, but my guess is that the artist actually collects only 20% of that $100,000+ paid out by Pandora and the record label collects the other $80,000 or so. So are the artists making too much money here or are the record labels? I just don’t think the artists themselves are seeing much of the money that you are citing and making your core argument around.
    Maybe on a competitive basis, royalty rates are expensive, however, lobby to raise rates on satellite or other channels so that you can more effectively compete as opposed to trying to hurt the artist. Or, go out there and do the work of the record label, and spend millions of dolars developing artists, taking risks, and then cut direct deals with those artists so that you can pay substantially lower fees. Obviously that doesn’t make sense for a technology company but you get the point.
    I just don’t like that this post doesn’t seem to tell the full story as to how much the artist is ACTUALLY seeing. Go back and edit the post to include the actual numbers that the artists are seeing and see how people react. My guess is that the post will read very differently.
    And, on a friendly aside, ever since you started interrupting my music with your constant pleadings for help lowering your royalty rates, my service has been terrible. It can’t find stations regularly, music stops intermittently, etc. Several people have experienced the same troubles. I hope you are not doing this on purpose!
    Simply put. I still love Pandora. I support artists and want THEM to get paid and supported, and I just want your service to work smoothly.

  12. I don’t see the big deal. I found so many songs that I haven’t hear in years. And frankly the songs that come out on the radio is not music!! Leave Pandora alone!!!!

  13. Question, are these payments to the artists or to the media rights holders, or specifically the record companies? If under normal circumstances, the artist usually gets only about 1 to 2% of these royalties. The rest go to greedy corporate types. I hate to see articles like this lie so badly.

  14. @Scott: “but they barely present a case for mistreatment, foul play, or even “unfairness”.
    What you don’t realize, is that over the air stations pay far less in royalties than Pandora does.
    Either raise the royalty rate for over the air stations, or lower the royalty rate for Internet stations.
    The big spectre for Pandora is a company located in Russia, or other country that ignores the Berne convention. Same business model as Pandora, but no royalty payments to the artists.

  15. Lefsetz is right. Tim Westergren is on the wrong side of this issue. To argue that artists are making too much on royalties is completely backwards. I’m a big fan of Pandora, but this is the type of thing that will lead to it’s end. Guaranteed.

  16. To earn $3M in royalties, Lil Wayne would need around 1.5 billion plays for the year. This enabled the delivery of around 500 million audio advertisements. What revenue does Pandora get for an ad delivery? So long as it is greater than royalty+overhead, I’m not going to feel particularly bad for Pandora. If it’s less, then maybe their ad rates or overhead costs need closer review.

  17. I’m all for supporting the artists…
    But what happened to free radio?
    These shocking AUDIO ADVERTISEMENT inserts
    have completley ruined my listening pleasure.

  18. As an independent artist, I am one of the poster children for Pandora/artist sucess. I was virtually unknown and not able to make a living off my art until Pandora accepted my music and plugged it into their music genome project. Pandora is single handedly driving ALL my revenue streams. Not just royalties that Pandora pays out. Now, ALL my combined revenue streams are able to make me enough money to take care of myself and my family, and to continue making new music for people to enjoy, even during this tough economic time. I owe everything to Tim Westergren and those at Pandora. They have been able to achieve something that no other radio entity in this business has. Thank god for Pandora, iTunes, Amazon, CDBaby, PayPal, Square, and all the other innovative companies out there that help musicians make a living from their art. Also thank you to all the fans. Without your support, none of what I do would be possible. With much gratitude and love to you all.
    Philip Wesley
    solo piano
    http://www.philipwesley

  19. Maybe some of this will help. I’m an old radio vet. I have a syndicated radio program. We have to keep it on standard broadcast radio, limiting our means of income, because of the issues that Tim brings up in his blog post.
    Terrestrial radio does not pay a Performance Royalty under the DMCA for standard broadcasting. The performance royalty is only paid on non-terrestrial mechanisms, such as the Internet.
    Here’s the structure:

    http://www.copyright.gov/carp/webcasting_rates_final.html

    Digital Performance Right in Sound Recordings Act of 1995

    http://www.copyright.gov/legislation/pl104-39.html

    Digital Performing Rights in Sound Recordings: The U.S. Experience (2002)

    http://www2.gtlaw.com/pub/articles/2002/jacobsonm02b.asp

  20. I think there’s one important thing to note about the royalties. Yes, Pandora is saying they want to cut what they pay. But right now, they’re paying around half of their revenues to royalties, according to a bunch of news stories. It used to be closer to 70%. I remember when Pandora was saying they might be out of business because they had to pay so much and it wasn’t sustainable.
    So what makes sense – cutting royalties to artists so it’s more in line with what a service like Sirius pays, and hopefully asking terrestrial radio to chip in too just to keep things even, or keeping the rate high and having Pandora eventually fold?
    It’s the goose that laid the golden egg, just in online radio. Yeah, if I was an artist, I’d probably be disappointed that my checks would go down. But it doesn’t help a lot if the service I get them from is going to fold.

