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. Greg Gibson
    October 09, 2012 at 4:32pm
    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.
    Reply
  2. Scott Richards
    October 09, 2012 at 5:04pm
    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".
    Reply
  3. Tyler
    October 09, 2012 at 5:33pm
    @Alan deL: AM/FM radio doesn't pay ANY royalties. By law.
    Reply
  4. ahw
    October 09, 2012 at 5:55pm
    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.
    Reply
  5. Tim
    October 09, 2012 at 7:16pm
    Pandora commercials have gotten louder. Its gotten to the point I will no longer listen to anything on Pandora.
    Reply
  6. Paul Jones
    October 09, 2012 at 7:24pm
    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.
    Reply
  7. Carol
    October 09, 2012 at 7:28pm
    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!!!!
    Reply
  8. Narg
    October 09, 2012 at 7:40pm
    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.
    Reply
  9. Amber
    October 09, 2012 at 8:19pm
    @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.
    Reply
  10. Alan deL
    October 09, 2012 at 9:11pm
    @Tyler: I believe that's an over-simplification, but it doesn't change the argument. Zero is a very low royalty. This article might be helpful to some people (it was to me), although parts might be out of date (like the stats on CDs vs digital downloads... from 2007): http://en.wikipedia.org/wiki/Royalties#Performance_royalties
    Reply

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