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

Comments

  1. Alan deL
    October 09, 2012 at 12:38pm
    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?
    Reply
  2. Carl Franzen
    October 09, 2012 at 12:43pm
    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.
    Reply
  3. Alan deL
    October 09, 2012 at 12:48pm
    Oh, also... "Pandora accounts for just 6.53% of all radio listening in the U.S." 6.53% sounds HUGE to me. Congratulations on that.
    Reply
  4. Alex
    October 09, 2012 at 2:03pm
    Is this payment scale unique to Pandora? I remember reading about Spotify's payments to artists being negligible for artists: http://www.guardian.co.uk/music/2010/apr/18/sam-leith-downloading-money-spotify Can you elaborate a little bit about this difference? Cheers, Alex
    Reply
  5. Mary Williams
    October 09, 2012 at 2:27pm
    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?
    Reply
  6. Joe Dansk
    October 09, 2012 at 3:46pm
    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.
    Reply
  7. zoso
    October 09, 2012 at 3:58pm
    Artists, this is your future... Let us pay you less than we agreed to contractually...
    Reply
  8. Zim
    October 09, 2012 at 4:08pm
    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...
    Reply
  9. Kevin
    October 09, 2012 at 4:11pm
    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%.
    Reply
  10. Jesse Briggs
    October 09, 2012 at 4:17pm
    @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.
    Reply

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