  21. Great points Tim. I am encouraged by this post. I think we still live in an age that most people (music lovers, perhaps congress?) do not understand how difficult it is to make music a livelihood. In the past 2 years, (via my ChicagoMixtape.com project) I have come into contact with over 500 “professional” bands which comes close to nearly 2000 musicians who are very dedicated, passionate and gifted artists and very few are able to sustain in the current environment. I truly believe that our culture on a whole is suffering from the laws that you discuss here, thanks for shining a light on these issues.
    Casey
    ChicagoMixtape.com
    PS > It was great to meet you at the Theophilus London concert in Chicago a few weeks ago.

  22. 1. If Pandora gets it’s way, what would those payments that you are touting look like? Let’s see that before I feel so badly for Pandora.
    2. Those unknown artists, how much would those figures be cut?
    3. The known artists, how much would their figures be cut?
    4. So the blog is about how the artists are making too much?

  23. All respect intended, I responded to this post on my blog at Forbes. You make many good points and I wholeheartedly support your desire to create a “middle class” of artists, but there is something self-serving here.

  24. As musicians who started our own label in 1979, we have watched the sale of our music decline with the advent of Pandora where our fans can listen our channel and never have to buy another CD or download. We have been very grateful lately for the increase in royalty income through Sound Exchange and much of that is coming from Pandora. As artists under the current system, we very much appreciate Pandora. If the bill under consideration goes through, we will be back to the same old artist’s struggle of not being paid fairly for our music. Land-based radio stations play music randomly which may promote the artist but not take away from their sales. We hope that people who read this blog will contact their congressional representatives to OPPOSE Internet Radio Fairness Act, Bill Number 6480.

  25. For the first three artists you mention, you are talking about performance royalties. But for the others in the next paragraph and at the end of the entry, it’s not clear if you’re talking about performance royalties only, or also songwriter royalties.
    I personally believe terrestrial radio should pay performance royalties – that’s what they do in other countries, and their radio stations haven’t dried up.

  26. I always find it amusing when people who work in the “General Market” consider Latin Music artists “well outside of the mainstream.” Grupo Bryndis are an extremely well-known and respected band in their genre. Given that the Hispanic population represents the largest emerging market in the U.S. (which happens to be the #1 Spanish language entertainment market in the world), perhaps it is advisable to recognize another ‘mainstream’. Although the Spanish language market may not be on your radar (I’m not being critical — I understand the obvious reasons why it’s not), it is, nevertheless, very, very real, and not at all “well outside of the mainstream.”

  27. I think it’s tasteless and invasive to publicly announce what specific artists are compensated. What an artist makes is private and shouldn’t be blasted for all to see.

  28. @Reid Foster: per yer “Lefsetz is right. Tim Westergren is on the wrong side of this issue.”
    Lefsetz is a major tool in every sense of the word. A bloviating loudmouth has been shill for the Labels that no one really wants at their party.

  29. Wow, thanks for that insightful post.
    Obviously, it is in fact possible to make a good living out of Pandora.
    I didn’t expect that much to got pay’d off to the stars :-)

  30. This makes no sense. Yes, artists are getting paid, but now they will paid even less… Yet Pandora will now make even more? Please explain.
    In addition, why shouldn’t Pandora pay a fair rate? After all, Pandora is making money. Why should Pandora make more money than the artists and labels it is piggy backing off of? Without the content, there would be no Pandora….

  31. Last time I checked an “avocation” and a “hobby” were the same thing.
    I think you meant the difference between a “vocation” and a “hobby”.

  32. The reply I received… I was just wondering if they have any idea how much you are paying now??
     
    October 15, 2012
     
    Dear Ms. Stroud:
     
    Thank you for contacting me to express your support for H.R. 6480, the Internet Radio Fairness Act of 2012. I certainly appreciate your input on this important issue and the opportunity to share my thoughts with you. 
     
    As you may know, the U.S. Copyright Royalty Board is the governing body that calculates how much money digital music broadcasters must pay music labels and artists each time a song is played. Under current law, two different standards are used to determine statutory royalty rates, the 801(b) standard for cable and satellite radio and the willing buyer, willing seller standard for Internet radio. However, this legislation, introduced by Rep. Jason Chaffetz (R-UT), would place Internet radio under the 801(b) standard and thereby bring the percentage of revenues that these providers pay in royalties more in line with their competitors. 
     
    In the rapidly evolving world of technology, it is important that Congress review the laws on the books to determine whether or not our laws are keeping pace with technological advancements. You can be assured that I will closely monitor H.R. 6480 as it moves through the legislative process and will keep your concerns in mind should this legislation come before the House for a vote. 
     
    Again, thank you for sharing your perspective with me; I hope that you will continue to do so in the future.  If I can ever be of assistance, please do not hesitate to contact me or a member of my staff.
     
    For more information, please visit my website at http://www.timscott.house.gov and subscribe to my monthly e-newsletter.
    Sincerely,
    Tim Scott
    Member of Congress
    This communication is being sent via e-mail in order to save taxpayer dollars. If you would like a written letter, please notify our office. The information contained herein is intended for the use of the individual or entity named above. Please do not tamper with or alter this communication in any way.
          
     
     

  33. Thanks for nice article Tim, even though I am typing this a second time since the first time I supposedly entered wrong captcha text and everything gotten erased, oh well. This time i will be brief and say there is a lot of opportunities if you are willing and able, just make sure you have big enough reason…thanks

  34. French Montana has the most-played song on urban radio AND was one of the opening acts for Drake’s summer shed tour.

  35. If Pandora chooses to pay the artists whose work it uses to make a profit, I will not be able to continue to listen to Pandora in good conscience. I already don’t listen to Spotify, and I’m happy to set up the online version of my Sirius/XM (paid) subscription for online listening as an alternative to Pandora. Paying artists less and less is not acceptable.

  36. I wonder if everyone who posted about Pandora being “unfair” to artist and complaining about paying too much…actually pay for Pandora? Or just mooch the service for free… If your not paying for it them you should just shut your mouth.

  37. To all those who are complaining about the leveling field of Royalty payments one simple question “Are Traditional Radio Stations playing anything different, Is there any other extra pleasure listener is getting?”. Please answer this before posting any other question. Every traditional radio tries to push only the Songs they feel good about or popular and no scope for any new musician. Can anybody name any popular Radio Station that plays unknown artists and still they remain popular. In fact Pandora is doing extraordinary job of providing more gratification by rendering songs that satisfy your music appetite. Let me tell whether law makers reduce royalty rates are not it does not matter in long run. Innovation always goes beyond laws unless it is killed intentionally.
    “Creating Musicians Middle Class” -Way to go Tim Westergren.
    Instead it should be “Making unknown musicians known – Pandora’s way”

  38. I believe in Pandora, I support it. I pay for my license to listen to the amazing music. I am a shareholder. I support Tim, and his company. Thank you, thank you, thank you. Pandora is disruptive and regular radio and siri hates them. I can’t stand siri, even when they give it to me for free. All reruns and commercials – lame. (drive under a tree and its gone). Pandora is awesome in so many ways. Congratulations Tim, you have an amazing company. Stay passionate, stay persistent, winners never quit :) I find nothing wrong with your blog post. Have a successful day and continue to grow and sustain your vision and our company :) Amado Gonzalez

  39. It’s a good thing to actually see Pandora supporting artists. Lots of artists are worth the money I pay, indirectly because I pay for Pandora.
    So thanks Pandora for being fair with ‘my’ money!

  40. Nothing in life is free, there are a lot of people today who feel entitled to free music with no commercials. Newsflash: traditional radio used to have and likely still has an exorbitant amount of commercials, so to everyone complaining about the service, if you don’t want the commercials upgrade your membership. Pandora pays out 63% of its revenues to royalty rights Siri pays out about 8%. I am not saying that artists deserve to be paid less, but they will go back to being paid nothing at all if Pandora goes belly up, because people aren’t going to go back to buying music, they’ll just illegally stream it from one of the many sites available. It seems to me that the only solution that is viable is increasing the number of ads, raising subscription rates or going belly up. Congress has failed to get anything done these last 2 years. I certainly wouldn’t count on them. Also, the law in place says willing buyer willing seller, so negotiate with the artists and if they are okay with not receiving anything less than the above stated income, then walk away. Me personally, I am a loyal Pandora One subscriber.

  41. It’s not that Pandora wants artist to make less, but that Pandora shouldn’t be the only ones paying. From what I read, the rates Pandora pays are not negotiated or set by the artists. They’re set by everyone’s favorite cartel, the RIAA. So the traditional radio channels pay nothing to performers and pennies to the creators/writers. Pandora does. This would be a competitive disadvantage.
    Why shouldn’t terrestrial radio pay artists for the right to broadcast their music?

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